The Heartland and Venture Capital

Here in the center of the country, we routinely hear complaints from entrepreneurs and government officials about the absence of local area venture capitalists (or angel investors). If only more local money would band together, so the argument goes, we’d see more high-growth start-ups.

Why won't the big VC firms on the coast fund the sharp innovators in the middle 99 percent of the country?  One knock on the VCs is that they don’t like to travel. They claim a need to kick the tires of the companies they invest in, preferably no further than a one-hour drive from Sand Hill Road (CA) or Route 128 (Boston).

But a recent report by DeLoitte and the NVCA shatters this supposed “truth.” According to its survey, VCs are bullish on various hot spots much farther than a one-hour drive (or flight), places such as Germany, the UK, and Taiwan, to name just a few.

In this age of global capitalism, money travels. And it is flying not just to the highest returns, but the most effient opportunities. Well, if VCs can fly across the ocean then they certainly can hop shorter (though probably less comfortable) domestic flights to deal sources within the United States. No?

I suspect the problem is simple deal flow. Specifically, there are good deals in middle America, but they are scattered across much smaller towns than Shanghai or Bonn, making the effecient volume of available deals harder to access in their own country. Irony abounds. The world may be flatter, but it's hardly level.

So, here’s an idea for Heartland entrepreneurs and local officials: if you’ve got the potential deal flow, flaunt it. Fly in, wine and dine the Coastal VCs. Show them your stuff. If the money isn’t at home, fly it in. But assemble the deals first....

(Hat Tip to our friends at the National Dialogue on Entrepreneurship)

Comments

[George Lipper]

Bob,
There's one other factor in your strategy that need to be addressed. I did investing work in Iowa with the (now closed down) Iowa Seed Capital Cororation. We did attract some coastal venture capital to some better deals. The problem was that the better opportunities then were pressured to move to the centers of capital, costing the state the growth opportunities for which they we funding ISCC.