By Sheila Watson
Contributing Writer

A recent National Venture Capital Association survey by PricewaterhouseCoopers and Thomson Venture Economics revealed disappointing statistics for the Southeast in general and South Carolina in particular.

According to the survey, the percentage of U.S. venture capital investments in the Southeast is well below the percentage represented by those states in the total U.S. population.

Additionally, in the past 10 years, most of the venture capital investments for the Southeast have gone to North Carolina’s Research Triangle Park and to Atlanta.

The bulk of venture capital is invested in a limited number of industry sectors. About a third is invested in software and related IT services, and a third in biotechnology or life sciences. The remainder is invested primarily in computer hardware and telecommunications.

Because South Carolina has companies involved in all of those industries, it begs the question: Why isn’t more of the venture capital money coming here?

Show us the money

Typically, venture capital is invested in highly entrepreneurial communities. Silicon Valley accounts for 40% of the investments. Hotspots on the East Coast include Boston, the Research Triangle Park, Atlanta and central Florida.

“If you look at our roots as a state, that can help explain a lot,” said Adrian Wilson, managing general partner of Trelys, a Columbia-based venture capital firm. “We’ve long had an agricultural economy, which gave way eventually to a textile and manufacturing economy. We haven’t had a culture of innovation, and that’s kept us behind.”

Wilson noted that the state’s economy was built on three legs: agriculture, tourism and manufacturing.

“That, combined with a conservative culture, are some of the factors that come into play to show why there’s a dearth of venture capital in South Carolina,” Wilson said.

He referred to a recent study done on what comes first, innovative companies deserving of venture capital or the venture capital itself.

“It’s a chicken and an egg thing, and they were unable to determine what comes first,” he said. “But what they did find out is that where you had one, you had the other.”

Keeping the money here

“When we go out and try to raise money from outside investors,” said Wilson, “we always have one question to answer: ‘Where are the success stories?’ The investors want to see a high-end, high-tech company that has been successful. Other places, like Boston and the Research Triangle, can pull out several. In South Carolina, there’s only a handful. We’re hoping we can get more here that we can point to.”

The infrastructure the state has recently put in place gives businesses every opportunity to be successful, Wilson said.

“A few things are significant,” he said. “As a state, we’re garnering more than $1 billion in federal reserve dollars a year, which includes Clemson’s I-CAR, growth in MUSC’s research grant money and USC’s fuel cell research center.”

Wilson also points to several state-backed supportive measures, including the endowed chairs program to which the state currently allocates $30 million a year to be matched by private-sector supporting funds, the backing of the state Legislature for the South Carolina Research Authority’s Innovation Centers, and the $440 million capital bond bill passed by the Legislature.

“And let’s not forget our high quality of life,” he said. “That helps account for our population growth being seventh highest in the United States, and that attracts both young knowledge-based workers and older talented retirees, many of them former executives who want to remain involved. Our quality of life is one of our state’s biggest assets.”

Nurturing a culture of innovation

“With the SCRA entering the picture and our ability to fund entities for the first time in state history, we can become a lead seed investor in South Carolina,” said Jim Stritzinger, executive vice president and general manager of South Carolina Public Interest Research, a division of the SCRA that coordinates the innovation centers.

“We can bring to the table not only dollars and cents, but also trained research and development professionals, as well as others trained to do the due diligence to get a company going.”

Stritzinger said he can connect startup companies with SCRA personnel who have security clearance, which can provide a high degree of credibility to a company.

“That’s something that could take years for a company to develop on its own.”

On the heels of a $200,000 investment in North Charleston-based Argolyn Bioscience Inc., a biopharmaceutical company focused on developing peptides for drug candidates, Stritzinger said he has 27 months left to invest the remainder of the $12 million that must be invested by legislative mandate in other innovation center companies.

By the end of the three years, he hopes to have a portfolio of 30 companies.

Because the bulk of venture capital money goes to companies in later-stage development, Stritzinger said keeping the companies here until that stage has become a critical issue.

“We’re working with venture capitalists in state and out to work on that,” he said. The idea is to provide funds to recruit top-level business talent to the area. Stritzinger is hoping the state Legislature will look at the proposal over the next few years.

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