States grow local communities through venture capital

The recession has left small businesses and communities looking for ways to boost their local economy and create an attractive investment ecosystem.

Since 1993, New Mexico has been funding a program in which the state awards money to venture capital firms with the stipulation that they open an office in New Mexico and match the state funds, Inc. magazine reports. Between 1994 and 2009, the state has committed $370 million to the program and seen a return of $1.7 billion.

Brian Birk, managing partner at private equity and venture capital firm Sun Mountain Capital, warned that this approach will not work in all communities. However, for states such as New Mexico with a high-technology base and assets, it is an approach to consider, the magazine writes.

Furthermore, Mike Dodd, a partner at Austin Ventures, told Inc. magazine that venture capitalists need to broaden their search for promising startups. "In Silicon Valley, there is more capital than start-ups, and investors are paying too much for good ideas," says Dodd. "But in Texas ... there is not enough capital relative to the supply of entrepreneurs."

Venture capitalists recently told ABC News that when they are evaluating potential investments, they are looking to see the qualities of a “ninja assassin.” Firms are looking for technology entrepreneurs who are “creative, fearless, nimble [and] focused,” they said.