Op-Ed: Investment in venture capital-backed companies to boost Indiana's economic success

Tony Armstrong

Private investment — including venture capital — continues to play a major part in Indiana's economic success and the health of Hoosiers.

Venture capital investors in the Hoosier state support promising early stage startups that create revolutionary technologies, products and processes that enhance business productivity and efficiency as well as even save lives. They invest in these companies knowing many startups will fail, but those that succeed will likely deliver a healthy return on their investment.

But that's only one part of the story.

Increasingly, we are learning more about the extensive impact this type of investment is having on catalyzing job creation for Hoosiers and beyond. A 2022 study indicates employment at venture capital-backed companies grew an astounding 960% in the U.S. from 1990 and 2020 — a pace eight times that of employment at non-venture capital-backed companies.

California Statistic: $1,954 in venture capital investment per resident California companies received more in venture capital funding on a per capita basis than any other state. For reference, total VC investment nationwide was equal to only $400 per capita in 2018.

These figures suggest Indiana is on the right path as it continues to encourage and support more venture capital activity across the state and works to cultivate a thriving culture of entrepreneurship and innovation. They also underscore the value of the state's colleges and universities as centers of creativity and the critical resources — including funding, talent, business connections and mentorship — that propel new ideas forward.

The positive impact our universities are having on Indiana's labor market is reflected in the entrepreneurial-related efforts of IU Ventures, Indiana University's early-stage and angel investment arm.

IU Ventures, which manages multiple early-stage funds to support IU-affiliated entrepreneurs, made investments in 10 Indiana companies totaling $1.2 million in 2021, adding to a growing portfolio that now features 22 active Indiana companies. Members of the IU Angel Network, which facilitates connections between new ventures and prospective IU-affiliated investors, invested another $3.1 million into eight new portfolio companies last year, including three new Indiana-based companies.

IU Ventures' portfolio companies include Indianapolis-based Encamp. IU alumni Luke Jacobs and Daniel Smedema founded the environmental compliance software company in 2017. Encamp, which will compete for "Tech Product of the Year" at TechPoint's annual Mira Awards this month, completed one of the biggest fundraising rounds with $12 million in Indiana last year. IU Ventures contributed to the round with a $151,000 investment made through the IU Philanthropic Venture Fund. This came after IU Ventures invested $250,000 in the company through the same fund, which Encamp used to scale its sales and marketing, customer experience and engineering teams.

In 2021, in the midst of the COVID-19 pandemic, Encamp grew its revenue by more than 500% and grew its headcount by 100% to more than 60 full-time employees. In the coming months, its founders expect to add to its workforce, which includes individuals with environmental, safety and technology expertise.

Encamp's ability to expand and provide quality job opportunities for Hoosiers during the global pandemic supports another of the study's key findings: that venture capital-backed companies demonstrate resiliency from market downturns. According to the study, after the 2007-2008 financial crisis and during the Great Recession, annual job growth at U.S. venture capital-backed companies exceeded 4%. In contrast, total private sector employment shrank by 4.3% in 2009, contributing to a decrease of 7.4 million private sector jobs during the Great Recession.

This past year, for the first time ever, Indiana surpassed $1 billion in venture capital investment, according to the 2021 Indiana Venture Report. It also showed that our state is second only to Illinois in venture capital deal activity in the Great Lakes region.

That’s tremendous news for Hoosier workers, and testament to the winning strategy of our state's policymakers, business leaders and university leaders, who are committed to building a robust and prosperous culture of innovation and entrepreneurship.

Tony Armstrong is the president and CEO of IU Ventures.

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