California lost several of its wealthiest residents last year. High-profile names such as Google co-founders Larry Page and Sergey Brin, venture capitalist Peter Thiel, and others relocated to Florida, Texas, and Nevada. They cited a proposed 5% one-time wealth tax on billionaires aimed at funding health care, food assistance, and education. Yet the state’s venture capital inflows hit new heights. More than $335 billion flowed into California companies this year. That sum dwarfs every other state. New York pulled in less than a tenth. Texas attracted just one-fortieth.
The numbers come from PitchBook’s private market funding data, released in early July. They paint a picture of stark contrasts. Billionaires may leave for friendlier tax climates. But the money, the talent, and the startups stay put. And they cluster around one force. Artificial intelligence.
In the second quarter alone, 1,087 California companies raised $108.8 billion. Three deals swallowed three-quarters of that total. Anthropic pulled in $65 billion, pushing its valuation near $1 trillion. Jeff Bezos-backed Project Prometheus and Anduril Industries took the rest. Nearly 90 percent of all invested dollars chased AI firms. That share jumped from 65 percent the year before. Kyle Stanford, director of U.S. venture capital research at PitchBook, put it plainly. “If you’re a tech company and you’re not an AI company, you have a very, very difficult opportunity ahead of you to raise capital.”
The concentration worries some observers. Smaller companies and midsize funds find themselves shut out. Only giants such as Andreessen Horowitz and Sequoia Capital can write the massive checks that back OpenAI, Anthropic, or SpaceX. Those bets may pay off if the companies go public. But the initial public offering pipeline looks thin. Stanford noted that a vast majority of investors lack exposure to the biggest names. Returns may not flow back widely. “It’s going to concentrate the fundraising over the next few years as well into these already very large names,” he said.
Southern California carved out its own slice. The Los Angeles, Long Beach, and Santa Ana metro area drew nearly $8 billion across 207 deals. That marked a 28 percent jump from the prior year. Defense and aerospace firms led the way. Anduril Industries, founded by Palmer Luckey, raised $5 billion. Impulse Space took in $500 million. Other winners included industrial suppliers, software developers, and life sciences outfits. Capital moves easily between San Francisco and Los Angeles, Stanford observed. The Bay Area still dominates. Yet L.A. and San Diego benefit from the spillover.
California’s broader economy tells a similar story of strength. The state’s gross domestic product expanded 5 percent last year to a record $4.25 trillion. That figure exceeds the entire output of every country except the United States, China, and Germany. Nearly 400 startups boast billion-dollar valuations, more than any other state, according to CB Insights. Gov. Gavin Newsom highlighted the results. “California’s workers, entrepreneurs, and innovators continue to prove that investing in California delivers real results,” he said in a statement responding to productivity data.
But the tax debate refuses to fade. The 2026 California Billionaire Tax Act, backed by the SEIU-UHW labor union, would impose a one-time 5 percent levy on wealth above $1 billion. Proponents project it could raise $100 billion over several years. Six prominent billionaires left before the January 1, 2026, cutoff. Their combined wealth implied roughly $27 billion in potential tax revenue, or more than a quarter of the expected haul, Yahoo Finance reported in March. The list included Page, Brin, Thiel, former Uber chief Travis Kalanick, car-loan magnate Don Hankey, and director Steven Spielberg. Mark Zuckerberg and David Sacks followed later.
Critics warned of wider damage. Garry Tan, chief executive of Y Combinator, predicted a “stampede of unicorns” out of the state. Chamath Palihapitiya claimed California had already lost $1 trillion in wealth. A Guardian article from January captured the split among tech leaders. Jensen Huang of Nvidia declared he had “no plans to leave California.” Others saw the tax as a threat to the innovation engine. Enrico Moretti, a UC Berkeley economics professor, called the revenue estimates “way overly optimistic” and warned the measure had “the potential to completely destroy California’s economy.”
Supporters counter that the departures remain limited. Only a handful of the state’s roughly 214 billionaires actually left. Even if all of them departed, the lost income tax revenue would take decades to offset the one-time wealth tax gains, argued economists Gabriel Zucman and Emmanuel Saez in a New York Times essay. The state’s Legislative Analyst’s Office projected temporary revenue increases of tens of billions but noted likely annual income tax losses in the hundreds of millions from out-migration.
Bobby Franklin, president of the National Venture Capital Association, struck a more optimistic note in the PitchBook report. “Capital is flowing back into American innovation with real force. Investment activity is picking up, fundraising is improving, and there are early signs the IPO market is beginning to reopen.” The association collaborated with PitchBook on the data release.
Still, questions linger about sustainability. The venture surge rides on a few mega-rounds and the promise of transformative AI returns. If Anthropic and OpenAI deliver strong financials in public markets, confidence could spread. If not, the concentration of capital might tighten further. Non-AI startups already face steep odds. Smaller venture funds without stakes in the winners struggle to show returns to their own investors.
And the billionaire moves continue to ripple. Florida gains gleaming office space and soaring property prices in Miami. Texas courts companies with no state income tax. California keeps its universities, its engineers, its network effects. Those assets prove hard to replicate. Stanford’s data shows deals and dollars still flow heaviest here. The talent, it seems, has not followed the ultra-wealthy out the door.
So the state finds itself in a strange equilibrium. Political pressure builds for higher taxes on the rich. Some of the richest respond by changing their legal residence. Yet the investment dollars pour in at record scale. The AI wave overrides many complaints about costs, regulations, and housing. For now. Whether that holds when the next tax proposal surfaces or when the current funding cycle turns remains anyone’s guess. California has bet before on its ability to innovate faster than politics can intervene. This time the stakes look especially high.
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