Massachusetts and Colorado Top Entrepreneurial State Rankings
At FormDs, we strive to make it easier to find new business fundraisings since we celebrate the role that entrepreneurs play in growing the US economy. Today we embark on a new chapter: putting those fundraisings into perspective by ranking states on their entrepreneurial activity.
Specifically, we set out to answer:
- Which state's entrepreneurs have the most fundraisings?
- Which state's entrepreneurs have the most fundraisings when adjusted for number of people?
- Which state's entrepreneurs raised the most money?
- Which state's entrepreneurs raised the most money when adjusted for number of people?
Some background - What are Form Ds?
Form Ds are filed by startups and growing companies when they raise money. In fact, nearly all companies that we consider 'startups' are required to file a Form D with the SEC when they raise money. At FormDs when we use the word 'startup', we mean everything from tech startups like Twitter, biotech startups like Immune Design Corp, and non-tech startups like oil and gas startup Recovery Energy and retail startups like Sprouts Farmers Markets. Form Ds are not filed for offerings conducted by publicly-traded companies (for example, Intel or Coca-Cola) and small, local businesses (for example, your neighborhood dry cleaner).[1] Companies typically file a Form D for each round of money they raise. Given that nearly all startups file Form Ds, we can use Form Ds to track startups as they are created and grow.
Quick Note on Methodology
We analyzed the 13,000 new fundraising filings from October 2009 - October 2010. New fundraisings occur for both new companies and growing companies that raise additional funds to further their growth. We excluded filings for investment funds since we aimed to track non-financial startups[2], which does skew finance states like New York downward. We also excluded amended filings since we wanted to track only new fundraisings.[3] Lastly, we excluded fundraisings that were greater than $50 million in cash value. We used $50 million as the cutoff for when a company grows beyond a startup.
New Fundraisings per Million People
Winner: Massachusetts - 100 Fundraisings per Million People
Runner Up: Colorado - 95 Fundraisings per Million People
Massachusetts' 6.6 million people churned out an impressive number of new fundraisings: 659. Biotechnology and technology firms from the area around the Harvard and MIT drive much of the new startup activity with other technology firms close behind.
Denver and Boulder power Colorado to be the Runner Up in the New Fundraisings per Million People division with 479 new fundraisings across 5 million people. Colorado has considerable diversity in types of business fundraisings with strong showings from technology, energy (both oil and gas as well as alternative energy), and even mining.
Total New Fundraisings
Winner: California - 2,670 New Fundraisings
Runner Up: Texas - 1,061 New Fundraisings
California's startup economy powered California to a commanding lead over all other states. While technology startups comprise the majority of new fundraisings and especially in the San Francisco area, Southern California showed a large number of technology and bio tech companies. Unfortunately the SEC doesn't have an 'entertainment' category such that we can't get a good read on the number of Hollywood-oriented businesses that were created.
Beyond getting runner up in total new fundraisings, Texas gets an unofficial award for having the most diverse fundraising economy with three major fundraising centers - Dallas, Houston, and Austin. Oil and Gas dominated Texas fundraising but technology also had a strong showing.
Total Dollars in New Fundraisings
Winner: California - 11.5 Billion Dollars
Runner Up: Massachusetts - 2.8 Billion Dollars
California's dominance in total new fundraisings also extends to California being crowned Winner in the Total Dollars in New Fundraisings category with 11.5 billion dollars raised. Thus not only are California's startups the most numerous, they are also very well funded.
Massachusetts takes distant Runner Up with 2.8 billion dollars in new fundraisings. That means California's total startup fundraisings are at least four times as big as the next contender!
New Fundraising Dollars per Person
Winner: Massachusetts - $418 per Person
Runner Up: California - $312 per Person
Massachusetts, the Winner in New Fundraisings per Million People category, is also the Winner in the New Fundraising Dollars per Person category with $418 in new fundraisings per man, woman, and child in the state. Even though California startups raised more than four times as much money as Massachusetts startups, California has six times as many people (37.0 million vs 6.6 milion) and thus Massachusetts startups raise more per person.
California takes Runner Up. Massachusetts startups are too numerous across such a small populace for California to compete. Massachusetts startups raise 30% more money per state resident than California startups.
Check out your state to see its Entrepreneurial Ranking
Notes on Methodology
Thanks to the Stanford Visualization Group for the visualization on which this map was based.
[1] See SEC Guidelines for Small Businesses
[2] We excluded investment firms, REITS, investment banks, and a couple other categories of investment firms for two reasons. First, investment funds raise money and then turn around and invest that money in other businesses. If you're not careful, you'd count that same dollar once when it went into the fund and again when it was invested in a startup or growing business. Second, investment firms often operate multiple funds and they file Form Ds for each fund. For example, an investment firm called ABC Venture Capital might have funds named ABC Venture Capital I, II, and II. There would be Form Ds filed for each fund and thus that would overcount. Lastly, we excluded real estate funds since we don't think of raising $40 million to build an apartment complex as a traditional startup. As such, we excluded investment firms.
[3] Excluding amended filings does skew results when looking at dollars raised since companies can report new money raised in an amended filing. Unfortunately the way the SEC filing is structured makes it difficult for us to determine how much money was raised. Hence, we excluded amended filings for this analysis.
