This indicator represents the portion of a state’s venture capital deals as a percentage of the knowledge- and technology-intensive (KTI) industry employment. KTI industries include both manufacturing and service industries in research and development (R&D) relative to their production. These industries have high and medium-high R&D intensity, where R&D intensity is defined as the ratio of R&D expenditures to production.

KTI industries consist of nine manufacturing industries—chemicals and chemical products; pharmaceuticals; computer, electronic, and optical products; electrical equipment; other machinery and equipment; motor vehicles, trailers, and semi-trailers; air and spacecraft and related machinery; railroad, military vehicles, and other transport equipment; medical and dental instruments—and three services industries—information technology and other information services; software publishing; and scientific research and development. States seek to attract such industries because their relatively high compensation levels draw workers and increase state tax revenues.

For more details about KTI industries, see the “Technical Appendix” of the Indicators 2024 report “[2022] Production and Trade Knowledge- and Technology-Intensive Industries.”

Venture capital data include financing at seed, early, and later stages of venture investment. Seed financing supports proof-of-concept development and initial product development and marketing. Early stage financing supports product development and marketing, the initiation of commercial manufacturing, and sales; it also supports company expansion and provides financing to prepare for an initial public offering. Later-stage financing includes acquisition financing and management and also leveraged buyouts.

Some states have relatively few venture capital deals taking place in a given year; thus, the value of this indicator may show large fluctuations on a year-to-year basis. In states that report only several venture capital deals per year, a single large or small investment can substantially affect the value of this indicator.

Data sources: PitchBook, venture capital and private equity database; Census Bureau, American Community Survey, Public Use Microdata Sample.