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 Decide.com ($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.