Bottom line is that I agree that deeper analysis needed regarding non-competes. However, I fear that, as is often the case in public policy, robust data to support deeper quantitative analysis is unlikely to be available.

So, in the absence of good data, the challenge is to sort through the reported experiences (a/k/a anecdotes) of employees, business leaders and investors and try to define legislation that seems to fairly reflect the legitimate problems and concerns that each have.

Of course, as they both point out in different ways, this is just looking at dollars invested, not deal numbers, or numbers of firms actually formed. The real argument against non-competes is that they impede the formation of new companies, which we won’t get to by looking at VC dollars, or even VC deals done (though that would be a better metric). It could even be that the unenforceability of non-competes in California HAS led to more VC dollars being invested there, but that NE is doing something else to offset that.

To me the real lesson here is that a deeper level of analysis is needed on the effect of non-competes before we really get to the bottom line.

On another question raised by Tim, why has NE lost ground to CA since 2002 after gaining ground before that, first, I would point out that just investing money at a lower rate isn’t necessarily a sign of losing ground. I have heard it suggested that there were so many pseudo-VCs in CA during and right after the dotcom bubble that a ton of money was invested poorly in the early part of this decade, more so than in MA. So I’d want to look at when the biggest differences occurred and I’d like to look at NE firm performance vs CA firm performance. I also know from looking at the 2009 investment numbers earlier today, that Silicon Valley has fallen off this year at a steeper rate than has NE when comparing 2008 to 2009. So maybe we are gaining ground again.

Finally, Bijan Sabet once shared with me his theory that when Boston VCs got into the consumer Internet during the Internet bubble, “they jumped in late and they got killed.” Many, he suggests, said ‘never again.’ That might have affected investment dollars since 2002 as well.

I agree with Will’s analysis: measured from 1995-2009, the ratio of VC investment in California to New England is almost exactly flat, and since non-compete policy didn’t change over this period, we can’t infer anything about non-competes relative to VC investment.

Will and I agree that since 2003 the trend has been largely against us.

Alert readers will deduce that this means that from 1995 to 2002 we gained significant ground, and this is what Will’s analysis shows.

Why we gained so much ground then, and why we have been losing it for a while now, remain unexplained. It would be great to hear theories from our readers.

What it does suggest in any case is that we should continue to look carefully at all ways that we can improve our competitiveness.

Regardless, the recent downtrend suggests that we should be doing everything we can to improve.

I think it is valuable to bring the stats up to date. One thing we have been writing about on our San Diego site (SD is one of the other three regions Tim is looking at, if I read his slide right) since opening there last fall is the tremendous falloff in venture activity since 2007. Indeed, many feel the local VC industry there is in serious peril. LA actually rose in 2008 in terms of dollars invested, unlike the other regions, but then seems to have had an even more precipitous decline so far in 2009. Texas fell off a bit less on a percentage basis than New England in 2008 vs 2007, but seems to have fared worse so far in 2009 as well.

Even Silicon Valley, which was essentially flat in 2008 vs 2007, has had a steeper decline than NE so far in 2009.

So, as far as the past year and a half goes, it does look like New England has more than held its own, or at least improved its standing a bit vis a vis other regions. Now that is just in terms of dollars invested. Of course there is much more to be looked at to get a picture of the true state of venture health. What stages are firms investing in, who is raising new funds, and then ultimately the performance of those funds, just to name a few. And finally, even if NE is holding its own on all fronts, that doesn’t get to the real issue I think Tim is getting at: how can things be improved?

The raw data into 2009 is at https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=notice&iden=B (under the title “regional aggregate data”)

Am I missing something?

As to your question, we are both using the same data (PricewaterhouseCoopers data).

Amrith Kumar is correct that New England has been flat for a long time. What is striking is what has been going on elsewhere. Since 2003 Silicon Valley has been on a steep climb. During the 5-year period I analyzed, 2003-2007, we were essentially flat, and Silicon Valley went from attracting twice as much venture capital as New England to attracting three times as much capital as New England. And the next three regions after New England collectively are following a trend that looks a lot like Silicon Valley. Here is the chart, which is generated directly from raw PWC data:

http://www.slideshare.net/rowetim/venture-capital-trends-in-us

And here is the source of the raw data, for anyone who wants to do their own analysis:

https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=historical

Since I did this analysis last May, I didn’t yet have access to the 2008 data. That data is available now, however. I did a quick check, and found that Silicon Valley widened its lead over New England in the last year.

If an employee moves and gives up remaining vesting, they have clearly decided it is more valuable to start accruing at the new place, than to try to hang on at the old one.

Let individuals decide- this argument should probably be more about that, than about ‘society’, which is really only the statistical sum of individual benefits.

http://www.thepetitionsite.com/75/support-the-alliance-for-open-competition