In a February 20 Wall Street Journal online article titled “How to Get Venture Capital to Places Left Behind,” Steve Case — the co-founder of AOL and chief executive of investment firm Revolution LLC — spoke about the importance of encouraging and developing startups across the United States, not just in California, Massachusetts and New York. Tremendous work is being conducted around the country, and especially in the Midwest, where researchers and startups are among the nation’s leaders in advances in the life sciences, information technology, energy and agriculture.
But these leaders must overcome an obstacle: financial support. When Case was asked about the lack of venture capitalists in certain regions around the country, he replied that usually there is money in those areas, but individuals and companies that could be investing in startups, aren’t.
Multiple problems stem from this lack of support. Companies without strong local backing, including investors’ mentoring and guidance, may struggle and close; jobs disappear; and local and regional economies become less diversified. Fewer jobs will be available for a highly skilled workforce, including recent statewide college graduates, some of whom will leave the state for better opportunities.
In the article, Case suggested another negative impact from a lack of local investment: It may lead other investors to believe that nothing of value is developing in those regions.
“It’s really important that local entrepreneurs get their initial support from local investors — I think that is a signal to people in other places,” he said. “If the people in Nebraska or Minnesota or Iowa or what have you aren’t investing in entrepreneurs, why should the folks in California or New York or Massachusetts pay attention?”
Amazing technologies are being developed and commercialized by established companies throughout Indiana. Warsaw has been dubbed “Orthopedic Capital of the World.” The global headquarters for Anthem, Cook Medical, Dow AgroSciences, and Eli Lilly and Company are located here, as well as the North American headquarters for Roche Diagnostics. Small companies and startups are creating solutions that impact people’s lives, as evidenced by the Genesys purchase of Interactive Intelligence and the Salesforce purchase of ExactTarget.
Sometimes these smaller companies and startups are launched from research conducted in the state’s — and nation’s — premier research institutions, including Indiana University, Purdue University and the University of Notre Dame. When these startups are founded, there is usually a history of state and federal government support of the basic research, often in the form of SBIR grants, STTR grants and matching funds. Usually there will be institutional support, perhaps from funds whose mission is to advance innovations and spur economic development — sources like the Innovate Indiana Fund, which promotes a culture of entrepreneurism within the Indiana University family by helping early-stage venture companies grow to the next level of success.
Local investment and support of our startups as they grow and develop high-wage, highly skilled job opportunities can positively affect the state. The support can include institutional, state and federal funding, but it must spread further into the private sector. We must develop more early-stage investment capacity in Indiana and encourage investment and mentoring locally, not only for immediate benefits to the state’s economic and workforce development, but also to show others that research conducted — and companies created — here in Indiana have an impact across the world.
Tony Armstrong is president and chief executive officer of the Indiana University Research and Technology Corp.