# Colorado is bucking the trend of slumping startup investment Author: Kevin Dowd Published date: February 14, 2023 Read time: 5 minutes Colorado has proven more resilient than most other states as the U.S. venture capital sector endures a pullback in funding. In most of the United States, venture capital activity tailed off considerably in 2022 after [smashing records in 2021](https://fund-forecasting@carta.com/data/state-of-private-markets-report-q4-2021/). The combined value of startup investments in the nation declined by 80% from Q4 2021 to Q4 2022, [according to Carta data](https://fund-forecasting@carta.com/data/state-of-private-markets-q4-2022/). That reversal was present in nearly every state that’s home to a significant startup hub. In California, deal value dipped by 84%, in New York it was 80%, and in Washington it was 89%. However, there is one notable exception: In Colorado, the value of startup investments dipped just 24%. That’s far and away the smallest drop among states with at least 20 venture deals tracked on Carta during Q4. The next-smallest year-over-year decline was Virginia, at 48.5%. There’s a similar trend in deal count. Overall, the number of startup investments in the U.S. fell by 56.4%, but in Colorado, deal activity dipped just 28%. For the full year, venture deal count in Colorado fell just 13.5% between 2021 and 2022, compared to a national decline of 29.2%. The next-smallest dropoff among states with at least 150 investments in 2022 was Florida at 22.9%. In terms of deal value, Colorado’s annual decline of 26.3% from 2021 to 2022 again compares favorably to a national decrease of 50.8%. Denver County alone saw $2.29 billion in venture capital raised last year, ranking 12th among all counties nationally. Of that cash, 27% went to the energy sector, while SaaS startups raised another 21%. In 2022, there was one venture investment in Colorado for every 32,076 residents. That was the fourth-highest density of deals in the U.S. ## A magnet for tech talent Several factors help explain why Colorado weathered 2022’s venture downturn better than other states. It starts with the people: Colorado’s total population [grew by 14.8%](https://www.census.gov/quickfacts/CO) between 2010 and 2020, the [sixth-largest increase for any state](https://www.census.gov/library/visualizations/2021/dec/2020-percent-change-map.html). That migration has included a significant segment of tech workers. The number of Denver-area workers employed in high-tech industries [rose 18.9% between 2015 and 2020](https://www.thecentersquare.com/colorado/denver-aurora-lakewood-co-has-one-of-the-fastest-growing-tech-sectors/article_85e44aa5-9b11-5cb1-b6cb-cfdd351d1b3c.html), compared to 8.9% for the whole U.S. over that period. Remote work during the pandemic has encouraged even more tech workers to flock to the region, drawn by the great outdoors and a lower cost of living than Silicon Valley. Big tech companies have also expanded their presence in Colorado. Five years ago, Google opened [a $131 million facility](https://www.bloomberg.com/news/photo-essays/2018-02-23/inside-google-s-131-million-boulder-campus) in Boulder. More recently, Palantir Technologies moved its headquarters from Palo Alto to Denver in 2020. Companies like Marqeta and Wix [opened new offices in the region](https://www.denverpost.com/2020/09/06/colorado-tech-boom-despite-coronavirus/) during the pandemic. Investors credit several nearby universities for contributing to the Rocky Mountain region’s rise as a tech hub. The [University of Colorado](https://www.colorado.edu/venturepartners/), [Colorado State University](https://biz.colostate.edu/centers-institutes/entrepreneurship), and others have dedicated entrepreneurship programs. ## A new generation of startups Some newcomers and recent graduates are starting their own companies, and these founders are beginning to attract more attention from VCs, helping Colorado’s startup ecosystem evolve. Across 2021 and 2022, about 67% of all venture investments in Colorado were either seed or [Series A](https://fund-forecasting@carta.com/learn/startups/fundraising/series-a/). Just 3% were at Series D or beyond. Investors believe that some young companies will eventually raise later-stage rounds, creating alumni networks of entrepreneurs who start new companies. ## Colorado vs. other rising states During 2022, Colorado sustained its pandemic-era tech growth better than other states. For instance, venture deal count in Florida was down 57.4%, and deal values fell by 86.2%. Some other notable state-by-state takeaways: - Total VC funding in California fell from $32.5 billion in Q4 2021 to $5.2 billion in Q4 2022, a difference of $27.3 billion. - Only North Carolina and Virginia saw annual VC deal count climb from 2021 to 2022. - Utah experienced an 86% decline in VC investments from Q4 2021 to Q4 2022. The geographic democratization of venture capital has become a major trend, and Colorado may have more staying power than many have predicted.