Think venture capital is just a Silicon Valley game? Think again
To unlock the full potential of the American entrepreneurial economy, we need more venture capital partnering with founders in every corner of the country.
Venture capital is an increasingly national industry, with investments fueling innovation and job creation in all 50 states. From coast to coast, VC-backed companies are reshaping how we live, work, and connect – think SpaceX revolutionizing space travel, Airbnb transforming hospitality, Waymo advancing autonomous vehicles, Cava reimagining fast-casual dining, and Instacart changing how millions shop for groceries.
But to unlock the full potential of the American entrepreneurial economy, we need more VCs partnering with founders in every corner of the country – not just with funding, but with mentorship, advice and long-term support.
In 2024 alone, more than 3,600 venture funds operated outside the traditional strongholds of California, Massachusetts and New York. Texas counted 475, Florida 313, Colorado 185, and Ohio 139–proof that the innovation economy is thriving nationwide.
From a robotics startup in Pittsburgh, to an agtech company in Des Moines, to a cybersecurity firm in Austin, venture capital is fueling the next generation of transformative businesses. These companies aren’t just creating cutting-edge technologies – they’re fueling local job creation and shaping the future of entire industries.
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The economic impact of venture capital is hard to overstate. Over the past few decades, VC-backed companies have been behind many of our nation’s most important technological breakthroughs, while also driving job creation at scale. Today, the industries being transformed by venture capital – defense tech, healthcare, blockchain and more – are redefining America’s economic future and strengthening our global leadership.
In defense technology, VC is fueling the development of next-generation security solutions that enhance America’s defense capabilities. From autonomous drones to AI-driven cybersecurity, venture-backed startups are helping the U.S. stay ahead in a rapidly evolving threat environment. Take Fortem Technologies, a VC-backed defense startup headquartered in Utah that is working on technology that uses radar, AI and autonomous drones to intercept hostile drones and protect critical infrastructure.
In healthcare, VC is accelerating breakthroughs in biotech, telemedicine and personalized medicine that are improving patient outcomes, expanding access to care and reducing costs. VC-backed startups are developing cutting-edge treatments for diseases like cancer, Alzheimer’s and rare genetic orders. Minnesota-based HistoSonics is pioneering a noninvasive tumor treatment that uses sound waves instead of surgery – a potentially life-changing advancement powered by venture capital.
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In the cryptocurrency and blockchain space, VC is driving a wave of financial innovation that’s disrupting traditional banking, increasing transparency, and expanding access to digital financial services. The rise of decentralized finance (DeFi) and blockchain applications is only possible because of the investment ecosystem that venture capital provides. In Texas, ConsenSys is building tools that help developers connect their apps to blockchain networks, advancing the infrastructure of a decentralized economy.
These examples are just a sampling of the more than 58,000 U.S. venture-backed businesses active at the end of Q1.
VC is a proven engine of innovation, economic growth and job creation – but today, that engine is at risk. Congress is considering changes to the tax treatment of carried interest, a cornerstone of the VC model.
Carried interest is the share of profits that investors earn when they successfully help build a startup into a thriving company – an outcome that studies show happens only about 25% of the time. It’s taxed as a capital gain – not ordinary income – because it reflects long-term investment, which typically spans eight to 10 years from initial funding to exit and involves significant risk-taking."
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The current tax treatment of carried interest is the ideal public policy; VCs pay the same capital gains tax rate as anyone else when they hold an asset long-term, reflecting both the duration and risk of their investment. Long-term investment has been incentivized, and the benefits to our nation have been realized with new company creation and job growth, as well as new innovations before there is ever a question about the tax rate.
Raising taxes on carried interest would discourage precisely the kind of patient, high-risk investment that fuels groundbreaking technologies and job creation across the country.
Altering carried interest taxation wouldn't just affect investors – it would undermine the venture ecosystem that fuels innovation and economic growth. From life-saving medical innovations to next-gen defense technologies, the ripple effects would slow progress in industries critical to America's future competitiveness.
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America is facing serious technological competition from China, which is why we need policies that support – not hinder – entrepreneurship and investment. The carried interest incentive has been a crucial driver of the venture capital ecosystem, ensuring that capital continues to flow toward transformative ideas and industries.
To stay competitive on the global stage, America must double down on innovation. That starts with protecting the entrepreneurial ecosystem that’s fueling it–from Idaho to Florida and New Hampshire to Arizona, and everywhere in between.
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