The State of State Venture Capitalism

Abstract

State governments have become increasingly visible players in the venture capital arena, allocating an estimated $192 million in tax, bond, and other revenues and perhaps a billion dollars in pension trust funds to a variety of public and quasi-public venture capital arrangements. This article offers a review of the variety of arrangements at the beginning of the 1990s by attempting a census of such programs, an estimate of their financial dimensions, and some preliminary observations regarding their impact. The review concludes by suggesting that state venture capitalism, though a well-established feature of state economic development strategy, represents a very small commitment of capital compared, for example, to private venture investment. Economic development results tend, therefore, to be modest.