New Mexico, Pittsburgh lead VC growth

‘Venture capital is not just Silicon Valley and Boston,’ according to NVCA data showing that the fastest growing regions for US venture investment are in non-traditional markets.

Government support, university research and an entrepreneurial spirit have led to fast-growing pockets of venture investment in non-traditional venture markets in the US.

New Mexico and Pittsburgh are the fastest growing venture capital regions in the US, according to data from the National Venture Capital Association.

New Mexico:
attracting VCs

From 1997 to 2007, the number of companies funded in New Mexico increased 650 percent from three to 21. Total investment increased by 375 percent in the same 10-year period from $27 million (€17.3 million) to $128 million.

“The [New Mexico] State Investment Council has stepped up,” says Utah-based EPIC Ventures principal Stephanie Spong. EPIC is one of the nation’s most active investors in New Mexico, maintaining a Santa Fe office.

National research labs and universities are significant sources of technology for entrepreneurs to carry to market, Spong adds. Lack of prepared management talent has been a weakness in the region. However, conditions have become venture-friendly enough to begin creating a “self-reinforcing positive cycle” that has seen the recruitment of management from out of state, she says.

The “intensely committed entrepreneurial community” in New Mexico is a “soft factor” contributing to venture growth but one that Spong says is highly important to those on the ground there. Angel investors as well as support organisations like the Technology Ventures Corporation and the Coronado Ventures Forum “work very, very hard to make sure promising technology gets its hearing”.

What you're seeing is hopefully better tech transfer.

Mark Heesen

The total number of companies funded in the Pittsburgh, Pennsylvania region increased by 267 percent between 1997 and 2007 from 12 to 44. Total investment increased 513 percent to $198 million from $32 million.

Universities and government support have been essential to this fast-growing venture region as well. Local academic institutions including University of Pittsburgh, University of Pittsburgh Medical Center and Carnegie Mellon have continued to bring in increasing amounts of federal research funds, says Innovation Works chief executive Rich Lunak.

Pittsburgh-based Innovation Works is a non-profit, government-backed seed stage investor established to “fill the gaps in the funding continuum”, says Lunak. “The state has taken an active role in fostering an innovation economy,” he adds. The state both provides money to venture firms as a limited partner and “makes it easy for VCs to do business in Pennsylvania”.

There has also been a general maturing of the entrepreneurial environment in Pittsburgh, Lunak adds. Strong anchor companies are spawning entrepreneurs and intellectual property and serial entrepreneurs are beginning to emerge. Increased entrepreneurship has then attracted out-of-town venture firms to invest locally and establish offices in the area.

Sector expertise is the key factor creating successful pockets of venture capital according, to NVCA president Mark Heesen. National labs conducting cleantech research, particularly solar, have been a major draw in New Mexico. Life science research in the universities has been a main driver in Pittsburgh.

“What you’re seeing is hopefully better tech transfer,” says Heesen.

Regions like New Mexico and Pittsburgh have not yet reached a critical mass and may not get there, Heesen admits. However, they exhibit that “venture capital is not just Silicon Valley and Boston”.