Venture capital businesses outpace overall economy

Tennessee and Georgia trail most other states in VC funds

Over the past three decades, the number of venture capital funds has more than quadrupled and employment in businesses backed by venture capital (VC) funds has grown 24 times faster than the overall economy, according to data compiled by the National Venture Capital Association.

But for their size, Tennessee and Georgia continue to trail most other states in equity investments in startup companies. And after five years of steady growth, a new report found that venture capital and "seed" funding in startup businesses dropped in the second half of 2022.

"VC is famous for its ability to adapt, but few foresaw Russia's invasion of Ukraine and the ensuring geopolitical retrenchment that turned out to be one of the major disruptions of 2022," Bobby Franklin, president and CEO of the National Venture Capital Association, said in a new PitchBook report. "This chaotic cocktail caused the market to stumble in the second half of the year. Deal counts dropped, and exits were particularly hard hit with public listings falling to the lowest level in years."

Despite the dip in the second half of 2022, the growth in venture capital funding has still outpaced the overall economy in nearly all industries and states.

In Tennessee, venture capital-funded businesses grew 2.3 times as fast as the economy as a whole from 2012 to 2022, according to a new report prepared by the financial website Flippa based upon an analysis of National Science Foundation and Pitchbook data. In 2022, which is the last year for which such figures have been compiled, Tennessee had a total of 261 venture capital deals totaling $1.26 billion, up from the the 182 deals with a value of $329.4 million a decade earlier. Tennessee ranked 39th among all states in its share of VC funding.

Georgia ranked 42nd among the 50 states in the share of its VC funding and grew its venture funded businesses twice as fast as the overall economy. Georgia had a total of 484 venture fund deals in 2022 valued at $2.28 billion, up from the 226 deals valued at $665.7 million a decade earlier, Flippa reported.

— Compiled by Dave Flessner

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