Look Out, Silicon Valley, the Northeast Is Rising

Silicon Valley's nice and all, but who really needs it when you’ve got Boston and New York?

Sure, the Valley is still the epicenter of venture deals if you're looking at one location. But in this age of red-hot digital-media companies, the chilly Northeast is overtaking the cool Bay Area, David Broadwin, a partner at dealmaking Boston law firm Foley Hoag LLP argues.

Broadwin, who focuses his practice on startup tech companies, venture financing, and mergers, writes on the Foley Hoag blog that digital-media companies don’t necessarily need a Mountain View or Palo Alto address to be near the money required to grow.

His firm’s latest look at venture capital flowing to companies in the fourth quarter of 2010 shows that there were 46 such deals in New England, compared with about 95 deals in the Valley. That’s pretty consistent with Valley dominance of the venture capital scene.

But there’s an up-and-coming kid on the block, with a 300-year history of spawning entrepreneurialism. That place is called New York City, where, in the fourth quarter, 51 companies got VC financing.

So, taken together, the two Northeastern hubs just barely beat out Silicon Valley, at least when it comes to the raw number of deals.

Broadwin argues there’s a very good reason for the rise of the Northeast. The hottest sector in tech right now, he argues, is digital media and the technology related to it. That plays to New York’s strength as the media and advertising center of the country.

Broadwin writes:

If I had to pick something hot today, it would be Internet and digital media—and the epicenter is not in the Valley! The reasons for this are almost certainly that the advertising industry is headquartered in New York, there are lots of digital and data infrastructure companies in New England, and there is lots of money in New England and New York to fund these businesses. It is efficient to be near the relevant infrastructure (the advertising world).

So if you’re a digital entrepreneur doing some California dreaming, you might want to shift your focus to the Big Apple. After all, if you can make it there, you’ll make it anywhere.

---

Get more business intelligence from Portfolio.com:

• Social Relief: Zynga and LivingSocial follow more established companies and nonprofits in leveraging their strengths to provide relief for Japan. In the case of those two, strengths lie in tapping the power of social media.
• Franken: The Scary Secret of Net Neutrality: Here's a bit of political hyperbole that does cause you to think twice. "They're coming after the Internet hoping to destroy the very thing that makes it such an important [medium] for independent artists and entrepreneurs: its openness and freedom," Senator Al Franken warned.
• Reality of Running a Biz: Shows like Undercover Boss and the Real Housewives are giving America a glimpse of what it takes to run a successful firm and launch a new company.

---

Kent Bernhard Jr. is News Editor of Portfolio.com