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Tech Industry

Silicon Valley still a VC superpower

Despite the downturn in the tech industry, the dot-com capital is the best place to raise venture cash for companies.

Silicon Valley is still the best place to raise venture capital, but New York has finally beaten out Boston for the No. 2 spot.

Fueled by strong interest in Internet financial services companies, New York outperformed Boston for the first time, according to VentureWire's Top 20 Metro Areas 2001 study released Monday.

Over the past several years, New York has been steadily gaining ground against Boston, in part because of the rapid growth of the Internet services sector, said Ken Andersen, managing editor for VentureWire Group.

New York, during a 12-month period that ended Feb. 28, raised $8.8 billion among 627 deals. Boston, by contrast, raised nearly $7.6 billion from 559 deals that were primarily in the networking sector.

"Boston did not get much of a bump from the dot-com explosion (in early 2000)," Andersen said. "But over the next several months, I think Boston will come back to No. 2. It has a lot of optical-networking companies that are in favor."

He added that the declining interest in Internet-related investments is also likely to play a role in New York's brief limelight. New York is home to such Internet-related services companies as online advertisers, content companies and e-tailers. But Andersen noted Internet financial services companies are expected to remain strong in the near term.

Silicon Valley, which has seen its share of Internet investments, remained the top region for venture capital. During the same period, Silicon Valley invested $18.6 billion in 988 companies.

Atlanta and Dallas, which have benefited from the growth in the telecommunications industry, jumped to the top 10 category this year.

Atlanta climbed to ninth place from No. 12, raising nearly $2 billion with 167 investments. And Dallas made an even greater leap, moving to eighth place from No. 13 with $3 billion invested in 212 companies.

"They benefited as the money that was going into the telecom sector pulled out from e-tailing and business-to-business," Andersen said.