By Tom Still

MADISON, Wis. – It’s tempting to believe venture capital is predominantly a coastal phenomenon based on where such investments are made: About three-quarters of the record $333 billion invested in 2021 wound up in three states – California, New York and Massachusetts.

A number of focus for the rest of the United States, however, is where jobs created by venture-backed companies can be found. Nearly two-thirds of that U.S. employment base (62.5%) is located outside of the “Big Three” states, including emerging tech states such as Wisconsin.

That’s part of the message that Bobby Franklin, president of the National Venture Capital Association, brought to Madison recently when he addressed the annual Wisconsin Early Stage Symposium. It’s a conference attended by venture and angel capitalists who, among other things, hear investment pitches by emerging companies.

Franklin’s 400-plus-member NVCA is based within a few blocks of Capitol Hill in Washington, D.C., but he hasn’t forgotten his Heartland roots or the importance of dispelling the notion that America is mostly “flyover country” when it comes to venture capital.

Taking note of Wisconsin’s record early stage investment year in 2021 ($868 million, up from $484 million in 2020), Franklin talked about the historic importance of such capital in building a more diverse and resilient economy. With recessionary storm clouds on the national horizon, Franklin cited past patterns of major firms being born in tough times and adding a disproportionate number of jobs over the years.

“Venture capital plays an incredible role in fueling job growth in America,” Arkansas native Franklin told conference attendees, with data to back the claim.

  • Venture-backed companies made up a tiny share (0.18%) of all new companies between 1975 and 2015, but they accounted for 57% of the total market capitalization of public companies founded in the same 40-year period.
  • Private sector investment in research and development during the same time was 82% venture capital backed, most notably in tech industries such as artificial intelligence, machine learning, cleantech, cybersecurity, life sciences and more.
  • While still not on a par with the coasts, venture deals and dollars in the Great Lakes region are roughly equal to the Mountain and Southeast regions and not far behind New England.
  • Through the third quarter of 2022, software and related services and medical technologies were the biggest sources of deals in the Great Lakes region, which Franklin defined as Wisconsin, Illinois, Indiana, Michigan, Minnesota and Ohio. Technology, media and telecommunications was the third largest investment sleeve for the region; “fintech” (financial technologies) was next on the list.

Major tech companies are laying off thousands of workers nationwide, but it appears to be more a matter of growing too fast than the bottom falling out. Over time, VC-financed tech layoffs have been uncommon.

A 2022 study by NVCA and its partners concluded employment at VC-backed companies grew nearly 1,000% from 1990 to 2020. That’s a pace eight times that of job growth at non-VC-backed companies.

It works the same way in hard times. During the Great Recession of 2008-10, annual private sector job growth dropped by more than 4% while employment growth at VC-backed companies grew 4% during the same period.

A mix of economic forces, from inflation to interest rates to global turmoil, are pressuring venture capital in the United States. With initial public offerings bumping against an all-time low, it’s much harder for investors to “exit” mature deals at a profit – which is needed to make up for losses in startups that inevitably fail.

Other factors can help, however, such as business and lifestyle conditions in states that pay attention to the needs of emerging companies. In Wisconsin, with the right incentives, the trend toward more remote workers could draw some talent from the coasts.

“When I was growing up in Arkansas, the technology scene in places like Silicon Valley felt a world away,” Franklin said. “But today’s world is inter-connected and investors’ money doesn’t always stay on the coasts.”

That’s encouraging news for states such as Wisconsin, where the “flyover” reputation may be fading as investment dollars wing their way into the state.

Still is president of the Wisconsin Technology Council. He can be reached at