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Tech Industry

N.Y. firms seek Valley funds

Tech firms from New York's Silicon Alley converge on Silicon Valley for a conference aimed at introducing them to Bay Area venture companies.

Despite competition from other parts of the country, Silicon Valley is where the money is--at least in the eyes of technology start-ups looking for funding.

Despite the rivalry between New York City's Silicon Alley and the Bay Area's Silicon Valley, the Alley sent in its troops of high-tech companies to attend the first Alley to the Valley Conference today and tomorrow, sponsored by AlleyCat News, the Information Industry Association (IIA), and New York City Economic Development (EDC).

The two-day conference will outline the landscape of Silicon Alley, featuring roundtable discussions on the Alley's long-term potential, its diverse business models, and investment opportunities.

One such company is Index Stock Photography, a supplier of stock photography and a pioneer in Web-based sales of still images. The company tomorrow will announce the completion of an $18.6 million equity investment round.

Company spokesman David Parmet said the company ventured to the San Francisco conference to get new sources of financing to expand the business.

"San Francisco seems to be where the money is these days. There is venture money elsewhere, but in Silicon Valley, it is a lot easier for a lot of firms to get VC money," said Parmet. "It is easier to explain to Silicon Valley what a Web company does. New York is a bit behind the curve."

Kirk Walden, a national director at Price Waterhouse, said it makes sense for start-ups to work with venture firms that understand their industry.

"You see a concentration of tech companies in Silicon Valley and a concentration of VC firms in the Valley," said Walden. "It is very logical and happens frequently."

In 1997, only 37 percent of the venture money collected by New York companies came from New York VC firms, according to Price Waterhouse data. Eleven percent came from Silicon Valley. Meanwhile, 63 percent of the venture money taken in by Silicon Valley companies came from the Valley. Only 8 percent came from New York.

Walden said he expected that New York companies would have received a higher percentage of their VC from the Bay Area because "these are the VCs that understand the technology market."

He added that a good management team knows no boundaries. When a VC team is trying to get a start-up off the ground, he said, it is helpful to be in close proximity in order to have more hands-on guidance.

"But in this industry, you go to the best idea," he said. "They are looking for the next Zip drive, not the next zip code."

Selected companies were invited to present their business plans to Silicon Valley high-tech investors in San Francisco on March 16 and 17.

Technology companies received $8.4 billion in venture money in 1997, out of $12.8 billion in venture funds for all industries. Of that $8.4 billion, $3.3 billion was invested in Silicon Valley.