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When VC Inducements Pay Off

June 08, 2001

Encouraging local sources of capital is a common element of most tech-based economic development efforts. The broad strategies to accomplish this typically include forums, investor groups, tax credits, CAPCOs, and public seed capital to fuel fund development.

A different approach was made almost two years ago when Pennsylvania Governor Tom Ridge announced the state was giving a $200,000 grant to Redleaf Group, a West Coast venture capital group to open its Atlantic headquarters in Pittsburgh. (see the Pittsburgh story in the 7/23/99 issue of the SSTI Weekly Digest).

Besides the obvious advantage to the state's economic development strategy of increasing deal flow for local businesses by having venture capital nearby, that inducement grant appears to be producing more notable fruit for the state.

Redleaf Group is in the news again for its recently formed partnership with the University of Pittsburgh to launch a new business accelerator. In addition to traditional incubator services, the new Oak Leaf Networks will provide preseed financing ranging between $50,000 and $500,000. Information technology, and bioinformatics companies will be targeted for potential tenants and investees.

Through its Office of Technology Management, the University of Pittsburgh with Oak Leaf Networks will facilitate the formation of new ventures based on university technology. Permanent space for Oak Leaf Networks will be located near the Pitt campus.

Redleaf also operates a similar business accelerator at the University of Pennsylvania.


Lexington, Kentucky

The Lexington Herald-Leader reported Thursday that Lexington will be home to a $15-25 million private venture capital fund that will focus on health care and high-tech start up companies throughout the Commonwealth. Partners in the fund include Village Ventures, a private VC group that targets its deal searches toward smaller communities overlooked by other, larger investment companies. According to the article, Massachusetts-based Village Ventures has participated in the establishment of a dozen early-stage funds in ten states. The state's recent tech-based initiatives, including Bucks for Brains and the $52 million Kentucky Innovation Act, were cited by the new fund's founders as reasons why they were attracted to Kentucky (see the 2/18/00 issue of the SSTI Weekly Digest for a related story)

Fresno, California

In an effort to keep more local investors' money in the community, Fresno State University is assisting in the development of a $10-20 million venture capital fund for the central San Joaquin valley, according to a recent article in the Fresno Bee. The new CEO say once fully capitalized, San Joaquin Venture Partners could become "the premier agricultural technology venture capital fund in the country."

Green Bay, Wisconsin

The Post-Crescent reports a new Green Bay angels network is forming called ValleyAngels Investment Group, the fifth angel group to be created in the state during the past twelve months. The article says with 13 members currently and the potential to accommodate up to 30 investors, ValleyAngels plans to focus on science, technology, processing and manufacturing deals.

Great Angel Investing Resource

The new book Angel Investing, written by Harvard Business School professor Robert J. Robinson and management consultant Mark Van Osnabrugge, is already touted as one of the best resources for understanding the angel investment phenomenon -- one of the oldest but least known forms of raising capital for entrepreneurship. Angel and informal investing is a particularly useful tool in small communities under-served by venture capitalists and dominated by risk -adverse financial institutions. A longer description and purchasing information for Angel Investing and other titles for accessing capital are available on SSTI's website at: http://www.ssti.org/Publications/capital.htm