The Backroads of Venture Capital

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Jeff Bezos once attributed the dynamism of the American economy to venture capital. 

He said that every area in the world has banks. But only in America can someone with a dream borrow $50 million with less than a 10 percent chance of a return. 

If anything he’s underestimating the opportunity. 

And the reason is that 85% of venture capital available for private investments in America comes from three states: California, New York, and Massachusetts.

And most of that money gets plough right back in startups in those same areas, which helps explain the vibrancy of tech in Silicon Valley and biotech in Boston. 

But it also leaves out the rest of the country, especially rural areas. 

It’s something I learned from Christine Jones who, along with Karin Gregory, co-founded Blue Highway Capital. It’s a private equity fund focused on rural investments. 

Blue Highway, which is based in Philadelphia, derives its name from the backroads on traditional maps and atlases, which were drawn in blue.

The case for focusing on rural areas is simple: they are badly underserved.

Christine said the concentration of investments in the states where the money is raised is one of the things that limits what’s available for other opportunities in rural areas.

Blue Highway currently operates a $100 million growth equity fund. The firm provides capital through subordinated debt and preferred equity with 85% of their deals sourced from proprietary relationships.

They currently invest in industries including specialty manufacturing, natural consumer products and business services. 

Blue Highway isn’t looking to run the companies. They want to partner with people who “know their business.” 

While not explicitly an impact fund, Blue Highway Capital measures job creation and community prosperity alongside financial returns.

Christine and I met for coffee at the New York Athletic Club on 59th Street. It was an eye opening conversation, one that put the availability of capital into perspective. 

Most of the big venture capital-funded companies that come to mind, such as Google, Apple, Airbnb, Netflix, and Palantir come from a narrow band of locations. 

Who knows how many rural startups are out there struggling to get funded. 

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BRIEF OBSERVATIONS

STANDING DESK: I had a desk that you could raise or lower when I worked corporate. I pretty much just left it down.

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DEPRESSION: Alarming statistics both because young people are so much more depressed and how it’s increasing.