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Venture development describes economic development activity that is focused on using best-practices and activities of experienced business mentoring and pre-angel and venture capital investing in order to help create venture and angel-capital-ready firms which have the promise to create significant economic wealth for a region, state or country including entrepreneurial wealth and jobs.
Communities that do not have recent significant history or a critical mass of current venture-backed firms are beginning to pursue venture development as a way to help their local economies begin to transform their ability to create and support such organizations.
Venture development organizations typically are organized as not-for-profit corporations. They may manage for profit or not-for-profit seed funds. Their sources of financial support are corporations, local and state governments, universities, research institutions, foundations, and individuals.
Why is Venture Development Important?
Venture-backed firms now account for a significant portion of current jobs in the U.S. economy.
- Employees from venture-backed companies represent 9 percent of all private sector U.S. employment and the revenues from venture-backed companies represent 17.6 percent of U.S. GDP
- U.S. companies that received venture capital resources from 1970-2006 now account for 10.4 million jobs and $2.3 trillion in revenue in the U.S. economy
- Venture-backed companies also grow much faster (revenues and employees) versus non venture-backed companies (11.8 percent versus 6.5 percent in revenues and 3.6 percent versus 1.4 percent in employment between 2003 and 2006)
As a result of these existing and on-going trends, the economy of communities that do not have a significant set of venture-backed firms will suffer on a competitive peer basis when evaluating economics such as job growth and per-capita income.
Example of Venture Development
JumpStart Inc. is a non-profit venture development organization in Northeast Ohio that has exemplified the venture development model since its inception in 2004. JumpStart is a non-profit organization focused on promoting entrepreneurship by investing in high-growth potential entrepreneurs and assisting them to propel their business to the next level of funding by providing business assistance through their Entrepreneur-in-Residences and guidance in raising subsequent investments (either Angel Investor or Series A Venture Capital). With a venture development organization such as JumpStart, 100 percent of its return-on-investment is placed back into the fund; ROI is not JumpStart’s priority, as with a venture capital organization. JumpStart’s charitable gifts from funding partners are all focused on economic development returns or regional wealth creation, while venture capital firms have limited partners.
- National Venture Capital Association’s 2006 edition of “Venture Impact: The Economic Importance of Venture Capital Backed Companies to the U.S. Economy:”