A look back | Give up venture capital for a lawn care business? Economic uncertainty makes one VC wonder
From 2001 to present, I’ve led as its president CEI Community Ventures (CCVI), a $10 million early-stage venture capital fund, now fully invested and awaiting returns. Three years ago, I announced plans (see “Starting from Scratch,” Mainebiz, 12/24/2007) to raise a new venture capital fund, Clear Venture Partners (CVP). A new entity unaffiliated with CCVI, CVP set out in late 2008 to raise capital with a still-maturing portfolio and in the context of the most significant downturn since the Great Depression — impeccable timing.
I’d like to say I was undaunted by this challenge. I believed then, as I do now, that the portfolio I’d developed for CCVI — driven, as is the case in most early-stage VC funds, by a minority of the portfolio — would allow me the possibility of attracting new funds to feed the capital gap (“Mind the Gap,” Mainebiz, 7/13/09) so as to help early-stage ventures avoid the valley of death (“The Valley of Death,” Mainebiz, 4/21/08). Certainly, demand for capital from entrepreneurs has only increased as a result of the downturn — the gap for seed and early-stage ventures is rapidly becoming the Grand Canyon (“Capital Pains” by Jackie Farwell, Mainebiz, 10/13/10) — a situation that is not at all good for entrepreneurs who need capital to fuel growth, but really good for capital-rich investors who benefit from the undersupply of capital relative to the over-demand for capital. With sources for new funds also in contraction mode, I elected in early 2009 to shelve the prospectus I’d developed for CVP.
A new direction
With the time I’d planned to use raising and deploying new capital, I shifted into focus on regional innovation clusters, inspired by the work of Gov. John Baldacci’s former Jobs, Innovation and the Economy chair and current U.S. Small Business Administration Administrator Karen Mills (“What Mills Means,” Mainebiz, 2/23/09). Clusters were intriguing both because of the sector and regional focus, something which was fully aligned with my venture capital work, and because of Mills’ expressed intent to bring this economic development strategy to the federal government. As noted (“One Year Later,” Mainebiz, 2/22/10 and “Catalyzing Clusters,” Mainebiz, 8/9/10), Mills has had some success in her work.
In “Link, Leverage and Align” in the 3/22/10 issue of Mainebiz, I highlighted the importance of the private sector in mirroring the government’s work and articulated part of a program I’d conceived to activate and expand existing and emerging clusters. I noted that activities that convene and connect cluster market actors — tech and trade associations, universities, venture capital and private market investors, etc. — were key to realizing the knowledge diffusion and network effect of cluster development.
I described my own efforts to activate clusters; this past summer, I led or co-led three cluster proposals in response to requests for proposals from two federal agencies that announced new cluster funding initiatives over the summer (“Bottoms Up,” Mainebiz, 10/4/10). The LINK (Leveraging Innovation, Networks and Knowledge) initiative I’d outlined included delivering a slew of cluster-related events, organized around target growth sectors in New England, coupled with a web services platform that would help maintain and grow the networks formed or sustained through the events. I formed two new entities — Clear Innovation Partners (CIP), an LLC, and Regional Cluster Alliance (RCA), a 501c6 nonprofit — in support of these proposals. While none of these proposals made the winners circle, they resulted in ongoing relationships with market partners who support their intent.
For example, I’m presently working, with my CIP hat on, with the New England Clean Energy Council in pursuit of fiscal year 2011 funding that might support their New England Energy Innovation Consortium efforts. NEEIC seeks to support translational development with funding and technical assistance to help commercialize clean energy/tech initiatives throughout the six-state region. I’m part of a small strategy team formed to build the plan, create the regional network and lay the infrastructure for events and web services to help activate a clean energy cluster here in the Northeast. On one hand, I can imagine bipartisan support for investment in this type of sector initiative; on the other, the partisan rancor, already informed by the 2012 presidential election, provides little reason for optimism for support of anything that doesn’t reduce taxes or decrease the deficit. Global competitors share our interest in this high-growth strategic sector but don’t seem to share our country’s interest in letting politics prevent critical investment and action.
So, with a contracting venture capital industry in Maine, I’ve put CVP to sleep for a bit. And with an uncertain cluster funding environment following the midterms, CIP and RCA may need to give way to yet another new identity. I’m thinking maybe Clear Lawn Services and Snow Removal — weather seems to be one of the few things one can count on these days.
Michael Gurau, president of Clear Innovation Partners, a Maine-based cluster development organization, can be reached at mgurau@clearinnovationpartners.com. Read more Venture Builder here.
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