California Gov. Gavin Newsom is taking a victory lap after The Wall Street Journal reported that Golden State startups have attracted a record $366 billion in venture-capital investment this year, more than three times the total raised across the other 49 states combined. 

It is an extraordinary figure, fueled by Silicon Valley’s AI boom. But Newsom and California Democrats should not mistake the state’s success for a success of their own making. If anything, California’s innovation economy has flourished despite their leadership, a testament to the enduring power of free markets, competition, and private enterprise, not Democrats' governing competence.

The credit belongs to California’s entrepreneurs, people who built companies, developed the ideas, attracted private investment, and continued to innovate despite the state’s suffocating regulatory ecosystem. They are competing in the rapidly evolving AI economy, where success is earned through risk, invention, and execution, not handed down by Sacramento. 

In fact, under a more pro-business political climate, California might have attracted even more investment and set an even larger record. The state’s extraordinary startup economy is not proof that overregulation works; it is proof of how much entrepreneurs can accomplish even while government makes the climb harder.

What do Newsom and California Democrats deserve credit for? 

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Making it harder, slower, and more expensive to build the next generation of companies. They deserve credit for permitting delays that postpone new facilities, new products, and new jobs; for taxes and compliance costs that raise the price of doing business; and for a regulatory culture that often treats innovation as a problem to manage rather than an opportunity to unleash. 

Every month a startup spends navigating Sacramento’s bureaucracy is a month it is not hiring, building, investing, or competing. Every unnecessary environmental mandate and every new compliance requirement favors established corporations that can afford armies of lawyers over the entrepreneurs trying to challenge them. California still attracts enormous investment because its talent base, capital markets, universities, and technology ecosystem are unmatched. But the state is succeeding while carrying the weight of its own government on its back.

While conservatives have long warned that California could eventually collapse under the weight of its own government, it is important to recognize the role private enterprise plays in postponing that reckoning. California’s businesses, entrepreneurs, and innovators effectively subsidize the failures of Sacramento. 

The state can govern poorly and still appear successful because it remains home to some of the world’s most productive and innovative industries. Its free-market engine generates the wealth, jobs, and tax revenue that keep an increasingly dysfunctional government afloat. That is not any sort of vindication of California’s leadership, it is a testament to the strength of markets, and a reminder of why free enterprise must remain a central conservative principle. 

California’s businesses have not simply endured Sacramento’s failures, they have protected the state from them. So the next time Gov. Newsom brags about California’s economy, remember: it is the economy propping up Newsom’s governance, not the other way around.