venture dev orgs

The Georgia Research Alliance (GRA) — a nonprofit working to grow Georgia’s economy through supporting research at state universities — recently announced that its portfolio of companies had raised more than over $2 billion in venture capital. These startups also had a high survival rate — 88% were still in business four years after launch, outpacing the national average of 44%. Along with this announcement, GRA released 2021 data on their economic impact on the state, demonstrating growth from the previous year.

Venture development organizations in Pennsylvania and Columbus recently released their economic impact reports for 2021. The reports from Ben Franklin Technology Partners (BFTP) and Rev1 Ventures show creation and retention of more than 16,000 jobs, $2.1 billion in client revenue, and almost $1.2 billion in capital raised.

Loyalty to alma maters matters financially beyond March Madness™ and college sports betting, it turns out — to such a degree that policy makers, venture development organizations and university seed funds hoping to attract equity investments for local innovation startups should pay considerable attention to the educational attainment section of founders’ LinkedIn profiles or resumes. Additionally, seed and VC funds organized in part for economic development goals may want to tap alumni networks from the regions’ institutions of higher education to identify potential investment partners, according to a recently released working paper from a trio of professors in Iowa, Texas and Michigan.

ESS Inc., a company that closed a deal to go public earlier this month, was able to leverage public capital at its early stages to accelerate its success as a startup. Founded in 2011, the Wilsonville, Oregon, based company manufactures batteries for long-duration energy storage applications. In 2012, ESS Inc. received a Phase I Small Business Innovation Research (SBIR) award from ARPA-E, and additional grant support from the Oregon Nanoscience and Microtechnologies Institute (ONAMI), an SSTI member. ONAMI is an Oregon-based non-profit that provides grants, equity funding and business development guidance to startups engaged in research-based scientific innovation. It receives funding from Business Oregon, also an SSTI member.

Benson Hill, a unicorn (a startup valued over $1 billion) that closed its deal to become a public company last week, was able to leverage several sources of public capital to accelerate its early success. The St. Louis-based agricultural technology company uses machine learning and genome editing to facilitate the production of sustainable and healthy crops. Founded in 2012, Benson Hill has utilized state-sponsored venture capital and federal grants to reach its funding goals.

Forthcoming research suggests venture development organizations, that is, those publicly-supported nonprofits that combine risk financing with expert technical assistance to grow local innovation-based startups, should give careful consideration to the exit histories of the venture capitalists they partner with to move the VDO’s portfolio firms through seed and series A investment rounds. Who those VCs know and have worked with to achieve successful exits previously through acquisitions or IPOs, in many cases, may be more important than the VC firms’ zip codes or assets under management.

Venture development organizations (VDOs) increasingly serve as the Swiss Army knife of small business growth and innovation throughout the country due to their diverse range of entrepreneurial programs, direct financing options, and commitment to local economic development. Their unique roles in the entrepreneurial ecosystems and regional public-private partnerships have allowed for startup success despite the financial instability brought on by the COVID-19 pandemic. Likewise, annual impact reports and program outcomes reveal many VDOs are serving as well-equipped options for confronting the problems of race and gender inequity that exist within the entrepreneurial and innovation landscape.

The federal Community Development Financial Institutions (CDFI) Fund released a new report profiling certified CDFIs in FY 2019. Notably, 14 active CDFIs are certified as venture funds, an increase from just four in FY 2017. Between the periods covered by these reports, the CDFI Fund updated their certification process and received encouragement from SSTI and members to be more open to equity financial structures. The results suggest that this change has taken place. An overview of the CDFI program with insights from members who have recently received funding follows.

Venture development organizations (VDO), nonprofit organizations across the country investing in innovation startups to help grow their regional economies as well as earn a respectable return, saw at least 20 exits in the first quarter of 2018, based on data entered on Pitchbook.com. Here are some examples from the quarter:

Most of the baker’s dozen of fourth quarter exits SSTI reviewed for publicly-sponsored venture investments reveal local employment likely to remain in place after the deals close, regardless of the deal structure. During the past three months, companies that 20 venture development organizations (VDOs) had invested in participated in at least 10 acquisitions, with seven resulting in operating subsidiaries under the new parent firm. Also in the mix for the quarter are one initial public offering (IPO), one sale of intellectual property and one leveraged buyout. Several of the deal structures suggest that regionally-based funds might have made the difference for those startups making it all the way to exit. Reaching that coveted milestone can be a tricky path, as we discover in some of the stories below. SSTI gleaned the information from Crunchbase, Pitchbook and company websites.