January 27, 2022

Texas startups attract $10.55 billion in venture capital last year

Texas startups in 2021 attracted more than $10 billion in venture capital — more than double the total from 2020.

According to a new report from data provider Pitchbook and the National Venture Capital Association, Texas startups attracted a record-breaking $10.55 billion in venture capital last year, up 123% from the $4.73 billion total in 2020. Back in 2011, the VC total for Texas was almost $2.87 billion.

“Texas’ venture capital record numbers for 2021 validates the state’s friendly, nurturing environment for startups from every industry and of every size,” said Robert Allen, President and CEO of the Texas Economic Development Corporation (TxEDC). “Investors continue to pump capital into Texas startups with the assurance that these businesses will thrive in the state’s robust entrepreneurial ecosystem.”

The Austin Metropolitan Statistical Area (MSA) was among the top 10 U.S. markets for total VC funding in 2021, the report shows. Last year, startups in the Austin area raised $4.9 billion in venture capital through 387 deals, up 111% from the dollar total in 2020, according to the report.

The Austin MSA’s 111% growth rate for the value of VC deals exceeded that of five other markets: Boston (94%), Los Angeles (47%), San Francisco Bay Area (91%), Seattle (71%) and Washington, D.C. (100%).

Across the country, U.S.-based, VC-backed startups collected a record-shattering $329.6 billion in 2021, up almost 98% from the previous record of $166.5 billion in 2020, the report says. That money includes seed, angel, early-stage and late-stage funding.

“2021 began with a bang in VC activity and ended in spectacular fashion, producing another record-setting year. While many were bullish on the industry at the start of 2021, possibly no one predicted how remarkable the year would prove to be,” the report says.

Bobby Franklin, president and CEO of the National Venture Capital Association (NVCA), said the record-setting VC activity of 2021 means American entrepreneurs are creating more jobs than ever.

“Entrepreneurs are our nation’s job creators who plant the seeds for the new high growth companies of tomorrow,” Franklin said. “To ensure their future success, we need policymakers to think about the long game when it comes to the startup ecosystem. These numbers show the massive impact our industry can have on our nation’s economic success.”

Many of these job-creating startups either have been founded in Texas or have relocated to Texas, in large part because the entire country has taken notice of the state’s startup-friendly atmosphere. This includes the low cost of doing business, highly talented workforce and lack of a state income tax.

In 2021, personal finance website WalletHub and business website Expertise.com named Texas the No. 1 state to start a business. Also last year, real estate investment platform Roofstock ranked Austin (No. 3), Dallas-Fort Worth (No. 5) and Houston (No. 10) among the top 15 major metro areas in the U.S. with the most startup activity. Among small metro areas, Midland ranked 15th.

“Texas continues to cement its status as a beacon for entrepreneurs who are looking for a great place to start and grow their businesses,” Allen said.