VC investments: Boston vs. New York

April 15, 2011, 6:11 PM UTC

I keep hearing about how regional battles over venture capital funding don’t matter. How Silicon Valley and New York and Boston all have important roles to play in the entrepreneurial ecosystem, and how territorial battles are anachronistic pissing contests from the days when VCs only would invest within a dozen miles of their office. How we should all board the Accela and give each other back rubs.

Lovely sentiments, but they’re naive.

Of course it matters where companies are getting funded (and, conversely, where they aren’t). Prospective entrepreneurs migrate to where conditions are the most favorable for company growth, and capital availability is one of the determining factors. It’s certainly true that many of today’s VCs will travel far and wide to find investments, but all of them would prefer to do one in their backyard. Plus, many entrepreneurs still value board members who can stop by the office on a moment’s notice.

So, in the spirit of justified competition… Boston not only continues to lead New York in VC investments, but the gap has actually grown. (Note: Silicon Valley remains the undisputed champ, so this is a battle for second place)

Seventy-seven Massachusetts-based companies raised around $583 million in venture capital last quarter, according to the MoneyTree report released this morning. This compares to 44 New York-based companies that raised around $403 million — a 43% spread in deal volume and a 31% discrepancy in deal dollars. Those percentages were just 22% and 17%, respectively, in the fourth quarter of 2010.

Boston also regained its lead last quarter in the number of “information technology” fundings (35-34, compared to 43-55 in Q4), although still lagged in terms of investment dollars ($225m-$331m, compared to $276m-$361m in Q4). Those IT dollar figures for New York seems a bit higher than in past MoneyTree reports, perhaps due to new methodology that includes corporate investments (a long-overdue change). Or perhaps because two of the first quarter’s largest deals were for New York-based IT companies, Beyond Oblivion and Appsense (no Boston companies were in the top 10).

To be sure, none of this means that Boston will produce more VC home-runs than will New York. But it does mean that Boston will have a few more times at bat…