DRC Working on Plan to Grow VC Investing
From the Dallas Business Journal: DRC working on plan to grow VC investing‘Blueprint’ sets 2015 goals for chamber’s core three counties
Premium content from Dallas Business Journal - by Jeff Bounds, Staff Writer
Date: Friday, February 11, 2011, 5:00am CST
One of the Dallas Regional Chamber
’s “Blueprint for Economic Prosperity” initiatives is to boost annual venture capital investments in the organization’s core three counties by 50 percent by 2015. That would make the area a top 10 U.S. region for such investments.
The question is: How? And the answer remains undetermined.
“This is a new focus for us,” said Mike Rosa
, the chamber’s vice president of economic development. “We’ve got a lot to learn about the venture capital, angel and private equity environment going forward.”
The chamber announced the “Blueprint for Economic Prosperity” initiatives at its 2011 annual meeting. The blueprint also includes adding more jobs than any other U.S. region between 2010 and 2015; becoming a top 10 region for Fortune Global 500 headquarters and a top three region for major public and private U.S. headquarters; and driving improvements in education.
North Texas ranks No. 13 among major metro areas for receiving venture capital, according to Rosa, citing a MoneyTree report issued by PricewaterhouseCoopers
and the National Venture Capital Association, with data from Thomson Reuters. PricewaterhouseCoopers now goes by PwC.
Dallas Business Journal research shows that venture investment in this region has been largely stagnant for years, dating to the 1990s bust of the technology and telecom bubbles.
“When we did the strategic-planning process, we noticed that Dallas-Fort Worth did not seem to be a top 10 spot for that kind of thing,” Rosa said. “We’re top 10 in jobs, business locations, lots of things. But it was noticeable that venture capital spending and innovation
spending did not seem to be one of those.”
Although chamber officials haven’t come up with their plan to fix that state of affairs, they are taking preliminary steps.
“We’re putting together a plan to communicate and measure angel and venture capital (financing) in this region,” Rosa said. “We are talking and learning right now with those that are in the space. We’re making sure we’ve got good data.”
Another effort under way is to come up with a list of high-potential industry sectors to concentrate on, Rosa said.
“We’re doing some cross-referencing and data combinations to come up with some of those,” he said. “In a month or two, we should have some preliminary results on what it makes sense to concentrate on. You’ve got to choose the paths of highest returns.”Less VC to chase
Data from DBJ research and Dow Jones VentureSource show there are fewer VCs, and they have less money to invest.
For instance, 119 venture firms raised $11.6 billion last year, the lowest numbers since 2003. And the number of active venture firms making at least one investment in a year has steadily fallen in the past decade. The latest number was 657 in the first half of 2010. In 2000, that number was 1,338.Sevin Rosen Funds
, Dallas’ largest and most prominent venture firm, has cut in half the size of its latest fund, from $300 million to $150 million. Officials of the firm have said they hope to better focus on a smaller number of portfolio companies in hopes of producing stronger returns.
“There’s no question that the amount of venture capital funds invested certainly moves up and down with other forces that take place in the economy,” Rosa said. “The venture capital goal is really a marker for an even bigger goal: spending on innovation and the growth of companies and jobs here.”
To help grow venture financing, a chamber might encourage the development of incubators that develop companies in areas that VCs are interested in, such as “clean tech,” biotechnology and medical devices, according to Scott Hendon, a tax partner in the Dallas office of BDO USA LLP.
“To the extent they could attract more of the entrepreneurs here, that will drive venture capital investment,” Hendon added.