Economically Speaking: Venture capital provides seed money for state businesses

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Joseph L. Driskill is the director of the Missouri Department of Economic Development. |ret||ret||tab|

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In the midst of these challenging economic times, Gov. Holden's administration is developing a forward-thinking economic blueprint to ensure Missouri is positioned to thrive in the new economy. One of the elements of this plan is creating a climate for entrepreneurial growth, which includes increasing access to venture capital. |ret||ret||tab|

Venture capital is money provided by professionals who invest in young, rapidly growing companies that have the potential to develop.|ret||ret||tab|

Clearly, venture capital is a vital source of equity that enables our entrepreneurs and business start-ups to take the risks involved in developing new technologies and bringing them to market. |ret||ret||tab|

In order to strengthen the state's focus on increasing venture capital resources, a group of key business and government leaders known as the Venture Capital Roundtable Group actively provides support and advice to Holden on venture capital issues. |ret||ret||tab|

I met with the Venture Capital Round-table earlier this month to discuss strategies for the future regarding our continuous attempts at increasing venture capital resources in Missouri. Their assistance will be critical in helping develop and implement a successful strategy to capture a greater share of venture capital here, particularly now as investors have become more cautious as a result of the uncertain economic environment, corporate accounting scandals, etc. |ret||ret||tab|

Missouri has made tremendous progress over the past five or six years to increase venture capital investments for our small businesses and entrepreneurs. |ret||ret||tab|

Missouri has gradually increased its venture capital investment since 1997. In 1999, the state set a record with $283.7 million invested in 20 companies as reported by the PricewaterhouseCoopers Money Tree survey. Missouri ranked 20th in the nation for venture capital in 1999. |ret||ret||tab|

In 2000, Missouri again broke the state's record with $755 million invested in 49 deals, ranking 19th in the nation. And in 2001, the ranking edged up two more steps to 17th in the nation with $339 million invested in 22 deals. Today, Missouri has more than 40 funds actively investing in the state with approximately $1.55 billion under management. |ret||ret||tab|

Several factors have contributed to the recent growth and recognition of the venture capital industry in Missouri. |ret||ret||tab|

The state's Certified Capital Companies Program used $140 million in state tax credits to create several venture capital funds. Since 1997, the funds have invested nearly $79 million in more than 30 small Missouri businesses, primarily in the information technology and telecommunications industries. |ret||ret||tab|

The Prolog Ventures Fund, has raised $33.7 million and helped generate venture capital investment activity in Missouri. This fund is now targeting life science businesses and has invested $2.16 million in three companies. |ret||ret||tab|

Despite these significant accomplishments, the current challenging economic times have unfortunately led to a decline in venture capital investments in Missouri, with only $47 million invested in 15 deals during the first and second quarters of 2002.|ret||ret||tab|

We remain optimistic that investments will once again increase as economic conditions improve. And we will continue to pursue a greater share of venture capital resources for Missourians. |ret||ret||tab|

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