Region is a hot spot for venture capital investments

September 10, 1995|By Mark Guidera | Mark Guidera,Sun Staff Writer

The Mid-Atlantic area -- particularly the Baltimore-Washington corridor -- has emerged as one of the hottest spots in the country for venture capital firms to sink their money into start-up companies, a national survey has found.

During the first six months of this year, venture capitalists in the Mid-Atlantic region reported the second highest level of investments in the nation, according to a survey by Coopers & Lybrand LLP, the international professional services firm.

Venture capital deals in the region totaled $338 million, representing about 12 percent of the national total. The Baltimore-Washington area accounted for $176 million of those deals, the survey said.

"This is a very hot area for new companies starting up. It's now on a par with, if not surpassing, the Boston region," said Charles W. Newhall III, chairman of the Mid-Atlantic Venture Association and general partner of New Enterprise Associates, the largest venture capital company in the Baltimore-Washington region.

The reason for all the activity can be found in the fast-changing dynamics of the region's economy, say experts like Mr. Newhall.

The region, he said, is coming of age as venture-backed successes in the area help shift the region's economy from industrial and defense-based industries to service- and technology-driven businesses.

Such successes include Northern Virginia-based America Online, the computer-based information provider, and Owings Mills-based Integrated Health, a nationwide managed health care service provider that employs 39,000 people.

The Coopers & Lybrand's survey did not attempt to discern the reasons for each region's level of investment activity. Instead it sought to determine where venture capitalists around the country, including the Baltimore-Washington corridor, Pennsylvania and southern New Jersey, were investing and how much money they were pouring into start-up companies.

Nationwide, the survey found, more than $2.8 billion was invested.

California attracted the most venture capital during the first half of this year, Coopers & Lybrand said. Venture deals in the nation's most populous state totaled $883 million between January and June, or 31 percent of U.S. venture capital activity.

Other hotbeds for venture capital activity: New England where $247 million in venture capital investments were made in the first half of the year, and the New York City metro area with $195 million.

Coopers & Lybrand could not provide a comparison with previous years because it only began tracking venture investment during the third quarter of 1994, said Larry Buchsbaum of Coopers & Lybrand's Boston-based high tech group. The company plans to conduct the survey annually, he said.

But Mr. Newhall -- whose New Enterprises company was the most active investor in the United States during the first half of 1995 -- said that investment activity in new companies has more than doubled in the Mid-Atlantic during the past four years, according to his company's tracking of activity.

Investment activity in the region between Richmond, Va., and Southern New Jersey, he said, has jumped since 1991 from about 7 percent of all start-up companies backed nationally to about 15 percent today.

"There are lots of good ideas, and there's good return on the investment," said Mr. Newhall.

Venture enterprises capitalized by the Mid-Atlantic Venture Association's members had revenues totaling $10.4 billion in 1994 and employed 108,000 people, said David Kirby, spokesman for the association.

Looking ahead, he said, more than 50 hopeful entrepreneurs will get a chance in November to sell the association's members on backing their ideas when the association hosts its fifth annual "Venture Fair" in Baltimore. The start-ups will showcase their business plans and product or service to association members during the fair on November 13 and 14.

Meanwhile, Mr. Newhall said the majority of companies in the Mid-Atlantic backed this year by venture money are located in the Baltimore-Washington area and the Philadelphia-Princeton, N.J area.

The lion's share of venture investments in the region have been with companies in the medical and medical technology fields, he said.

"Since 1982, that's where 80 percent of the investments have gone," said Mr. Newhall.

That trend has been in step with a national movement among venture capitalists, the Coopers & Lybrand survey shows.

Medical and medical technology-oriented companies were among the sectors most actively backed with venture money. Communications, financial service and entertainment also were strongly backed during the first half of this year, the survey found.

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