Forget Silicon Valley
Could venture capital rescue impoverished areas?
- April 29, 2011
For many people, “venture capital” conjures images of cutting-edge technology and biomedical research in affluent hotbed zones like Silicon Valley. Greg Fairchild would like to adjust that perception.
“I believe that the venture capital model can work in lots of places,” including economically distressed areas,” says Fairchild, executive director of the University of Virginia’s Tayloe Murphy Center and associate professor of Business Administration at the Darden Graduate School of Business.
To that end, the Tayloe Murphy Center has identified five areas around the commonwealth that would be good matches for venture capitalists looking to combine good returns with good deeds. They are:
• Eastern Shore
• Southside Virginia (including Danville, Reedsville and Henry County)
While each of these areas suffers from high levels of poverty and unemployment as well as low levels of self-employment, Fairchild believes they offer good investment opportunities.
For example, Franklin “has extensive knowledge and labor associated with paper and timber” that could be utilized by an investor who is able to match it up to an emerging technology, he says.
Likewise, the expansion of Fort Lee will bring population growth to Petersburg, offering equity providers an excellent opportunity to invest in new businesses that can provide goods and services.
Historically, Virginia hasn’t applied private equity models to economically distressed regions as much as some other states have. “Given the private equity talent we have in the state, especially in Northern Virginia, it’s surprising this same set of ideas hasn’t diffused to the rest of the state,” Fairchild says.
In the future, though, we’ll see it at work here in the commonwealth, he argues, because private equity capital is vital to a distressed area’s recovery.
“It’s highly unlikely that a business could organically grown out of a currently hard-hit area without the intervention of capital,” he says. “And private equity can do that.”