Regional Patterns of Venture Capital Financing in the US

This paper analyses the development of venture capital financing in the US covering a time period from the beginning of 1995 until 2008 (third quarter). Its focus is the structural changes emerging from reallocation of financial resources over time with special emphasis on regional allocation based on quarterly data collected by the National Venture Capital Association (NVCA) and Price WaterhouseCoopers as the MoneyTree dataset. Taking into account the multiple dimensions offered by stages of venture financing cycle, direction of industries, and regional allocation together with the overall business cycle patterns one key finding is a fairly steady concentration process of US venture capital financing in two key destinations as the Silicon Valley and New England. This trend even prevails with a significant shift from ICT related research industry areas towards biotechnology, health and energy over the respective time period. Furthermore after the burst of the new economy bubble in particular start-up/seed early stage financing lost in importance measured by their respective shares in favour of financing for expansion and later stage financing. This indicates an increasing risk averseness in venture capital financing which might be attributed to the high degree of uncertainty of early stages.