Indiana venture activity shows signs of strength in down market, report says

The number of venture investments nationwide and the value of those deals dropped sharply in the first quarter as compared to a year earlier, but the situation in Indiana is considerably rosier, according to a new PitchBook report.

PitchBook’s latest Venture Monitor report, released Thursday, counts 2,856 venture investments nationwide worth a total of $37 billion in the first quarter. That’s 45.5% fewer deals than the 5,243 PitchBook counted during the first quarter of 2022. The total dollar value of those deals dropped 55.1%, from $82.4 billion a year ago.

The situation in Indiana was somewhat different: PitchBook recorded 41 venture investments in the state during the first quarter, a 12.8% drop from the 47 deals recorded during the same period in 2022. But the total value of those deals actually rose 24.7%, from $128 million to $159.6 million.

Indiana’s first-quarter deal value is “actually pretty impressive,” said Vincent Harrison, a venture capital analyst at PitchBook.

As to why Indiana may be showing relative strength in the continuing down market, Harrison said he believes it has to do with the remote work trend of the past few years coupled with the high inflation that has made traditional coastal tech hot spots even less affordable than they already were.

“As remote work becomes more popular and I no longer need to live in Silicon Valley to be a successful entrepreneur, I can go live in the Midwest. Or Colorado has been a really popular emerging hub for a lot of talent,” Harrison said. “If you look at inflation and just how expensive the cost of living in certain markets is becoming, I think you’ll probably see more engineers move out to these places that have lower costs of living.”

Looking at the numbers a slightly different way, data from the nation’s metro areas supports Harrison’s hypothesis.

The San Francisco metropolitan statistical area saw 2,629 venture investment deals worth a combined $59.6 billion in 2022, as compared with 2,234 deals worth a combined $46.8 billion in 2020. That represents a 17.7% increase in deal numbers and a 27.4% increase in the value of those deals over the two-year period.

In comparison, the Indianapolis/Carmel metropolitan statistical area saw its deal count increase 39.2% and the value of those deals rise 88.4% from 2020 to 2022, the PitchBook data shows. In raw numbers, the Indianapolis metro area saw 110 deals worth $630.9 million last year, as compared with 79 deals worth $334.5 million in 2020.

Indiana’s other metro areas did not have enough deals in each of these years to allow for similar comparisons.

PitchBook’s first-quarter Venture Monitor report noted that the San Francisco Bay Area accounted for 18.4% of all U.S. venture deals in the first quarter. That marked the third consecutive quarter that the Bay Area saw less than 20% of all deals, PitchBook said.

The trend is likely to continue into the second quarter, the report said, because last month’s collapse of California-based Silicon Valley Bank had more of an impact on the Bay Area than other U.S. markets.