Capitalizing on Rural Communities Released by ARC

The Appalachian Regional Commission (ARC) has released a new report on the growing importance of development venture capital funds in attracting more private capital investment into the Appalachian Region. Co-sponsored by the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, the Federal Reserve Bank of Cleveland, and the Federal Reserve Bank of Richmond, the report outlines the need for development venture capital funds in rural and distressed communities, and presents several specific investment opportunities within Appalachia. 

Capitalizing on Rural Communities notes that during the past two and one-half years, more than $50 billion in venture capital has been invested in the United States, mostly in high technology firms. However, only a small percentage of these investments—about one percent—has flowed into new businesses in the 13-state Appalachian Region. 

To attract more equity financing and help small businesses expand, Appalachian communities increasingly are looking at development venture capital (DVC) funds as a first step toward attracting more private investment capital, according to the report. Like traditional venture capital funds, DVC funds seek a strong return on investments, but unlike most traditional funds they have a ‘double bottom-line’, requiring that investments return a social benefit to the communities in which investments are made. In many cases DVC funds help to make local firms stronger so they can attract traditional venture capital investment. 

So far, ARC has funded five DVC projects in the Appalachian region. The Commission estimates that investments in the development of six to seven new DVC funds capitalized at $10 million each will result in the creation of 75 new firms and 1,300 jobs in Appalachia over a five-year period. The report is available on line at http://www.arc.gov under "What’s New."