I’m talking about the $10 million that Mike Kazmierski hopes to pull together in private and public funds to help area startups get up and running.
Kazmierski, the head of the Economic Development Corp., plans to reveal this idea next Friday at a luncheon speech titled “Change has Come.”
The fund will be one of a number of initiatives the EDC hopes to pursue in the next few years in response to the changes we’ve seen in the economy and changes in the way economic development is done.
And so an emphasis on capital creation will now be among some of the new approaches the EDC will attempt.
Kazmierski describes it as a community foundation of sorts.
The idea will be to help promising companies. In exchange, their founders will have to pledge to remain in the Springs. That’s important because companies that attract venture capital often are made to relocate to wherever the money resides.
The point of this, of course, is to help create jobs. At the same time, in a more traditional EDC role, Kazmierski and his people will step up their efforts to identify “entrepreneurial talent prospects” that would consider a move to our region.
While a lot of details still need to be worked out, the EDC hopes to work with UCCS Professor Thomas Duening, who is already laying the groundwork for what would be the city’s first VC fund. The university will be a general partner in the Duening-led fund, and will share in the profits.
Whether Kazmierski’s idea works will depend on a bunch of factors.
One way or the other, it’ll no doubt take a while to raise as much money as he’d like. But Kazmierski’s bigger hurdle will be getting support from the public sector.
Few of our elected officials support these sorts of public-private endeavors, preferring a limited government approach to most things. What role is most appropriate for government is always going to be point of debate here, as it well should be.
But you can look to cities as close as Austin or as far off as Hong Kong for instances in which public funds were successfully used to help stimulate the economy and provide the government with a decent return on investment.
According to the National Venture Capital Association, VC and private equity investors in the U.S. saw annualized returns of 16.7 percent over the 20-year period ending Dec. 31, 2007.
If the U.S. government had made annual investments of $10 billion in VC firms during that same period, its $200 billion investment would have yielded a return of almost $1.5 trillion.
Michael R. Bloomberg, the billionaire mayor of New York City, gets this. His administration in the past year has launched several initiatives to promote entrepreneurship including the establishment of a city venture fund.
FirstMark Capital, a VC firm, responded by agreeing to invest $19 million in the NYC Entrepreneurial Fund. That was more than double the $9 million in private money that the fund’s organizers had hoped to raise on top of the $3 million that the city put in.
Less than 200 miles to the south, Maryland Gov. Martin O’Malley last proposed creating a public-private partnership to fuel venture capital investment in Maryland. The idea is now before Maryland’s legislature and is expected to win approval.
Here in Colorado, former Gov. Bill Ritter took a step in the right direction last year when he announced the formation of the Colorado Advisory Committee on Venture Capital Investment. The group is working with the state Office of Economic Development to help in the state’s efforts to encourage investment in Colorado companies. So far, the committee hasn’t done much more than meet to share ideas, but its very existence raised hopes that the partnership between business and government would yield new approaches to funding companies.
There’s no doubt that venture-backed companies historically have preferred to limit government funding. But times have changed, and so our attitudes need to change as well.
A community VC fund is just what we need. The next mayor and City Council should support this initiative.
Kazmierski, meanwhile, promises a surprise ending to the lunch. I’ll be out of town so can’t make it, but if it’s really big news, go to csbj.com for the latest.
Allen Greenberg is the editor of the Colorado Springs Business Journal. He can be reached at firstname.lastname@example.org or 719-329-5206.