Venture Capitalists Finding Opportunities in "Unexpected" Pockets
NEW YORK, March 11 /PRNewswire/ -- While Silicon Valley and New
England remain the country's leading regions for venture capital
investment, they are not the fastest growing, according to The
MoneyTree Report by PricewaterhouseCoopers and the National Venture
Capital Association (NVCA) based on data by Thomson Financial. In
the last ten years, smaller pockets in non-traditional venture
capital regions have enjoyed impressive growth in the number of
companies funded each year. Included in this ranking are areas such
as New Mexico and Pittsburgh, which have not had a strong venture
capital presence in the past but have recently shown notable signs
of growth. Additionally, the ranking included larger metropolitan
areas such as Seattle, Los Angeles, and the Washington DC metro
area, which have been quietly growing their venture base over the
last ten years. None of these up-and-coming areas were included in
the top five regions for total venture capital investing in 2007,
but that could only be a matter of time, suggests Mark Heesen,
president of the NVCA. "Venture capital growth is extremely
organic. Once a critical mass of companies is funded in a certain
region, a new ecosystem will develop," Heesen says. "It is very
magnetic in the sense that start-ups breed innovative thinkers and
entrepreneurs who, in turn, attract venture capitalists. For
regions that don't have a large, indigenous venture investor base,
it is important to give outside VCs a reason to visit. These
unexpected regions are making venture capitalists stand up and take
notice." The analysis focused on the ten-year growth rates for
regions across the country and ranked the fastest growing areas
based on number of companies funded, excluding areas that had under
$100 million in investment in 2007. 2007 1997 % Change No. of Total
No. of Total No. of Total Comp Investment Comp Investment Comp
Investment New Mexico 21 128.26 3 27.03 650% 375% Pittsburgh/
Tristate 44 198.17 12 32.32 267% 513% Seattle 132 1253.41 65 403.2
103% 211% Los Angeles 124 1146.04 73 459.41 72% 155% Washington DC
Metroplex 180 1282.16 105 558.24 71% 130% The following offers some
insight and fast facts about each of these regions: New Mexico at a
Glance: 2007 Venture Investment The state of New Mexico experienced
significant venture capital investment growth in the last year,
fueled largely by interest in clean technology and alternative
energy. The area is part of the larger Southwest region that also
has seen increased deal flow in the last several years. "New Mexico
has long been a world leader in its concentration of technology
research and development -- over $6 billion in R&D spending in
2007 alone, spread across a dozen national laboratories, public
research universities, corporate laboratories, and independent
think tanks," said Trevor Loy, managing partner of Flywheel
Ventures. "Much of that innovation is concentrated in sectors of
growing interest to venture capital investors -- such as energy,
advanced materials, water treatment, optics, and high- performance
computing. In parallel, policymakers in New Mexico have
dramatically improved the business climate for entrepreneurship,
including a particularly successful State Investment Council
program that augments market- driven investments made by local and
out-of-state venture investors. Coupled with the creative character
of the 'Land of Enchantment' and its unique lifestyle advantages
for entrepreneurs, the rapid growth of venture capital- funded
entrepreneurship is a natural outcome." Top industries: Clean
Technology, Life Sciences, Semiconductors Top investors: Verge,
Flywheel Ventures, EPIC Ventures Stage of Investment: 52 percent of
the companies were Seed/Early stage Largest Investments: Advent
Solar, MIOX Corporation, Aspen Avionics Pittsburgh at a Glance:
2007 Venture Investment Once a region that relied primarily on
traditional industries such as steel, Pittsburgh has the
opportunity to further develop its innovation economy through
venture capital investment. Like many regions, Pittsburgh saw
substantial increases in venture capital investment during the
technology bubble, but has since been building sustainable growth
in the area of life sciences and other scalable sectors. According
to Dean Miller, managing director at Novitas Capital, "We have
completed six early stage investments in Pittsburgh in just the
last three years across life sciences, clean technology and
software. Several of these investments are based on technology
spun-out of the local universities and medical centers. The
academic and clinical powerhouses of the University of Pittsburgh
("PITT"), the University of Pittsburgh Medical Center ("UPMC") and
Carnegie Mellon University ("CMU") produce significant amounts of
primarily government-funded technology across multiple disciplines.
CMU is a world leader in Computer Science and Robotics; UPMC is
ranked nationally as one of the top medical centers in a host of
clinical areas such as transplantation oncology and CNS; and PITT's
research spans both biomedical and engineering fields in medical
devices and drugs. Most importantly, these three entities work
extremely well together and all serve as value-added partners for
our companies." Top industries: Life Sciences, Software, Clean
Technology Top investors: Innovation Works, Draper Triangle,
Pittsburgh Life Sciences Greenhouse, Novitas Capital Stage of
Investment: 66 percent of the companies are Seed/Early stage
Largest Investments: Millennium Pharmacy, Logical Therapeutics, BPL
Global Seattle at a Glance: 2007 Venture Investment Seattle
benefits from a strong bench of local venture capital firms that
have embedded themselves in the start-up community. It does not
rely on a single industry to carry investments. Rather, it is very
diverse, investing in both traditional venture capital areas as
well as cutting edge investment sectors such as biotechnology and
clean technology. "Venture investing in the Pacific Northwest is an
even greater opportunity than when I started 25 years ago," said
Chad Waite, managing director at OVP Venture Partners. "One of the
things that grows well here is the entrepreneurial spirit. That,
combined with the resources and scale of some local, establishment
technology giants, means the start-up scene continues to be vibrant
year after year. I love being in the midst of a region I truly
consider an epicenter of innovation, creativity, talent and
productivity." Top industries: Software, Life Sciences, Media and
Entertainment Top investors: Ignition Partners, Madrona Venture
Capital, OVP Stage of Investment: 42 percent of the companies were
Seed/Early stage Largest Investments: Imperium Renewables, Telecom
Transport, Dexterra Los Angeles at a Glance: 2007 Venture
Investment Los Angeles is one of the strongest regions in the
country for media and entertainment companies. It offers a great
deal of promise for innovative young companies operating at the
intersection of telecommunications, Internet and consumer
entertainment. It also has a great deal of activity in the
alternative energy and clean technology spaces. Steve Krausz,
general partner at U.S. Venture Partners explains, "As technology
has begun to transform media, entertainment and consumer trends,
Southern California and Los Angeles, in particular, has become a
center of innovation. Venture capital investment has increased to
the region in response to this dramatic new opportunity to
re-invent large existing industries. Los Angeles has a unique,
creative workforce. When coupled with the state's favorable
entrepreneurial and innovation policies which helped grow Northern
California into the well known capital of U.S. venture activity we
expect to see a continued flow of venture capital into the region."
Top industries: Media and Entertainment, Software, Clean Technology
Top investors: Clearstone Venture Partners, US Venture Partners,
Draper Fisher Jurvetson, Redpoint Ventures Stage of Investment: 41
percent of the companies are Seed/Early stage Largest Investments:
Amp'd Mobile, Ceres, Vantage Media Washington D.C. Metroplex at a
Glance: 2007 Venture Investment The Washington DC Metroplex region
has many attributes that help foster a strong venture capital
ecosystem, including a strong population of technologists and
entrepreneurs, a group of indigenous venture capital firms, and
clusters of innovations in areas such as Southern Maryland and
Northern Virginia. Much of the D.C. region's entrepreneurial
culture is uniquely rooted in three main components of
government-based activity, said Roger Novak, founding partner at
Novak Biddle Venture Partners. "First, the entrepreneurs bred by
federal laboratories and agencies create opportunities for VCs who
understand the nuances of building companies around talent and
innovations spun out of a government lab. Second, VCs are
increasingly drawn to local companies' ability to sell
sophisticated technologies that address some of the government's
and industries' toughest challenges. With D.C.-area venture- backed
companies like Blackboard and AOL spawning new companies and, in
some cases, new clusters, the region is likely to remain attractive
for many years." Top industries: Software, Life Sciences, Telecom
Top investors: Novak Biddle Venture Partners, Columbia Capital,
Grotech, New Enterprise Associates, Valhalla Stage of Investment:
37 percent of the companies were Seed/Early stage Largest
Investments: Bravo Health, BillMeLater, Gridpoint While these five
regions represent the fastest growing, there are many other areas
of the country that have enjoyed significant venture capital
investment growth in the last ten years. In fact, 25 of the 50
states experienced double digit growth from 1997 to 2007. "Silicon
Valley and New England are well-known for their entrepreneurial
spirit. However, VCs have been encouraged to look to other markets
for talented individuals with great ideas and solid business plans,
in part because the cost of doing business is less in these
alternative markets," explained Tracy Lefteroff, global managing
partner of PricewaterhouseCoopers venture capital practice.
"Another reason VCs are likely drawn to these markets is the
quality of talent coming out of prominent universities and
corporations as well as the opportunities for academia and other
large corporations in the region to spin out new companies. These
factors provide ample investment opportunities as well as a capable
employee base to staff those opportunities." The National Venture
Capital Association (NVCA) represents approximately 480 venture
capital and private equity firms. NVCA's mission is to foster
greater understanding of the importance of venture capital to the
U.S. economy, and support entrepreneurial activity and innovation.
According to a 2007 Global Insight study, venture-backed companies
accounted for 10.4 million jobs and $2.3 trillion in revenue in the
U.S. in 2006. The NVCA represents the public policy interests of
the venture capital community, strives to maintain high
professional standards, provides reliable industry data, sponsors
professional development, and facilitates interaction among its
members. For more information about the NVCA, please visit
http://www.nvca.org/. The PricewaterhouseCoopers Private Equity
& Venture Capital Practice is part of the Global Technology
Industry Group, http://www.pwcglobaltech.com/. The group is
comprised of industry professionals who deliver a broad spectrum of
services to meet the needs of fast-growth technology start-ups and
agile, global giants in key industry segments: networking &
computers, software & Internet, semiconductors, life sciences
and private equity & venture capital. PricewaterhouseCoopers is
a recognized leader in each industry segment with services for
technology clients in all stages of growth. PricewaterhouseCoopers
(http://www.pwc.com/) provides industry-focused assurance, tax and
advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 146,000 people in 150
countries across our network share their thinking, experience and
solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a
separate and independent legal entity. About Thomson Financial
Thomson Financial, with 2006 revenues of US$2 billion, is a
provider of information and technology solutions to the worldwide
financial community. Through the widest range of products and
services in the industry, Thomson Financial helps clients in more
than 70 countries make better decisions, be more productive and
achieve superior results. Thomson Financial is part of The Thomson
Corporation, a global leader in providing essential electronic
workflow solutions to business and professional customers.
DATASOURCE: PricewaterhouseCoopers; National Venture Capital
Association CONTACT: Emily Mendell, National Venture Capital
Association, +1-610-565-3904, ; Clare Chachere,
PricewaterhouseCoopers, +1-512-867-8737, ; Lisa Peterson, Porter
Novelli for PricewaterhouseCoopers, +1-512-241-2233, Web site:
http://www.pwc.com/ http://www.nvca.org/
http://www.pwcglobaltech.com/ http://www.thomsonfinancial.com/
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