CUMBERLAND — The Power of 32 initiative is moving forward as the economy team works on two initiatives — to create a venture capital fund and a site development fund, according to Don Smith, president of the Regional Industrial Development Corp. of Southwestern Pennsylvania.
“I think they are really exciting — they address a real need in our region and I think they actually have the possibility of working,” said Smith in a presentation to The Greater Cumberland Committee on Thursday.
The economy is one of six major themes that was identified by data collection by the Power of 32 group and a framing committee was formed to deal with this issue.
The goal of the economic team is to promote abundant, diverse and high-quality job creation that provides ample opportunity for family-sustaining jobs throughout the region, according to Smith.
The venture capital fund is targeted at early stage company formation so new company formation and growth can be encouraged, according to Smith.
“There is lots of evidence that startup companies are perhaps the major source of growth in regions,” said Smith. “Seed funding is a critical part of that. Financing is important,” said Smith.
There is a debate about what creates companies, whether it is capital or entrepreneurialism, according to Smith.
“I am a little ambivalent about that. I think entrepreneurial is the key element,” said Smith. “There is no question that capital is good and more is better.”
Energy companies are being targeted as early stage investors.
Fort Washington, a group in Ohio that is managing three of the capital funds, is proof that the approach works, according to Smith.
Smith wants to bring the Ohio model here and marry it across the region. “They are attracting new venture capital funds into Ohio, which is not always considered the hotbed of seed investing. They are investing a lot of companies, they are achieving positive returns and most importantly are creating new companies and jobs,” said Smith.
There will be one large fund of $100 million that will get directly invested into companies. A selection committee has been formed to screen candidates for a manager position and proposals for the position will be solicited in the next couple of months. The manager will be responsible for raising funds.
The region is losing some deals because development sites for large industrial users aren’t immediately ready to go, according to Smith. It often takes about 18 months until the site is ready.
“It is abundantly clear that when you drive from Pittsburgh to Cumberland we don’t have the large flat plains that many parts of the country do. So, we don’t have easy development sites,” said Smith. “They are hard to do, they take a long time and there is a risk involved.”
The site development fund would create a limited partnership where people would invest in a $75 million to $100 million fund and then that fund would make an investment in top priority sites.
A team of real estate and financial professionals would form a team to determine the top priority development sites, according to Smith.
“This team would be created so we can make sure that this funding goes towards sites that actually have the highest capacity to make a difference in our region’s economy,” said Smith. “This will also serve to help bankers in the region feel some confidence that these just aren’t wishes and field of dreams projects but that there is actually some market sense behind them.”
The Power of 32 is a regional initiative that spans four states, 32 counties and nearly 4.2 million people.
Contact Elaine Blaisdell at eblaisdell@times-news.com.
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