Venture Capital for Community Economic Development

<p>Tyler Mulligan is a School of Government faculty member.</p> <p>When we think of venture capital, we imagine business people making investments in the most innovative companies and technologies: pharmaceuticals, medical devices, computer software, and nanotech applications, to name only a few. Indeed, this month’s venture capital conference in Pinehurst, North Carolina, is boldly titled, “Where Great Minds Meet Smart Money.” But it might take a particularly innovative investor with an especially great mind to make venture capital investments in distressed communities in pursuit of economic growth and social benefits. It’s a safe bet that some of those great minds are found in community development venture capital firms. Let’s take a look at a few of the models for this kind of investing.</p> <p>The original rural community development venture capital firms were formed in the 1970s and invested in rural businesses with two primary goals: producing economic growth in rural areas and creating employment opportunities for low-income rural residents. North Carolina’s Rural Venture Fund follows in this mold and concentrates its investments in distressed Tier 1 counties.</p> <p>A few venture capital funds have gone beyond these traditional aims and seek to use their investor role as a means for building assets for low-income employees in portfolio companies. Kentucky Highlands Investment Corporation (KHIC) was the first venture capital firm to focus entirely on financing businesses in struggling rural counties.  In determining where it invests its equity, KHIC strongly prefers companies that provide living wages and a minimum benefits package (life, health, and disability insurance) to low-income employees.   Additionally, KHIC requires all companies in its [...]</p>