Editorial: Indiana making progress in quest to boost venture capital funding

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When ClearObject CEO John McDonald this month announced new owners for his Fishers-based company, which specializes in internet-of-things integration, he put the upside succinctly: “If cash is oxygen, we just strapped on a big oxygen tank.”

Cash is indeed oxygen for young tech companies in central Indiana, whose fate—wither or prosper—hinges in no small part on finding deep-pocketed backers, typically venture capital firms, to fund rapid growth.

There is no shortage of ingenuity in central Indiana, as IBJ’s reporters chronicle in our online and print coverage nearly every week. A plethora of firms is chasing innovations in a range of fields, including marketing technology, health care and life sciences.

And many of the firms are scoring impressive fundraising hauls—fueling the perception that the central Indiana startup community is thriving and gaining momentum.

To be sure, there is a lot positive happening here. But the national reports issued each quarter that keep tabs on venture capital activity serve as a stark reminder that we still have a long way to go.

According to data from PitchBook and the National Venture Capital Association, Indiana racked up 93 deals in 2018, bringing in a total of $368 million. Those numbers might sound lofty, but dig a little deeper and they lose their sizzle. In the same span, neighboring states Ohio and Michigan each hauled in more than $1 billion. (Those states are bigger, of course, but not triple our size.)

As McDonald notes in his Forefront column this week, Indiana’s gross domestic product ranks 16th nationally, but the state ranks low—39th, and last in the Midwest—in venture capital deployed to Hoosier companies.

Fortunately, improving the supply of VC funding in Indiana is a front-burner issue for Gov. Eric Holcomb, who last year rolled out a state-backed venture fund that will invest up to $250 million, with some of it expected to flow to Hoosier startups.

It also has helped that some out-of-state venture capital firms that bet on Hoosier startups in recent years hit the jackpot—with the $2.5 billion sale of Indianapolis-based ExactTarget to San Francisco-based Salesforce in 2013 serving as the highest-profile example. Such deals have helped the state shake fly-over status among coastal VC firms, thereby attracting new rounds of investment.

But we still need more Indiana-based venture capital, in part to keep as much as possible of the wealth that successful exits generate within our borders—and thus available to invest in future waves of Hoosier startups.

That’s why we’re thrilled by Indianapolis-based Allos Ventures’ announcement this month that it has raised $40 million for a new investment fund and by Indianapolis-based High Alpha’s announcement in July that it had raised $85 million for a new fund.

Such efforts are sure to help Hoosier firms land more venture capital. But Indiana is not alone among Midwestern states in upping our game. So now is the time to push for even more Indiana-based funding sources, not rest on our laurels.•


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