Silicon Valley still dominates the venture capital world in deals and dollars, but it's got some young rivals.
A new report from PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Financial, showed that the funding amount for deals in Silicon Valley grew 120 percent in the last 10 years--from $4.7 billion in 1997 to $10.4 billion in 2007. The number of companies funded also grew 41 percent, from 705 companies in 2007 to 993 companies last year.
New England, the No. 2 market for venture capital, experienced comparable growth over that time. In 1997, investors backed 311 companies with a total of $1.6 billion. But last year, 400 companies were granted a total of $3.8 billion, for a 139 percent rise in investment dollars.
Despite their honey pots of investment, Silicon Valley and New England are no longer the fastest-growing markets for VC funding in the country. The areas with a bullet are New Mexico, Seattle, Los Angeles, Pittsburgh, and Washington D.C, according to the report.
Last year, for example, investors in New Mexico put $128 million in about 21 companies, a rise of 375 percent in investment dollars in the market since 1997. That's largely thanks to the state's interests in clean technology and alternative energy--last year, New Mexico invested $6 billion in research and development in technology.
Los Angeles is another venture hotbed for its media and entertainment assets, and creative talent. Venture capitalists invested $1.15 billion in about 124 area companies last year, up 155 percent from the $459 million invested in 1997.
Seattle is on the fast track for biotechnology, clean technology, and media investments. Last year, investors put $1.25 billion in 132 companies in the area. That's a rise of 211 percent in total investments from a decade ago.
In comparison, a city like New York, which is typically one of the top markets for venture capital, is growing at only double-digit rates. Last year, VCs funded about 216 companies in New York for $1.7 billion, a rise of 32 percent in investment dollars since 1997.
To look across industries, growth in technology investment is lagging behind clean technology and life sciences.
In 2007, venture capitalists invested $11.1 billion in about 1,595 deals related to networking equipment, software, semiconductors, telecom, and computers and peripherals. Ten years earlier, it was $7 billion in 1,434 deals. Total investments grew by 59 percent over 10 years.
Clean-tech investing blows those numbers out of the water because it's such a new, hot market. According to PricewaterhouseCoopers, investors put $205 million into 54 companies in 1997. Last year, they invested $2.2 billion in 202 deals, for a 973 percent growth in dollars.
Similarly, life sciences investments have exploded in the last decade. In 1997, investors backed 514 biotech and medical device companies with about $2.4 billion. Last year, they inked 862 deals for $9.1 billion, a 274 percent growth in dollars.
Much of that investment is still happening in the Valley, but it's clearly spanning more of the country.
"Silicon Valley and New England are well-known for their entrepreneurial spirit," Tracy Lefteroff, global managing partner of PricewaterhouseCoopers venture capital practice, said in a statement. "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."