I recently came across an article that shows “Where U.S. venture capitalists are placing their bets.” The article includes this map of the United States with bubbles showing the dollar amount of venture capital invested in that state during 2013.
Venture capital is basically money provided by investors to startup firms and small businesses that have long-term growth potential. This funding is a form of seed money that helps grow the economy, and it has been a prominent financing tool fueling the country’s technological revolution.
It isn't surprising that California’s bubble dwarfs all other states. But Utah has a bubble worth noting as well, and is actually bigger than in many other states. The following chart, also taken from that article, shows Utah received the 11th most venture capital in 2013.
While this is quite commendable for a relatively small state like Utah,. there is a more demonstrative way to make this comparison. The map shows that Utah’s venture capital investment isn't much smaller than Texas, yet the Texas economy is considerably larger than Utah’s. So to get a true appreciation of the relative importance of venture capital investment in each state, we need some sort of per capita or proportional adjustment based on each state’s economic size. That way, the amount of venture capital going to each state can be evaluated in proportion to what that state’s economy can work with.
Since most venture capital flows to a firm (verses an individual), I have used each state’s firm count as the proportionality factor. Texas had $997M dollars in venture capital investments spread across roughly 597,400 firms. Utah had $403M spread across only 85,122 firms. That is $4,734 per firm, while the Texas distribution is only $1,669 per firm. This shows that Utah is doing a better job of pulling in venture capital money for its size than the article shows communicated.
We created the following chart that shows the top 20 venture capital states from the article, rearranged based upon a number-of-firms per capita adjustment. In that listing, Utah moves up to the 5th position. Adjusted for its economic size, an argument can be made that Utah is the 5th best state in the nation in attracting venture capital in 2013.