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County payments: a VC chance?

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Saturday, November 01, 2008

STATEWIDE  If Oregon’s counties were start-up companies, they would be freaks. In the midst of economic crisis, the state’s rural governments scored $800 million in what could be described as VC funding — a massive cash infusion in the form of federal timber payments that will keep them afloat for another four years. The money came in the nick of time; some counties were literally facing bankruptcy.

But like any check from an angel investor or VC firm, the money for the counties is finite. Over the next four years the county timber payments will decrease dramatically each annum. And then Oregon’s rural communities will be back to square one.

So what can Oregon’s counties learn from their private counterparts? Some of the funding is earmarked for basics such as roads and schools, but Carolynn Duncan, a Portland- and Seattle-based start-up consultant, says counties need to have an investment mindset with discretionary funds.

“Don’t spend a dime until you bring in someone who knows what the hell they’re doing with regional economic development — and at the same time, will operate as a venture capitalist would, to generate a return on the $800 million investment by creating self-sustainable new economies,” she says.

Like any startup company, rural counties should be identifying their competitive advantages and then using those funds to capitalize on that, says Eric Rosenfeld, with Portland’s Capybara Ventures and the Oregon Angel Fund. “This is a gift from Washington. Counties can use it to identify the role they want to play in their region,” he says. “Because at some point they have to become self-supporting economies.”

And there’s the rub: self-supporting. The previous round of payments ended without the majority of counties ever reaching, to continue the metaphor, profitability. Those governments will never be able to act exactly like businesses. But like their counterparts in the private sector, someday they’re going to have to prove their fiscal sustainability. Four years isn’t a lot of time. But for a startup rich with VC dough, it’s an empty slate waiting to be filled with innovation and plans for the future.      


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