The five worst states for start-ups

Inventors, beware. If you’ve got an idea for the next big thing in networking, you better get the heck out of Dodge if you live in one of the states listed below.

These states have not received any venture capital funding for an IT-related start-ups since January 2004. That’s 10 quarters without any seed funding available to entrepreneurs starting software, hardware, Internet or telecommunications companies.

The five states to win this dubious prize are:

• Alaska
• Maine
• Puerto Rico
• Vermont
• Wyoming

(O.K. So Puerto Rico isn’t a state, but it’s a commonwealth associated with the United States and the chief of state is the President of the United States. So it’s close enough.)

The state-by-state breakdown of venture capital investments in IT start-ups comes from the MoneyTree Report, compiled by PricewaterhouseCoopers and the National Venture Capital Association using data by Thomson Financial. Network World receives a special cut of the MoneyTree data that is focused on the network industry.

Narrowly missing this honor are Arkansas and Nebraska, which each claimed one venture capital deal during the second quarter of 2006.

“I had tried for years to raise capital, but I found it very difficult," says Todd Lewellen, CEO of SiteExcell Tower Partners, a Little Rock, Ark. Start-up that is developing communication towers for wireless carriers. Lewellen announced in March that his company raised $15 million from M/C Venture Partners of Boston.

“There are no venture firms in this state. You’ve got a credibility issue when you start knocking on the door or making phone calls," Lewellen admits.

Game Plan Technologies, an Omaha start-up, in April raised $2.5 million from venture firms in South Dakota, Ohio and West Virginia. Game Plan Technologies sells digital video systems to sports teams at the University of Nebraska, Ohio University and the University of Kentucky.

“This company has a pretty unique architecture to their solution," says Paul Batcheller, managing principal of PrairieGold Venture Partners in Sioux Falls, S.D., which chipped in $500,000. “They’ve exploited that transition to digital video, and there are a lot of opportunities to utilize and distribute their digital video of sports footage."

Batcheller’s firm has invested in one South Dakota startup, which is in the life sciences area. Both of the IT start-ups he funded are in Minnesota.

“There’s not a lot of venture deals here in South Dakota, but there is some entrepreneurial activity," Batcheller says. "It tends to get to cash flow early and grow slowly."

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