Charting capital investment

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The venture world is in carnage. Make no mistake about it, money is tight and cash is king. Many business owners and venture capital firms across the nation are still suffering under the sweltering heat that lingers from the dot-com implosion, stock market correction and swooning economy.

“The loss of private equity is enormous,” explains Mario Marino, chairman of the Washington, D.C.-based Venture Philanthropy Partners and the Morino Institute. “It’s not a good economic forecast out there.”

An outspoken technology insider and native Clevelander, Morino was a key player in the development of Washington, D.C., as a high tech region. In 1995, he sold his software firm, Legent, to Computer Associates for nearly $2 billion. Today, Morino has returned home to Northeast Ohio and promotes positive economic and social change through the power of the Internet.

Morino maintains that Cleveland’s financial landscape – as troubling as it appears – is better off than other regions, especially the two coasts. Despite the current problems of LTV and uncertainty about TRW’s local future, he believes most local capital sources are in good shape.

“Midwest firms may actually be OK because they weren’t speculative,” he says, adding that the region’s overwhelming conservative nature probably spared many from financial ruin. Now, they are well positioned to invest in the next round of entrepreneurs who understand the basics of business and finance, and, most important, know how to make money.

Ironically, Morino says, what’s hurt the region in the past, “its remarkably low entrepreneurial spirit,” could suddenly work in its favor.

“The bar of creation is so high that we’ll see some of the best companies created during this next phase of business,” he says.

But it won’t be easy. There are numerous high hurdles that need to be leapt before any of this happens.

Morino points to three key factors that must be addressed – a spark of entrepreneurship and entrepreneurial culture in the region, strong leaders to affect and execute change, and significant capital investment to spur research and development and help get new companies off the ground.

“There are great assets here,” he explains. “But change comes from the periphery. The established system doesn’t see it. One of Cleveland’s biggest challenges is that you’re going to have to cut through the core. There are established businesses and families here, and there are enormous implications if you have the old guard blocking the path to change.”