Our Business Needs Government Funding Because We Don't Want To Drive Out Of State To Talk To Bankers

This is from an article in Distro, free publication that Engadget pushes to my iPad.  The only version I can find to link to is this pig of a pdf.  The article is on 38 Studios, the Curt Shilling video game company that the taxpayers of Rhode Island lost over $50 million funding.  This is a justification for a similar tech funding program in Nevada:

“The Catalyst Fund and the NCIC Fund are two of the best things that have happened in Nevada in the time that I’ve been here,” he said. “The biggest challenge facing Nevada is that we have very little in the way of risk capital. Our funding capacity is only a fraction of what our actual funding needs are.”

Meanwhile, most of the limited venture money available in the area tends to be in the hands of investors who lack familiarity with the tech sector, said Colin Loretz, co-founder and CEO of Web-based  startup Cloudsnap. Loretz — whose company recently received support from startup accelerator TechStars — ended up going out of state to secure funding from investors in San Antonio and San Francisco.

“What we’ve always found was that there were few funding options in Reno, and most of them didn’t understand what we were doing,” Loretz said. “They were very, very knowledgeable in more traditional areas such as manufacturing, mining and clean energy, but not cloud services.”

This is simply bizarre.  Why does every single geographical box we might draw on the map need to be self-sufficient in tech venture capital?  What is the big deal about going out-of-state for investment.  It can't be hard to do, since the person speaking actually did exactly that himself.

According to Google Maps, Sand Hill Road, the epicenter of tech venture capital, is just 4 hours and 24 minutes from downtown Reno by car.  That makes the venture capitalists in Menlo Park closer to Reno than to LA.  What is the big freaking deal that makes it so important for Nevada to have in-state tech venture capital, even at the cost of blowing a lot of taxpayer money to get there?

By the way, I thought this was a funny adjunct to that justification:

Meanwhile, Nevada officials said they have learned from the problems experienced by other states and built the necessary protections into their programs. Management of the NCIC fund, for example, will be overseen by a private equity firm, said Nevada State Treasurer Kate Marshall.

We need a state private equity fund because we have no private equity expertise in Nevada.  The state fund will be run well because we will put the (supposedly nonexistent) state private equity experts in charge of it.  Not to worry.  No chance at all that this state money will just be used to back and bail out the private equity managers' investments.

The article is light on details about how the whole Rhode Island debacle went down.  I would really like to find a step by step history that shows how debacles like this occur.

  • obloodyhell

    }}}} I would really like to find a step by step history that shows how debacles like this occur.

    Let's create our own...

    Step 1: Give money to the government without specific encumbrances directing how it is to be spent....

  • paul

    I'm completely against this sort of government fund but...

    You are wrong about distance. VCs I know (I've been CEO of a couple of startups and pitched several others) don't like to invest in companies that take too long to get to. They have to go to board meetings. They like to participate in strategic planning etc. So it really is the case that the funds need to be local. This is actually one of the secrets of silicon valley. The VCs on Sand Hill Road will generally not invest in anything more than a couple of hours drive away, so rarely outside silicon valley (where, by the way, there are no longer any semiconductor fabs, most silicon is actually made in Taiwan).

  • HenryBowman419

    This time in Nevada, things will be different. Unlike Rhode Island, which is infested with Mafioso (at least Providence is), Nevada has always been free of such folks, and all business transactions are in the open and above-board.

    Like all Socialist enterprises, this time things will be different.

  • CraigNCowartEsq

    This is a government employee that wishes he was a venture capitalist, but isn't good enough or brave enough to be one in the real world, seeking to create his own little VC by confiscating other peoples money so he can be important. I am sure he has lots of other explanations, but this is the bottom line. Of course, it would wind up as a fiasco and a loss, because if it was legitimate, it would already exist via real profit makers.

  • SamWah

    obloody...what makes you think encumbrances will keep them from doing something completely different?

  • Matt

    "Why does every single geographical box we might draw on the map need to be self-sufficient in tech venture capital?"

    Why do geographical boxes even matter any more?

  • Vitaeus

    The geographic boxes matter since otherwise we could all be living with teh rules of California or Illinois or New York

  • AZCapitalist

    We used Sand Hill roads VC's from here in AZ. But location counts one heck of a lot, even in this day of the internet. Silicon Valley is a dynamo that sustains innovation and investment precisely because of the synergy derived from having all those folks living in the same community (and having Stanford and Berkeley close by).

  • http://profiles.google.com/colomon Solomon Foster

    Someone should establish a rule that any loses from this sort of nonsense come first out of the responsible politicians' pensions...

  • Matt Landry

    Bankers don't mind lending out of state. VCs, on the other hand, seem to have a very perverse attachment to physical proximity. This despite the fact that most of the pitches are coming from folks who were eating paste in kindergarten (if, indeed, they were even out of diapers) the last time location _really_ mattered to most tech companies for any reason except ones relating to government (laws, taxes, regulations, etc).

    Of course, that doesn't justify getting the state into the VC business, but it remains a fact of life.