Southern Cal overtakes New England in start-up activity

It’s official. Southern California has overtaken New England as the nation’s second largest center of start-up activity.

Venture capitalists invested $1.122 billion into Southern California companies during the first quarter, compared to only $984 million into the Northeast companies centered around Boston, according to VentureOne/Ernst & Young. See chart below

Several times over the years, venture capitalists have pumped more money into Southern California than New England companies, but these blips never lasted more than a quarter. This latest quarter (Q1, 2007) was the first time Southern California has remained steadfast in front for three quarters, which makes the trend. It helps that the other main vendor of VC data, Thomson Financial/PricewaterhouseCoopers, has today confirmed the trend too (Dan has details).

Sunny weather, a culture more compatible with experimentation and risk-taking, and general economic growth spurred by a more diverse and dynamic population drawn to the Los Angeles area (it is closer to Asia/Latin America) are all possible reasons. This is no one-hit wonder, either. SoCal is exploiting the green technology trend, given its strength in materials science (thanks to aerospace industry). It has an advantage in wireless (Qualcomm offshoots). And it will hold its own in healthcare (wealthy, aging population; indeed, the region’s largest deal was CardioNet, a San Diego-based maker of wireless mobile cardiac outpatient monitoring devices).

[Clarification: We were too expansive with the Northeast map we used above. The Northeast, according to the survey, includes only the area north of New York]