Venture Capital: Follow the Money

Venture Capital: Follow the Money

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If you’re like many small businesses, especially an emerging enterprise, having access to capital is critical. Without it, your business isn’t going anywhere. Venture capital is one way that businesses get started or expand their operations. Indeed, it is a source of funding that is prized by many, even if it is not always so readily available. Yet, a recent National Venture Capital Association and Pricewaterhouse Coopers LLP report demonstrate that the money is flowing, and is now flowing to businesses located in 160 metropolitan areas nationwide.

“The venture community continues to invest in entrepreneurs founding innovative companies in regions across the U.S., deploying capital to more cities in 2014 than any year in the past five years,” said Bobby Franklin, President and CEO of NVCA. “Great ideas and great companies can be started almost anywhere and while historically concentrated, the venture capital ecosystem is able to move capital quickly and efficiently toward the greatest opportunities. The diverse geography of venture investment points to the enormous impact of entrepreneurs, students, incubators, investors and others who are working to build local ecosystems where high-growth companies can thrive, create jobs and shape the future our economy.”

Strongest Metro Areas

Certainly, some metropolitan areas imbue capitalism, given the very nature of their economies. San Francisco, San Jose, Boston and New York command the top four spots for the fifth consecutive year. In fact, five of the top 10 VC deals conducted in 2014 took place in San Francisco. Taking over the fifth spot last year was Los Angeles, which knocked out Washington, DC, as “The District” descended to ninth place.

All it takes is for one or two mega transactions to propel a metropolitan area forward in the rankings. For example, Fort Lauderdale finished in 11th place from the 81st position it held the previous year, benefiting from a lone Early Stage deal in excess of $500 million. Provo, Utah, and Houston were among the other cities that saw increased VC activity, with both metropolitan areas penetrating the Top 20 for the first time.

A number of metropolitan areas, 12 in all, saw an influx of venture capital for the first time in five years. Companies located in the following metropolitan areas benefited in 2014: Bryan-College Station, Texas; Bismarck, North Dakota; Terre Haute, Indiana; South Bend, Indiana; Elkhart-Goshen, Indiana; Bellingham, Washington; Johnson City-Kingsport-Bristol, Tennessee-Virginia; Lafayette, Louisiana; Newburgh, New York-Pennsylvania; Greenville, North Carolina; Springfield, Massachusetts; Janesville-Beloit, Wisconsin.

The Advent of Private Equity

Private equity came into being after World War II. Before then, families and wealthy individuals invested in companies, but access to emerging businesses was often limited, if not nonexistent. At that time, investors concentrated on funding new businesses launched by returning war veterans.

Private equity has often provided the only outside source of funding for emerging businesses, suffering immense losses in 2000 when startup technology companies crashed. Despite widespread and deep losses, these companies largely rebounded and currently provide seed funding, start-up support, Series round “A” backing, second round assistant, expansion and exit funding, the latter attributed to assisting with the “going public” process.

VC Reach Across America

To summarize, the study demonstrates the reach of VC investors to communities across America, large and small. These risk-takers are leaving no investment possibility unturned, by searching well beyond the usual communities for the next big thing.

See Also4 Methods For Finding Small Business Funding

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