In many ways, venture capital is the invisible hand of our economy, a remarkable catalyst for innovation, economic growth and job creation. It has been at the heart of revolutionizing defense technology, health care, and blockchain. Additionally, venture capital is leading monetary innovation in the cryptocurrency and blockchain industries. As of the first quarter of this year, there were over 58,000 active venture-backed enterprises nationwide. As a result, venture capital has become a truly national phenomenon, supporting innovation and creating high-paying jobs in all 50 states.

National Expansion of Venture Capital

The venture capital landscape is no longer limited to traditional strongholds like California, Massachusetts, and New York. In 2024, more than 3,600 venture funds have diverged from norm investment hotspots. This is indicative of a broader geographic distribution of investment activity. To them, this expansion is symbolic of an entrepreneurial potential being recognized across the nation. Second, it demonstrates an increasing availability of capital to build and support innovative, risk-taking ventures across the country.

For decades, venture capital-backed companies have led the way in developing disruptive technological innovations here in the United States. These companies power the majority of net new, large-scale employment, punching far above their weight in fueling bottom-line economic growth and prosperity. Texas, Florida, Colorado, and Ohio are enjoying large dividends from recent venture capital bets. These investments spur groundbreaking new technologies and innovation while generating thousands of new jobs in these states. Texas, with 475 venture-backed firms, is in first place. Florida is next, with 313, Colorado has 185 and Ohio has 139.

Venture capital is instrumental in nurturing the next wave of transformative businesses, ranging from robotics startups to agtech companies and cybersecurity firms. These investments help create and grow cutting-edge solutions to our most pressing challenges and fuel economic development. Venture capital firms serve as an important source of capital and expertise for early-stage companies. With this support, entrepreneurs are equipped to actualize their visions and generate tangible, lasting value.

Transforming Industries

Today, venture capital-backed companies are changing the game across a range of industries — a testament to the extraordinary impact innovation and smart investment can have. Once again, SpaceX is reshaping the limits of space travel. On the other hand, Airbnb has reinvented the hospitality sector, and Waymo is leading the charge on autonomous vehicle innovation. These three examples typify how venture capital accelerates technological innovation. At the same time, it opens up new business models that disrupt long-standing industries.

Venture capital is having an equally transformative effect in the financial sector, especially where cryptocurrency and blockchain are concerned. Investments in blockchain startups are fueling the development of decentralized finance (DeFi) platforms, non-fungible tokens (NFTs) and more. Only such innovative applications hold the promise to democratize wealth creation and financial opportunity. This influx of capital is driving experimentation and innovation, leading to new products and services that are reshaping how people interact with money and assets.

Carried interest is currently treated just like long-term capital gains taxes, which is the ideal public policy tax treatment for allowing and encouraging long-term investment and risk-taking. This puts venture capitalists on the same capital gains tax footing as all other investors that hold an asset long-term. This alignment motivates them to help ensure the success of the companies in which they invest. Instead, carried interest gets taxed as a capital gain. This taxation is warranted given the nature of this long-term investment and the high level of risk inherent in venture capital.

The Future of Venture Capital

Venture capital is key to maximizing the promise and opportunity of the American entrepreneurial economy. To ensure it has the greatest impact, more venture capitalists should work alongside founders from coast to coast. This will further increase access to capital and innovative expertise in the most underserved parts of the country. Venture capital helps all 50 states—entrepreneurs in each state are powered by entrepreneurs in every state. This funding fuels innovation, generates jobs, and produces economic growth that enriches communities from coast to coast.

At the end of the day, the ongoing growth and diversification of venture capital is really key to keeping America’s competitive advantage in this global economy. By investing in groundbreaking technologies and supporting innovative companies, venture capital firms are helping to create a more prosperous and sustainable future for all. Venture capital’s influence is growing, and so are its harms. As it has in the past, so too will it again fuel advanced innovation and spark U.S. economic prosperity.