Smaller College Towns Do Well In Attracting Venture Capital

July 12, 2013

Some smaller towns with major colleges and universities are doing well in attracting venture capital when measured on a per capita basis. According to data published by author and researcher Richard Florida, small cities such as Boulder in Colorado, Ann Arbor in Michigan, Lawrence in Kansas, and Austin in Texas  figured in the 2012 top 10 list when measuring the number of venture capital deals per 100,000 people. These small towns are home to some well known universities including the University of Colorado in Boulder, University of Kansas in Lawrence, University of Michigan in Ann Arbor and University of Texas in Austin.

Smaller University Towns Can Be VC hubs

Image: rachid sefrioui venture capital blog

Last year, Austin attracted a total of $626 million in venture capital and ranked eighth in overall venture capital investment. On a per capita basis, Austin attracted $37 million per 100,000 people and was again ranked eighth. There were 5.1 deals per 100,000 in Austin, the seventh best in this metric in 2012. Boulder ranked fourteenth overall with venture capital investment of $256 million but took the third spot both when measured in venture capital investment ($87 million) per 100,000 people, and when ranked in the number of venture capital deals (13.6) per 100,000. Cities such as Lawrence and Ann Arbor did not figure in the top 20 in terms of the overall venture capital investment but both ranked in the top 10 in investment and the number of deals on per capita basis.

Commenting on the data, the president of the Wisconsin Technology Council Tom Still says that the list confirms smaller university towns can be venture capital hubs and pointed out that every metro area that figured in the top 20 list had at least one major research university. The city of Madison in Wisconsin was among the cities that were in the 2012 top 20 list of venture capital investments on a per capita basis.

Venture Activity Mixed In Q2

According to data published by Thomson Reuters and the National Venture Capital Association (NVCA), twenty one companies backed by venture capital firms raised a total of $2.2 billion through the IPO route during the second quarter of 2013. This is significantly better than the first quarter when only about $720 million were raised through eight IPO (initial public offering) offerings. The number of deals this quarter also handily beat last year’s second quarter during which only 11 venture capital backed companies succeeded in raising capital from IPO. The second quarter of last year had an abnormally high dollar value of $17.2 billion primarily due to the $16 billion issue of Facebook.

Mark Heesen, president of the NVCA says that his industry checks suggest strong interest for venture backed targets. There were eleven venture backed biotechnology IPOs in the quarter, the highest since the third quarter of 2000.

Despite the brisk activity in the IPO market, US venture capital firms raised only $2.9 billion in new funds during the second quarter of 2013, a decrease of 33 percent from the first quarter and a drop of 54 percent from the comparable period in 2012. This marks the lowest quarter for venture capital fundraising since the third quarter of 2011. Heesen attributes the decline in dollar values of capital under management from historical levels to pressure exerted on venture capital firms by limited partners to raise smaller, more agile funds.

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