The role of formal venture capital Tuesday, October 12, 2004 How often have you heard the complaint: We don't have enough venture capital? The implication is that venture capital is like a water sprinkler. Just turn it on and everything will grow. There's only one problem: the thinking is backward. Venture capital is not an "input" to a dynamic economy. It is a reflection -- and "output" -- of a dynamic economy. Now, when I refer to "venture capital", I am talking about formal, organized venture capital. Set aside for a moment angel investment which represents networks of informal investors. Formal venture capital is not the leading edge of a dynamic economy, it is the trailing edge. By that I mean venture capital follows good deals. If a region -- like Northeast Ohio, for example -- scores low on venture capital investment, this fact indicates that the underlying "real" economy (as opposed to the financial economy) is not producing enough quality business plans. (In my own view, the civic leadership in Northeast Ohio really doesn't understand the role of a research university in spurring technology-based growth.) I'm painting with a broad brush here. The general point is important: EDPros need to focus on the underlying economy and not be enamored by proposals to create venture funds. So, I was encouraged to read an article out of Wisconsin about a group of venture investors who are doing just that. They are exploring the underlying dynamics of venture investing in the Midwest. Read more. posted by Ed Morrison |		This work is licensed under a Creative Commons License. links Some Background on EDPro Weblog The purpose of this weblog is to help economic development professionals -- EDPros -- keep up with the changes sweeping our profession. Strap on your goggles. It's a whole new game. There are no experts any more. The only place to learn about economic development is from other EDPros who are doing it. One other point: the prevaling approach (paradigm, if you like) in economic development is shifting from competition to collaboration. There are a lot of reaasons underlying this shift, but here's the important insight: You, your community, and your region will do better by collaborating and sharing information. So, spread the word...Share the knowledge. Tell a friend about EDPro Weblog. If you are using a news reader, here is the link to syndicate this site: Here's the link if you are a bloglines subscriber: Speaking and workshops on Open Source Economic Development As the idea of Open Source Economic Development starts spreading, more people are asking about it. Visit the I-Open web site to learn more. My colleagues and I are happy to explain the basic concepts in a talk or a workshop. E-mail Susan Alshuler if you'd like to learn more about workshops and speaking. Background on Ed Morrison Download some background information on me here.

The Web EDPro Weblog