Venture capitalists are professional investors that specialize in specific industries in which they network and research to find the best investment options. Unlike angel investors, venture capitalists invest a huge amount of money and focus on the return on investment (ROI), often taking a place on the company’s board or obtaining large shares in the company.
The US domination of venture capital
The US is the ideal place for venture capital as a majority of global venture capital deals happen in this region. The US has traditionally dominated in this area.
Latest research shows that 70% of all VC deals in the world, occur in North America alone, and 68% solely in the United States. In 2013, the number of clinched deals in the US was close to 3,200.
Major venture capital hotspots in the US
California and the Tri-State area of New York, New Jersey, and Pennsylvania are the top hotspots in the US.
California - In 2013, there were 1,389 deals secured, 35% of which were from Technology, 22% from Consumer Services, and 23% from Business and Finance services.
New York - There were 441 deals secured in New York in 2013 , while statistics for the entire Tri-state area show that the sectors of Consumer Services, Technology, and Life Sciences were the most funded via venture capital.
Massachusetts - Another hotspot for VC deals with 318 deals secured is the state of Massachusetts. Data for the entire region of New England shows Life Sciences to be the top funded sector followed closely by Technology and then, Business and Financial Services.
Top VC Investment Sectors in the US
Information and Communication Technology (ICT), Healthcare and Green Tech are the most commonly funded sectors in the US and therefore, filled with opportunity.
Prospects in ICT
In 2013, the ICT industry secured more than 50% of the 3,154 deals made in the US. This sector is attractive for venture capital due to less investment, business potential, and quick returns. Hence, it’s an attractive field to enter for fresh businesses.
Within ICT, the most promising sub-sectors under the Internet segment include Health and Wellness, Advertising, Business Analytics and Video, and Conferencing. In the mobile segment, Gaming and Security were most funded while in the Software segment, Open Data, and Cloud Computing initiatives received maximum funding.
Prospects in Healthcare
The research triangle formed by North Carolina, California and Massachusetts is a Healthcare hub. Biopharma dominates as the most attractive sub-sector in this industry, with Drug development, mainly Biotech gaining the most attention for venture capital.
Prospects in Green Technology
The Green Tech hotspots in the US include California, New York, Massachusetts, and Illinois. Though the economic downturn has affected this industry of late, from a venture capital perspective, it remains appealing.
Profitable areas under Green Tech include Smart Grid & Energy Storage, Water & Waste Management, and Solar Energy among others.
Venture capital raise depends on the industry and preferred state of the establishment. Since venture capital deals take place in the early stages of the business, investors are interested in companies with strong growth potential.
Market research can assist investors to identify the most profitable companies. If one is looking for investment, however, it may serve best to start small with personal funds, a loan or an angel investor. Once your company is equipped to provide a share and comply with the agreements of venture capitalists while remaining competitive in your business, you may try this option.