Miox : My Water. My World.

Venture capital spreads the wealth around the country

March 11, 2008, USA Today
By Edward Iwata

While fabled Silicon Valley still attracts the most venture capital in the USA, several other cities, states and regions boast the fastest growth rates for start-ups and venture dollars over the past decade.

The number of start-ups in New Mexico, Pittsburgh, Seattle, Los Angeles and the Washington, D.C., region has risen anywhere from 70% to 600% since 1997, according to data released Tuesday by PricewaterhouseCoopers, the National Venture Capital Association (NVCA) and Thomson Financial.

“Once a critical mass of companies is funded in a certain region, a new ecosystem develops,” says NVCA President Mark Heesen.

Why the surge? Universities and companies across the nation increasingly are launching research for the energy, health care, media and defense industries. And entrepreneurs, investors and big companies — prowling for promising start-ups to buy — know that talent isn’t limited to Silicon Valley. Look at:

•New Mexico. Los Alamos National Laboratory, Sandia National Laboratories and other research centers have spawned technology in advanced materials, water purification, photovoltaic cells and other fields.

About $6 billion in R&D spending poured into the state in 2007, says Trevor Loy, managing partner at Flywheel Ventures and a former Intel (INTC) manager.

Flywheel, based in Santa Fe, has invested $40 million in local firms with global products, Loy says. One start-up, Miox, makes equipment that produces a chlorine-based solution for municipal and waste water markets without the dangers of shipping chlorine gas.

•Pittsburgh. The heart of the steel industry last century, this city is home to the University of Pittsburgh, Carnegie Mellon University and other world-class institutions that specialize in medical, biotech and pharmaceutical research.

“We make our bread and butter from companies in the mid-Atlantic region,” says managing director Dean Miller at Novitas Capital, “but we source technologies from California, Europe — all over the world.”

Novitas, in Pittsburgh, manages $237 million in 30 start-ups, including Logical Therapeutics, which develops drugs to treat diseases such as arthritis.

•Washington state. There’s a rich pool of entrepreneurial talent to tap in Seattle, home to Microsoft, (MSFT) Starbucks (SBUX) and Amazon.com, (AMZN) says Chad Waite, managing director at OVP Venture Partners in Kirkland, Wash.

Waite left Silicon Valley and joined OVP 21 years ago, well before Microsoft became a global giant. Now, OVP manages $800 million in 100 start-ups in life sciences, semiconductors, nanotechnology and other fields.

While other regions fund first-time, untested entrepreneurs, OVP is investing in a second generation of seasoned, successful entrepreneurs. “They’ve been through the battles and are proven,” Waite says.

CHART: Venture capital investments by region

http://www.usatoday.com/money/smallbusiness/2008-03-10-venture-capital_N.htm