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If you have a software startup and are looking to raise big money from venture capitalists, Silicon Valley in California is the place to be.  But new data from PricewaterhouseCoopers, National Venture Capital Association (NVCA) and Thomson Financial shows that several cities outside Silicon Valley have the highest growth rates for startups and venture capital (VC) investments over the past decade.

As stated in USA Today, the number of technology startups in New Mexico, Pittsburgh, Seattle, Los Angeles and Washington D.C. has risen between 70% to 600% since 1997.  VC investments in these regions have surged as universities and corporations launch research startups in the energy, health care, media and defense industries.  Although none of these up-and-coming regions make the top-five list for VC investments in 2007, that could be only a matter of time.

The fastest growth was in New Mexico, which is super-hot for VC investments because of its high concentration of research labs including Los Alamos National Laboratory.  Pittsburgh, home of the steel industry in the last century, is now home to many world-class universities such as Carnegie Mellon that specialize in biotech, medical and pharmaceutical research.  And of course, right next door to Seattle is Microsoft, which attracts a large amount of high-tech talent and hence investment money to that region.

Venture capital was strong in 2007, with VCs investing $29.4 billion in 3,813 deals, the highest yearly investment total since 2001.  The 2007 total represents a 10.8% increase in dollars and 5% increase in deal volume over 2006.  But software investments have remained relatively flat for the past five years, with $5.3 billion invested in 905 deals in 2007.  Despite the lack of growth, software remained the largest VC investment category for the year both in terms of deals and dollars, edging out biotech for the top spot.

Article published on March 12, 2008

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