Editorial: We need more investment capital
We now have two new studies on the state of the economy in the region that covers the New River Valley, the Roanoke Valley and Lynchburg — a grouping defined by the state economic development council known as GO Virginia.
The first of those, which came out in December, looked at a particular part of that economy — our ability to start and grow new businesses. We often talk about how our region needs to create a new economy as we transition from the industrial age to the information age. There are two ways to do that: We can either attract companies from the outside, or we can grow our own. In practice, we want to do both, but we have more control over the latter than the former. If you look at the places most identified with the new economy — say, Silicon Valley and Seattle — they all grew their own companies.
So how are we doing? Not as well as we could.
The December study — by the Ohio consultant TEConomy Partners — found that our region lagged behind peer communities in the number of new businesses being created. It also found that the region was losing college-educated workers, the people most necessary to a technology economy. From 2012 to 2017, the region saw a net loss of 23,974 people with college degrees. By contrast, the peer communities we were benchmarked against — Austin, Texas; Birmingham, Alabama; Charlotte, North Carolina; Chattanooga, Tennessee; Dayton, Ohio, and Gainesville, Florida —all gained workers with degrees.
We also need something else and the second study, out last week from the Valleys Innovation Council, looks more deeply at just what that is: Investment capital.
Here’s how all these things tie together: There may be lots of reasons why we’re not growing enough new companies: We have too many educated workers leaving the region; we underperform against our peers in the number of patents being issued here; and a lot of research conducted at local universities doesn’t translate into commercial applications. Those are all hints and clues that pop up in these studies. The other is the lack of investment capital to fund those companies that do get started.
The more difficult part is the investment capital. The financial world defines three different types of investments. Whichever definition we use, though, our region comes up at or near the bottom compared to our peers.
Angel investors: The industry-recognized PitchBook, a financial data service, measures $5 million between 2015 and 2018. That’s less than half the next-lowest community — Chattanooga with $11 million — and well below No. 1 Charlottesville with $55 million.
Seed capital: We had $200,000, just below Greenville at $400,000, and well behind No. 1 Chattanooga with $12 million.
Venture capital: We measured $32 million, just ahead of Greenville at $30 million, but well behind No. 1 Chattanooga at $167 million or even No. 2 Charlottesville at $138 million.
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