March 20, 2003

  
Indiana Must Venture to Raise More Capital for Start-Ups

Robert Davignon, Rose-Hulman Ventures - Project Manager
This was a letter to the editor printed in the Indianapolis Star Feb. 3, 2003

There has been a lot of effort during the past few years to transform Indiana into an innovative state with higher-skill, higher-wage jobs. The creation of new jobs and businesses will produce a stronger economy, ultimately leading to a better standard of living for all Hoosiers. It will also help retain many students who are currently leaving the state upon graduation.

However, if the plans being proposed today are to be successful, Indiana will have to heavily increase the amount of investment capital available to start-up companies. Fortunately, there are ways to obtain this much-needed capital without added strain on the state budget.

One solution is to increase the amount of funds that come into the state from private venture-capital firms. The impact that these types of funds have on an economy is enormous. The National Venture Capital Association says that venture capital invested from 1970 to 2000 has created 7.6 million U.S. jobs and more than $1.3 trillion in revenue. History shows that Indiana could be doing a better job of obtaining these funds. In 2001, $42 billion of private funding was invested in the United States; Indiana companies received only $54 million of that total. This means that only one out of every 778 dollars invested nationally went to Indiana companies.

State leaders must focus on this uneven balance and find a way to increase private investments. They should foster relations with the 600 or so private investment firms that exist in the country, showing them why Indiana is a smart place to invest and showcasing our new businesses that could use venture funding.

A second solution is to create our own Indiana Venture Capital Fund. State residents would have the opportunity to invest in the new fund similar to how they invest in a bond or mutual fund. This state-sponsored fund would provide capital to start-up and small existing companies throughout the state.

With the proper promotional campaign, the fund could create a substantial amount of capital in the state. Indiana could make this fund appealing by adding bonuses such as tax breaks on investments and matching part of the investments using the 21st Century Fund.

Indiana has a lot of strengths and resources that should make it an attractive investment option, from its great schools and research programs to its solid foundations in the life sciences and information-technology sectors. When you combine these strengths with the low cost of doing business in the state, Indiana has a unique offering. Hopefully, our state leaders will recognize this need for increased investment capital, which is critical for the type of economic expansion plans being set forth, and implement policies to reach out for more funding for the business sector.