National Trends. The United States has healthy venture capital activity levels. Last year, more than 8,000 venture-backed companies received $85 billion in funding. The Pharma/BioTech and Software sectors continued to lead all other sectors in venture capital investment, receiving $12.93 billion and $30.16 billion, respectively.
Nationally, venture capital investments have increased to rates similar to that of the internet boom.However, a closer analysis reveals there are only a few states that are significantly benefiting from the current tech boom: California, New York and Massachusetts.
Regional Competition. In 2017, New Jersey received $780 million in venture capital investments. Regional competitors New York and Massachusetts far surpassed other states in the region, generating $12.26 billion and $8.97 billion, respectively.
Additionally, regional states increased the amount of investments at a faster rate than New Jersey. The Garden State ranked 7th in the region, with a 4 percent increase in venture capital investments from 2004 to 2017. National leaders, New York and Massachusetts, experienced a whopping 1,910 percent increase (1st in the region) and a 78 percent increase (4th in the region), respectively, during the same period.
New Jersey at a Crossroads. Throughout New Jersey’s long history, the state has achieved many notable accomplishments, including earning its reputation as the nation’s center for innovation. In more recent years, however, states like California and Massachusetts have passed New Jersey and have taken the lead as national innovation hubs.
While venture capital investment is only one component in strengthening an innovation ecosystem, it is an essential driver for economic growth. In order for New Jersey to regain its stature as the “innovation state,” it must find ways to increase venture capital investment.
Investment in venture capital through tax credits and business incentives will stimulate the development and creation of businesses that help drive innovation.