For Immediate Release September 20, 2007 Contact:
Ramona DeNies Communications Director Development Capital Networks Phone: (503) 234-0558 rdenies@dcnteam.com

Flyover States Confront Growing Size of Venture Capital Funds

Early-stage and seed funds, crucial to the industry's pipeline, highlighted at NASVF conference

September 20, 2007 | Little Rock, Arkansas - Increased investor confidence in alternative asset classes has fueled a recent boom in the size of U.S. venture capital funds. But the shift away from smaller funds - and the smaller deals they imply - may prove a risk to the industry down the road.

According to recent data from the MoneyTree Report shared by the National Association of Seed and Venture Funds (NASVF), less than 5% of venture capital (VC) now goes to startups and early stage entrepreneurs, down from 17% in 1995.

This funding gap is further impacted by a narrowing regional focus of venture capital firms. According to the quarterly MoneyTree Report -- a collaboration between PricewaterhouseCoopers and the National Venture Capital Association - 60% of U.S. VC now goes exclusively to California and the Boston area.

"VC may not be distributed evenly in the U.S, but entrepreneurs pop up in places like Albuquerque, where Microsoft began, and South Dakota, birthplace of Gateway," said Sue Strommer, NASVF CEO.

The trend away from smaller, regional funds could squeeze not just eventual VC deal flow but also the vitality of America's economy - particularly in areas dubbed "flyover" for their lack of proximity to business centers of the coast. Many of these flyover states, said participants at yesterday's NASVF Annual Conference in Little Rock, look to early-stage and seed capital to catalyze growth of new industries in the wake of lost manufacturing and agriculture jobs.

"Proximity to entrepreneurs is key," said Jim Schultz, Managing Director for Open Prairie Ventures and a conference speaker. "We recently did a study that shows that 60-70% of VC capital is invested within 200 miles of the fund manager's state."

Both state economic development professionals and VC investors attending the conference were clear that profitable returns - rather than job creation - drive the VC industry. But even as speakers highlighted opportunities for competitive returns within flyover states, several noted that, in the words of speaker Patrick Ennis, Managing Director with ARCH Ventures, "great returns mean job creation."

"Flyover states recognize that they have to plan for the industries of the future rather than save dying industries," said NASVF Publications Director George Lipper. "All these states are experimenting with a variety of public and private economic development techniques, forming a laboratory of results shared at conferences like the NASVF."

Among the 250+ conference participants were public agencies including the National Science Foundation, the U.S. Department of Defense, the Michigan Economic Development Corporation, the Arkansas Development Finance Authority and the Kansas Technology Enterprise Council as well as fund managers and investment banks including Astralis Group, Credit Suisse, Deutsche Bank, Richland Ventures, Adena Ventures, Village Ventures and Battelle Ventures.


Notes to Editors:

• The NASVF, a U.S. based association of private, public and non-profit organizations committed to building their local economies by investing in local entrepreneurs, was formed in 1993 as an ad-hoc group and formally incorporated in 1997.
• The NASVF currently has 92 members actively involved in capital formation for entrepreneurs.
• The NASVF Annual Conference draws over 250 international investment and technology-based economic development leaders, venture capital and seed fund managers, technology commercialization organizations and legal and financial firms. NASVF's 2008 Annual Conference will be held in Detroit, Michigan.
• The NASVF produces research tools including the online Innovation Capital Research Library and State Venture Capital Program Directory and Report.
• The NASVF NetNews is the innovation capital industry's premier weekly e-newsletter, read by over 5,000 weekly subscribers.
• NASVF's mission is to catalyze innovation capital, so that every entrepreneur can find their first investor in their hometown.
• For more information on the NASVF, visit www.nasvf.org.