Nonprofit VC Firms Look to Turn Around Struggling Regions

Operating under the theory that a strong regional economy helps everyone, nonprofits are springing up around the country to fund start-ups that would have trouble attracting capital from more traditional investors. The starring role in today’s New York Times trend story is played by the Cleveland-area nonprofit Jumpstart Inc.

Like a venture capital firm, Jumpstart identifies companies to invest in and advises them on their next steps.

But unlike a venture firm, Jumpstart relies on charitable donations, many of them from the private sector, for its financing and does not return a share of profits to those who provide the investment dollars. The return comes as satisfaction for elevating a region’s economic standing.

I love this kind of partnership, but my cynical side tells me that the private funders are in it for something more than regional pride. The kind of start-ups they’re funding attract talented workers, people who like to spend money. Economically strong regions are able to command higher real estate prices. Entrepreneurs who don’t have to kick back a percentage of their funding look positively on their funders. You get the idea. Like I said, it’s a cool notion, but while the funding organizations are nonprofits, many of their donors most certainly are not — and they’re the kind of people whose motivation isn’t the warm-and-fuzzies. | 501(c)