The Cincinnati Enquirer ran an article about a new a state-created venture fund charged with raising $100 million and steering at least half of it into Ohio startup companies. The new company, Buckeye Venture Partners, will be headed by a unit of Western & Southern Financial Group of Cincinnati.  Buckeye Venture Partners will serve as administrator of the newly created Ohio Capital Fund based in Cincinnati.  Of the money entrusted to venture capital firms, no less than 75 percent must go to Ohio-based funds. And of the money invested in companies, no less than 50 percent must go to those based in Ohio. Ohio-based funds that receive OVCA money must match it with an equal amount of their own funds.

Running adjacent to this was an article detailing the decline in venture funding in the Midwest.  The article showed reports indicated that the venture capital market nationally grew by 10.5% in 2004 but Ohio received 20% less in 2004, making Ohio’s share of U.S. venture capital 0.3 percent, down from 1.1 percent in 2002.  While some think this has more to do with the Midwest lagging in the recovery or that the Midwest is not a favorable business climate, it seems to indicate a continued bias towards investments on the coasts.  More often than not, we’re seeing venture deals that require a move out of the Midwest to a location on the coast, generally close to the VC’s home.  I guess no one wants to travel anymore.

Finally, Business 2.0 ran an article stating that they expect it to be raining cash in the coming months as much of the money raised in 2000 is in funds that will be closed to new investments after 2005, so VCs have to use that money now or return it to investors. VC’s do not like losing control over funds – they’d lose the 2 percent management fees and they’d have to go raise more money again. This could mean a good window of opportunity for all sectors and regions to obtain some venture capital. It will be interesting to see what portion, if any, makes its way to the Midwest.

See the entire article here.

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