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Entries with tag venture capital.

New Locales Emerging as Venture Hotspots

The Silicon Valley, New England, and the New York metro area aren't the only US hotspots of venture-capital fund-raising. According to research by OpenView Venture Partners, there's also a flurry of VC activity in cities like Los Angeles, Chicago, Seattle, Washington D.C., and Austin.

Los Angeles is one of the most active of the second tier regions, with 31 deals in Q2 2011 for an aggregate value of $174 million, and vibrant e-commerce and media sectors.

“The confluence of the entertainment, gaming, and aerospace industries has created a big talent pool,” said First Round Managing Partner Howard L. Morgan, noting that IdeaLab and other incubators did their part to create plenty of Internet-savvy companies in the first bubble.

With a reported $181 million in expansion stage deals alone through the first two quarters of 2011, the Midwest is another hot spot for growth capital funding. Leading the way is Chicago,
which saw $92 million in Q2 investments over 14 deals. With companies like Groupon and GrubHub paving the way, child care service provider Sittercity continued the Windy City's
dominance of the local space with $23 million in funding during the quarter.

New World Managing Partner Chris Girgenti said the e-commerce, retail, healthcare, and clean tech sectors are all trending well. He cited organizations like the Chicago Entrepreneurial Center (CEC), which works to mentor and support innovative young startups throughout their
early stages of development.

With giants like Amazon and Microsoft, the state of Washington has all the makings of a technology superpower, especially for e-commerce. Local firm Madrona Venture Partners participated in six out of 16 second-quarter deals, adding companies like ExtraHop Networks ($14 million) and ($6 million) to a portfolio that also includes a co-investment with OpenView in SkyTap, a Seattle-based cloud automation solutions provider.

Madrona Managing Director Greg Gottesman said that the presence of Amazon in particular has helped inspire young companies in the e-commerce space. “I think a lot of times, the VC business is mostly about people investing in truly great entrepreneurs and great
teams,” he said. “Naturally, when you have the world’s greatest e-commerce company right in your backyard, you’re going to have a lot of companies like that coming from this region.”

With high-profile services like Amazon Web Services and Microsoft Azure setting the tone, cloud computing has also proved to be a viable target for venture funding.Gottesman cited Madrona investments in Tier 3, Portland’s AppFog, and SkyTap as examples of some of the promising young cloud-based companies in the area.

Software Sector Tops VC Funding in 3Q

The software sector enjoyed its strongest quarter in a decade, with $2 billion invested in 263 deals during the third quarter, a higher investment than for any other industry.

Overall venture capital investment slipped to $6.95 billion in the quarter, a decine of 12 percent, according to the MoneyTree™ Report from PricewaterhouseCoopers
LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by
Thomson Reuters.

"Challenges in the regulatory environment for Life Sciences companies are prompting VCs to
look to other industries to put their money to work for a faster return on their investment as
indicated by the notable increase in Software investments," said Tracy T. Lefteroff, global
managing partner of the venture capital practice at PwC US.

The Biotechnology industry was the second largest sector for dollars invested with $1.1 billion
going into 96 deals, falling 18 percent in dollars and 20 percent in deals from the prior quarter.
The Medical Devices and Equipment industry also experienced a decline, dropping 18 percent in
Q3 to $728 million, while the number of deals declined 21 percent to 74 deals.

Investment in Internet-specific companies fell in the third quarter to $1.6 billion going into 231
deals. This level of investment represents a 33 percent decrease in dollars and a 21 percent
decrease in deals from the second quarter when $2.4 billion went into 292 deals, a 10-year high. Internet-specific is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

China Leads World in Venture Funding

Venture capital investments in China have come roaring back from the economic crisis, reaching $5.4 billion in 2010, a 79 percent increase over 2009. China venture capital investments are growing at a pace that’s outstripped every other nation on the planet, according to a report from Lux Research’s new China Innovation Intelligence service. Lux Research reports that 40 percent of China’s overall venture capital has backed emerging technologies since the start of 2010, affirming the country’s intent to be a rising global leader in technological innovation.

“Foreign investors look for breakout technological innovations. Domestic investors do as well, but they also factor in market channels and financials when selecting companies,” said Zhuo Zhang, a Lux analyst and the report’s lead author. “And locals are getting in earlier: Series A rounds represent over 80 percent of all domestic VC-backed deals, while foreign VCs have backed less than half that many. This implies that many untapped opportunities await foreign investors willing to step beyond familiar territory.”

Twenty-six out of China’s 31 regions received VC investment for emerging technologies since the beginning of 2010, but just four – Beijing, Shanghai, Jiangsu, and Guangdong – account for 60 percent of the activity. Foreign VCs have out-invested their domestic counterparts by two-to-one in both Beijing and Shanghai.

Foreign investors have driven significant activity in LEDs, medical equipment, solar, and pharmaceutical industries. In contrast, domestic VC firms dominate investment in materials technologies, be they advanced materials platforms or green building construction materials. Even within technology domains there are distinct behaviors: For energy storage, domestic investors heavily favor lithium-ion battery opportunities, while foreign interests have scattered deals in flow batteries, supercapacitors, and fuel cells.

Angel Group Takes Entrepreneurial Message to Italy

The Southern California-based Tech Coast Angels will extend its mentoring and educational capabilities to entrepreneurs in Southern Italy through a partnership with Italian-American non-profit organization Bridges to Italy. Mike Napoli, TCA chairman, will serve as the keynote speaker at its 20 June conference at the TechNest incubator at the University of Calabria (Rende), and will present on the topic, "Fundraising: Is Your Company Ready for US Investors?" The conference aims to raise awareness among international angel investors and venture capitalists of Southern Italy's high-tech potential.

Napoli will gauge investment opportunities among Southern Italy's leading entrepreneurial businesses, in areas including but not limited to renewable energy, nano-materials, biotech, and information technology. Napoli will evaluate business ideas from 15 research groups and entrepreneurs from throughout Southern Italy. All participants have been admitted to Brains in Motion, the executive training program launched by Bridges to Italy to cultivate American-style business skills and stimulate a global entrepreneurial attitude among Italian researchers.

After completing an e-learning program offered by Bridges to Italy in conjunction with the University of California, Irvine, the entrepreneurs will make presentations. The winner of the Brains in Motion competition will be selected by a panel of experts, including the president of Enel North America and members of Tech Coast Angels. The winner will be awarded the opportunity to present at networking events at each of the five Tech Coast Angels locations in Southern California.

Greylock Ups Early-Stage Fund to $1 Billion

Greylock Partners, a Silicon Valley venture capital firm, has expanded its early-stage Greylock XIII fund to US $1 billion. The expansion capital was raised entirely with existing limited partners and was oversubscribed. In addition, Greylock announced the formation of Greylock Growth, a fund focused on later-stage financings in breakout consumer Internet and enterprise companies. The firm also operates the Greylock Discovery Fund for angel deals.

Greylock partner David Sze, leader of the growth initiative, said that continuous product innovation is critical to a company’s success. Greylock Growth will invest from US $25 million to $200 million at a time to help companies maintain their dominant positions while they continue to grow and expand.

Since Greylock’s initial Facebook investment in early 2006, about 40 percent of the firm’s dollars have gone toward later-stage companies. Greylock's portfolio includes companies such as Constant Contact, Groupon, Pandora, Redfin, and Zipcar. Pandora and Zipcar are currently in registration with the US Securities and Exchange Commission.

Greylock Partners initially closed $575 million for Greylock XIII in November 2009. The firm is an investor in a number of early-stage companies through this fund, including Airbnb, One Kings Lane, Pure Storage, Rally Software and Shopkick.

Greylock Discovery Fund has completed 20 seed-stage investments since it was launched in September 2010. Investments from this fund range between $25,000 and $500,000.

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