Inconsistent Venture Capital Investment in NJ

In Action on Venture Capital

By Nicole M. Sandelier, NJBIA Director of Economic Policy Research On Oct 2, 2019

New Jersey is trying to position itself as an ideal location to retain and attract businesses that spur invention and innovation.

The increased Angel Investor Tax credit recently signed into law, which NJBIA supported, is a prime example of the initiatives being championed by the Legislature and Gov. Phil Murphy. A key component in creating an innovation ecosystem is attracting the companies and individuals that lure venture capital investment.

VC Investment in US. According to an analysis of National Venture Capital Association (NVCA) data, US companies saw a $103-billion boost in venture capital investment from 2006 to 2018. Total US venture capital investment reached more than $132 billion last year, compared to just $82 billion in 2017.

The software industry was the big investment winner in 2018, receiving almost $46 billion, a $15-billion boost compared to 2017. The pharma/bio-tech industry received $17.7 billion in 2018, a $5.7-billion increase from the previous year.

Regional Competition. New York led the way with $13.7 billion in venture capital investment, followed by Massachusetts ($11.7 billion). Both states saw more than a $1-billion increase over the previous year. Pennsylvania ranks third, receiving nearly $1.5 billion, while Maryland companies were awarded $1.3 million. Maryland’s 141% increase in venture capital investment from 2017 to 2018 was enough to replace New Jersey in the fourth spot. Connecticut (6th) and Delaware (7th) earned $630.1 million and $184.2 million, respectively.

A 12-year analysis of NVCA data found that New Jersey is the only state in the region to have experienced a decrease (-14%) in venture capital investment, from 2006 to 2018. In fact, the six other states in the region more than doubled the amount of venture capital they attracted during the same time span.

Inconsistent Venture Capital Investment in NJ. The 12-year analysis found that New Jersey has experienced significant ebbs and flows in venture capital investment throughout the years. In 2007 and 2008, New Jersey’s venture capital investments increased to over $1 billion annually. However, in 2013, the Garden State’s venture capital investment hit a 12-year low of $473.2 million before substantially increasing again to $1.231 billion in 2015.

Today, New Jersey has yet to reach venture capital investment levels equal to or similar to that of 2015. Instead, the state is experiencing more ebbs and flows in investment. In 2018, venture capitalists invested $738.8 million in New Jersey companies, a decrease of $62 million from 2017.

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