Startups seeking VC funding should head to areas with high human capital

New York City attracts talented industry leaders from around the world.
New York City attracts talented industry leaders from around the world.

While venture capital investments are becoming more common after a relatively sluggish decade, executives at U.S. startups should be aware that the location of their business and the amount of human capital it boasts greatly influence whether they are likely to receive venture capital funding.

In the third quarter of 2011, 790 venture capital firms distributed $7.9 billion in funding, setting investments on track to top $30 billion this year, according to venture capital database service CB Insights.

The report also found that New York dislodged Massachusetts from its long-standing position as the second-best state for venture capital funding. For the first time since 1999, New York companies received more venture capital funding than those in Massachusetts – $831 million, or 10 percent of total investments, versus $710 million, or 9 percent of funding. California, led primarily by technology startups in Silicon Valley, took home 48 percent of the venture capital support.

Writing for Entrepreneur Magazine, Peter Cohan attributes New York's success to a surplus of human capital in New York City, which attracts industry leaders from around the world. Experts think that top talent can be a silver bullet for many of the problems that ail a startup, such as a disorganized long-term vision.

The report also speculates that Big Apple entrepreneurs are by-and-large focused on technology companies, while those in Boston are spread across an array of industries. Because tech startups have been sprouting up everywhere recently, New York is surely benefiting, at least somewhat, from that surge.

Startups that receive venture capital funding have a pronounced advantage over their competitors. However, since companies require top talent to attract such investments, they may consider contacting an experienced executive recruiter who can identify the best C-level talent on the market. A global executive search, culminating in the selection of a skilled CEO, may be just what a particular startup needs to attract venture capital funding and get the company off the ground regardless of its location.