Venture capital (VC) is a crucial funding source for relatively new firms in the high technology industries that create many of the state’s high paying jobs. Changes in VC funding can be a good indicator of future growth in those sectors. A recent surge in VC funding continued in the fourth quarter of 2020 as California firms brought in $17.4 billion of new funding. The last two quarters’ combined total of $35.4 billion is second only to the period that included the anomalous spike in the fourth quarter of 2018. As the graph below shows, the pandemic did not disrupt the flow of VC funding to state firms. In fact, the pandemic caused many firms that provide services that cater specifically to remote work to become more attractive VC investments.
The next graph compares California VC funding to the rest of the country since 1995. The state has always attracted a disproportionate share of nationwide VC funding, and in fact the state’s VC funding has exceeded the other 49 states combined in each of the past seven calendar years. The past two quarters saw a reversal of this trend as the other 49 collectively slightly outraised California.
Source: PWC Moneytree