Venture Capital Investment: Emerging Force in the Southeast

Edgar Parker Phillip and Todd Parker
Economic Review, Vol. 83, No. 4, 1998

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Venture capital investment throughout the United States and in the Southeast in particular has grown dramatically in recent years. Pensions funds, bank holding companies, insurance companies, investment banks, and nonfinancial institutions all invest venture capital in pursuit of high returns and as a means of diversifying investment risks. However, returns from such investment have been mixed over the industry's relatively short history. As more and more large institutional investors pour increasing amounts of assets into venture capital and as state and local governments seek to attract this capital and the industries it fosters, the potential benefits will grow, but not without raising public policy issues.

This article examines the history, structure, and evolution of the national venture capital industry and then focuses on current developments in the Southeast, including state policies promoting such investment. The authors observe that venture capital, starting from a small base just a few years ago, has become an integral part of new business formation in the Southeast. They note that clear evidence on the impact of state venture capital support is lacking and the role of public support of funds and projects may still be questioned. Nonetheless, they conclude, new technological advances, business opportunities, and entrepreneurial needs should continue to spur development of the venture capital industry in the region.

December 1998