MA Leads the Nation in Venture Capital, But Follows National Declining Trend

Massachusetts leads the nation in venture capital investment. But new data shows the Commonwealth’s VC investment growth is not immune to the decline happening across the country.

One state is bucking this trend – Massachusetts’ neighbor to the north, New Hampshire.

New data released in the fall shows for 2023, the latest period available, Massachusetts took the top spot in the country for venture capital (VC) investment dollars per $1 million of state gross domestic product (GDP). According to data from Pitchbook presented by the National Science Foundation’s Science & Engineering State Indicators, the state beat out Delaware, the prior year’s top ranked state, as well as tech giant California and New York.

But here’s where the good news stops. While Massachusetts tops the nation in VC investment in its startups and businesses, it also follows the sweeping trend of declining investment across the country.

Since 2020, the Commonwealth’s VC investment dollars have fallen from over $31,000 (per $1 million of GDP) by 31 percent in 2023. Nationwide over the same timeframe, VC investment dollars fell by over 41 percent.

In fact, only six out of all 50 states have had positive VC gains since 2020. One of those is New Hampshire – which saw VC investment grow by 5% through 2023 – and Vermont, which saw investment grow even faster.

This puts Massachusetts’ innovation economy in perspective. According to the MOA Opportunity Report Card, the Commonwealth gets an “A-” – one of the state’s top scores – for innovation, based on venture capital investment, the number of patents granted per capita, and the density of employment and businesses in research and development industries.

But if a decline in venture capital investment continues, it could endanger the state’s position as a leader in these industries.

There have been other indicators of potential trouble for Massachusetts’ burgeoning tech industries.

In 2024 alone, thirteen biotech companies laid off a total of 1,400 employees in Massachusetts, according to the Boston Business Journal’s layoff tracker. In addition to the biotech sector, layoffs continued to claim jobs in the broader tech industry in the Commonwealth. Over thirty tech companies in the Bay State eliminated over 6,500 local jobs. Notably, these are conservative estimates as many companies do not disclose the exact number of job cuts.

CNBC ranked Massachusetts as the third best technology and innovation economy in the country in 2024, down from first place in 2023. Still, it was one of only two categories in which Massachusetts earned an “A+” from CNBC in the Top States for Business 2024 rankings.

Massachusetts has a lot to be proud of when it comes to our VC investment. But, by nature, these investments are a high risk, high reward proposition. A national downturn represents economic challenges being faced across the country.

The Legislature and Governor Healey have taken steps to leverage the state’s unique strengths to preserve and expand innovation in Mass. At the end of 2024, state leaders finalized an economic development bill that will provide state investments in artificial intelligence, biotech, and life sciences and the Governor announced the launch of a Massachusetts AI Hub. These efforts aren’t a cure-all but are a step in the right direction.  

When it comes to economic areas where Mass. shines, we need to be hypervigilant about fostering continued growth, lest we fall further behind. We cannot afford to lose our edge in this space. After all, the Massachusetts economy and the state’s overall economic competitiveness heavily relies on our innovation economy.