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Venture Capital Growth in Southern
California
Presented by: Bree NguyenFaculty Mentor: Dr. Tayyeb Shabbir
Becoming Silicon Valley
Importance of Venture Capital• Venture Capital Fuels:
New businesses, especially high impact ones
New industries
Job creation
Technological advancement
International competitiveness
Innovative Activity
Importance of Venture Capital
“The single, most important
component of long-term
economic
growth.”
Rosenberg, Nathan (Stanford University). 2004. Innovation and Economic Growth. In Innovation and Growth in Tourism. OECD Publishing.
Innovative Activity
Venture Capital Growth by Region
Region 2011
Silicon Valley $11,629,888,100 40.9%
Boston/New England
$3,204,345,800 11.3%
Southern California
$2,805,076,900 9.9%
Total $28,425,075,400
Source:
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
0
50
100
150
200
250
300
350
400
Total Dollars Amt (M) Acquistions Total Deals
Southern California Venture
Capital
Source:
Acquisitions & IPO’s (Exits)
2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
50
100
150
200
250
300
350
400
Southern California
Source:
Acquisitions & IPO’s (Exits)
2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
50
100
150
200
250
300
350
400
Southern California Silicon Valley
Source:
Determinants of Growth• Supply-side
o # of Venture Firms
o Venture Flows ($)
o Labor/Engineers
• Demand-side
o University R&D
o Corporate R&D
o Entrepreneurs
o Policy
o IPOs/Acquisitions
Mason, Colin (University of Strathclyde, Scotland). “Venture Capital: A Geographical Perspective.” Handbook of Research on Venture Capital. 2009.
Horvath, Michael (Dartmouth University). “Imitating Silicon Valley: Regional Comparisons of Innovation Activity Based on Venture Capital Flows.” Building High-Tech Clusters. 2004.
The Data• Source: CB Insights Investment Database
• Includes:o Investments across all stages of funding
o Superior tracking and categorization
o Detailed industry and sector data
o Acquisition, IPO and failure data
• Source: Bureau of Labor Statistics
Determinants of Growth
• Journal of Urban Economicso Edward L. Glaeser, William R. Kerr, Giacomo
A.M. Ponzetto (Harvard Business School)
o “Clusters of Entrepreneurship”
• Introduced:
“city-industry”
determinants of growth
Internet Industry Growth
2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Internet
Source: Source:
Internet Industry Growth
2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Internet % of Engineers in Internet
Source: Source:
Engineering Labor
RegionEngineers in
Internet Industry
Avg. Growth Time
Southern California 29,730 12.95 months
Source: Source:
Engineering Labor
RegionEngineers in
Internet Industry
Avg. Growth Time
Southern California 29,730 12.95 months
Silicon Valley 27,542 13.47 months
Source: Source:
Conclusions• IPO/Exit activity as strong in Southern California as
Silicon Valley
• Preliminary results show some correlation between
growth of engineering labor and industry growth
• Possible correlations between firm growth and
available labor
• These are Southern California qualities worth
promoting to potential investors and entrepreneurs
Continued research• In-depth analysis of each determinant
o Confirm correlations
o I.e. Test if Labor/Firm Growth holds over time and why
o Test with additional variables
• Explore other “city-industry” determinants
• Build a complete model of “city-industry”
determinants to understand the region as a whole