Thursday, June 3, 2010

A Blueprint for ‘Regional Transformation’

A proposal for a region-wide venture capital fund may be the key to future prosperity for the Great Lakes states, but how badly do they want it?


Frank Samuel, Jr., author of “Turning Up the Heat: How Venture Capital Can Fuel Regional Transformation,” a Brookings Institution report If one could simply light a spark under the economic potential resident in the Great Lakes region, and transform those states into red-hot centers of enterprise, then why hasn’t it happened yet? Two reasons: Every spark needs an energy source, and the region has to want the spark in the first place.

Long-term economic prosperity will elude regions and nations if businesses cannot grow and flourish and create jobs – if entrepreneurship is not rewarded and encouraged to take root and bear fruit. In the Great Lakes, this means keeping area companies with promising ideas and technologies from growing their businesses somewhere else.

A paper released in late January by The Brookings Institution explains how to do just that. “Turning Up the Heat: How Venture Capital Can Fuel Regional Transformation” was authored by Frank Samuel, Jr., a consultant and former science advisor to Ohio Gov. Bob Taft and architect of some of that state’s most successful venture capital initiatives, including the Third Frontier program. The paper was also the topic of a March 2010 Global Midwest Policy Brief, “A Venture Capital Strategy for the Great Lakes,” from the Chicago Council on Global Affairs.

Samuel advocates the formation of a Great Lakes 21st Century Fund, a fund of funds managed by the private sector – that’s a key point – and capitalized with US$1 billion to $2 billion targeting early-stage ventures with the goal of keeping them from moving and expanding elsewhere. His premise is threefold:

The Great Lakes region has the ingredients in place for economic growth, including major research assets, a rich supply of human capital and a mature industrial base.

Venture capital investing in the region is hindered by too few “investable” deals emerging from area research institutions, the high cost of early-stage investing due to geographic and other reasons and a lack in capacity to fund initiatives further into their life cycle, prompting them to seek locations outside the region that can provide post-early-stage financing.

A coordinated effort in the part of multiple stakeholders is needed “to create and sustain a virtuous cycle of venture investment, entrepreneurship and firm growth in the region.”

In early April, Site Selection Editor in Chief Mark Arend spoke with Frank Samuel about his case for a Great Lakes regional venture capital fund, which was first recommended in a 2006 Brookings Institution report called “The Vital Center.” More here.

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