Time for the Opportunity Fund?

As we get closer to the 2020 election year, DC-based think tanks are starting to float big ideas on how to jumpstart the economy in our distressed regions.  Third Way has recently released a plan to create a new $60 billion Opportunity Fund to encourage venture capital (VC) investments in locations outside of America’s VC hotspots.  That’s a big menu of places since the VC industry is heavily concentrated in a handful of locations, like Silicon Valley and the Boston area.  At $60 billion, the Opportunity Fund is a big idea, but not necessarily a new one.  It would operate much like parts he Obama Administration’s State Small Business Credit Initiative (SSBCI) which was developed as a response to the Great Recession.  That program has been closely evaluated, and generally was found to be found effective. In addition, we have decades of experience, in the US and globally, in how to best operate public-backed venture funds of this type, and groups like SSTI, CDFA, and CDVCA have developed great expertise in this issue-area.  This deep knowledge base yields several important lessons for the Opportunity Fund.  Any new venture fund must be part of a continuum of capital sources, closing persistent capital gaps.  It shouldn’t be a stand-one fund that only targets a small share of the local market.  In addition, customization and localization matter.  Local investors must be on board, and the fund must be targeted toward local entrepreneurial needs, which, in many places, will mean investments in smaller deals at earlier stages in a more diverse mix of industries.   I don’t know if the Fund has a chance of being enacted, but I’m happy to see the Opportunity Fund concept out in the policy debate.  We need more discussion and more focus on this important topic.

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