By Serafina Lalany

 

There’s a common myth in venture capital that startup funding is a national market, a level playing field where the best ideas win regardless of location. Founders know this isn’t true. Raising a seed round in Silicon Valley looks nothing like raising in the Midwest or the South.

Ecosystems in the U.S. are highly local, with uneven density of investors, networks, and capital access. These disparities show up in fundraising outcomes. Carta data highlights that in 2024 the median seed round in California was about $3.2M at a $17M valuation, while in Florida it was $1.5M at a $13.6M valuation. The difference isn’t founder quality or ambition. It’s geography. And geography, as it turns out, is not destiny.

Structural Valuation Gaps

Founders everywhere are building strong companies, but their terms reflect inefficiencies in the system. In dense hubs like the Bay Area or NYC, deals happen faster and often at higher valuations. In thinner markets, founders face lower valuations and smaller checks– not because their companies are worth less, but because the local dynamics impose friction.

There is no single “national” price for a Seed or Series A. There are only local markets, shaped by who’s at the table and how quickly they move.

Carta’s 2025 dataset of 903 early-stage rounds shows the split clearly:

To illustrate this point: A Midwest founder might raise a $2 million seed on a $10 million post-money valuation, while a peer in California could raise $4 million on $22 million. By Series B, the gap widens dramatically. Midwest Series B medians are roughly one-third of West Coast medians. Yet nobody seriously argues that Midwest founders are only one-third as talented. Instead, these numbers scream structural market inefficiency. Venture capital’s geographic allocation is out of sync with where innovation and economic potential exist.

Why the Gaps Persist

Capital geography. The Heartland produces over a third of U.S. GDP but receives only about 10% of venture funding. Investors cluster where they’re comfortable (Silicon Valley, New York, Boston), leaving wide swaths of the country undercapitalized.

Decision velocity. In dense hubs, deals close in days. In Arkansas or Iowa, it can take months. Time is money– slower decisions mean lower valuations and longer fundraising cycles.

Ecosystem maturity. Silicon Valley recycles talent and capital with every generation of founders. Many Heartland ecosystems are still maturing, and investors often price in that perceived risk.

2025: High Hype, Tight Capital

We’re in a paradoxical moment. On one hand, AI is overheating the market. In Q2 2025, more than 64% of all U.S. venture dollars flowed into AI startups, and the five largest AI rounds accounted for a third of all venture activity. It’s as if the industry has decided nearly everything outside of AI is optional.

On the other hand, overall capital availability is tight. Venture funding hasn’t truly rebounded; it’s been propped up by a handful of mega-deals. Remove one $40B AI round in Q1 and global funding would have dropped rather than rising. Deal counts at Seed and Series A have stabilized, but they’re flat: roughly 1,100–1,400 new investments per quarter for the past 10 quarters. That’s consistent, but a far cry from the boom years.

For founders, this climate creates a double bind. If you’re in a hot AI segment, you may find money plentiful — perhaps too plentiful, in a way that risks future down rounds. If you’re not, fundraising feels tighter than ever. Investors are writing fewer checks, larger rounds, and concentrating more dollars in fewer companies.

This backdrop of selectivity and capital discipline accentuates the geography gap. When money was cheap, it papered over location; investors were more willing to take flyers outside their backyard. With capital scarcer, many have retrenched to their comfort zones. The relative disadvantage of being a founder outside a major hub can feel sharper than ever.

But there’s another way to read the data: these regional valuation gaps are mispricing signals. They suggest the market is undervaluing strong startups outside the hype centers. For savvy investors, this is opportunity. For founders, it’s frustrating — you shouldn’t have to move to San Francisco to be valued on your merits.

What is different now is that the Heartland is no longer invisible. Nearly a third of early-stage deal activity is already happening between the coasts. Activity creates surface area, and surface area creates the conditions for momentum.

Convergence and Bright Spots

Even in this climate, signs of convergence are undeniable.

• Texas: Median seed valuations are only slightly behind California’s, and Series A medians are nearly indistinguishable from Massachusetts. Investors from both coasts are now regularly on the ground.
• Oklahoma: Once unimaginable, Series A rounds are now approaching national medians. Initiatives in Tulsa and Oklahoma City, often backed by local philanthropies and coastal transplants, are creating momentum.
• South overall: In Q1 2025, the South surpassed the Northeast in total venture dollars raised — a historic milestone that shows capital flowing between the coasts.
• Arkansas: Still data-scarce, but that is what frontiers look like. One breakout round can reset expectations quickly.

These are encouraging signals that geography is becoming less determinative for the best companies. The scales are tipping– slowly, then suddenly.

Founders First

It’s tempting for investors to view the Heartland or non-coastal markets as an “arbitrage play”, a way to find undervalued startups and get more equity for less dollars. But framing it that way does a disservice to founders. Founders aren’t looking to be someone’s bargain; they’re looking to build great companies without unnecessary friction. The goal shouldn’t be to keep the Heartland “cheap” so outsiders can profit. The goal is to fix the structural inefficiencies so that a founder in Little Rock or Cleveland can raise what they need as efficiently as a founder in Palo Alto. That means building the systems that let those founders move faster and reach further: local capital networks, accelerator programs, better connectivity to customers and mentors, and yes, more investor competition for their rounds. We should be clear: the aim is not to homogenize every regional market to be just like Silicon Valley. Each region will (and should) maintain its own character, sector strengths, and cost structure. Not every city needs $200 million Series B valuations on pre-revenue startups – that might even be unhealthy. Instead, the aim is to remove the arbitrary disadvantages.

A promising healthcare analytics startup in Birmingham or a fintech in St. Louis should be able to find seed capital without a herculean coast-to-coast search. By narrowing the information gap and the distance gap, we narrow the valuation gap organically. When capital flows more freely across geographies, valuations will better reflect company fundamentals rather than ZIP codes.

Join us in Little Rock

The geography gap in venture isn’t destiny. It’s design. And design can be changed.

That’s the work we’re doing with Onward FX.

In the past year, the model hastripled deal flow in our region and delivered term sheets to one in four participating startups, founders from 34 states and 4 countries.

On October 30 in Little Rock, we’ll host the next Founder/Funder Exchange with 25 venture firms from across the country. Not as tourists, but as participants in a system tipping the scales.

 

👉 Join us in Little Rock. See how geography is shifting and help accelerate the future of a more connected venture ecosystem.