ithout mezzanine lending provided by Hanover, N.H.-based Borealis Ventures, 12 technology companies between Boston and southern New Hampshire wouldn't exist today.
   In fact, the creation of at least 250 jobs in the greater Nashua, N.H., area alone can be traced to that early infusion of capital, says Phil Ferneau, Borealis Ventures' co-founder and managing director. Without that financial backing, "something wouldn't have gone funded, or the funding would have required the company to move," explains Ferneau, who's also on the faculty of Dartmouth College's Tuck School of Business. "And some companies would have been forced to grow more slowly and miss opportunities."
   "Venture capital (VC) and the angel investor community in southern New Hampshire are responsible for the vibrancy of the start-up community in the greater Nashua area," agrees Chris Williams, president and CEO of the Greater Nashua Chamber of Commerce. "The fact that we're close to Boston, combined with the number of tech companies in the greater Nashua area, makes us naturally friendly to start-ups. But what makes us better is that we have a strong VC community in the state. There may not be a lot of VC networks here, but the ones we do have are strong."
   Located about 100 miles (160 km.) west in Albany, N.Y., the Upstate Venture Forum lists 10 VC firms serving the state capital region, plus about 70 firms serving the entire Upstate region. That's a fairly dense VC concentration for a region in which population dissipates outside of urban areas such as Albany, Buffalo and Syracuse. The area's VC cluster is attributable in part to a 10-year effort called the Tech Valley Initiative (TVI), according to Justin Wright, executive director of the American Electronic Association's (AEA) Albany-based New York Council.    By all counts, the TVI program to boost upper New York's tech companies is paying off. A single venture firm – FA Technology Ventures, which has locations in Albany and Boston – has helped create 1,500 jobs in the Albany area over the last decade, according to Greg Hulecki, who is the founder and managing partner of FA Technology Ventures.
   Hulecki cites the example of MapInfo. MapInfo grew from a start-up with merchant banking money, then was able to go public with VC funds from FA Technology before being acquired in March of 2007 by Pitney-Bowes. MapInfo had about 940 employees at the time of its acquisition.
   Another example that Hulecki points out is Autotask, a software-as-service company. Autotask, which provides operational software for information technology consulting firms to manage other companies' systems, was started with seed capital in 2001. According to Hulecki, FA Technology helped the company develop a business plan, provided a round of funding in April of 2004 and eventually attracted a West Coast VC firm, San Diego-based JMI Equity, to support future rounds.
   "Autotask has grown rapidly from ground zero," Hulecki explains. "They now have between 80 to 90 employees, which is up from 10 at the time FA made our initial investment."    As those examples illustrate, the accessibility of venture capital is certainly a key element of growing a regional technology initiative.
   "The National Venture Capital Association recently released a report showing that companies that have venture capital resources have been seeing employment and revenue growth," says the AEA's Wright. "That report shows that angel investors and venture financing absolutely play a key role in being able to hire and move to the next level."
   A recent report from PriceWaterhouseCoopers, developed in conjunction with National Venture Capital Association, listed first-half 2007 corporate venture investments in private firms at $1.3 billion, with the focus on medical devices, biotech and software.
   But VCs provide "more than money," Wright stresses. A VC, he explains, brings expertise to a company's board and "sometimes assists in narrowing the focus on the marketing side. Also, some will act as money managers."
   VCs' expertise has gotten a lot of attention in Albany, which has made a major effort to position itself in nanotechnology. Wright says that Albany's academic and economic development officials, along with the business community, have worked hard for a decade to understand "what the venture capitalists are looking for and to let the VC community know there is this whole new, highly innovative area where they can do deals. And we find the VCs appreciate that."
   The VCs that are now established in the region have followed several paths in arriving. Some have come as a result of the Tech Valley Initiative, and some VCs were already in the area.
   "It matters a lot to have access to capital and [investors] that are willing to take a chance on more innovative companies," says Wright. "If you don't have that, you can't grow the entrepreneurial base.
   "Having angels or VCs here, and having them willing to look at deals, is an important function," he continues. "Secondarily, they provide expertise in identifying markets, other opportunities, and they provide contacts [among other VCs] that are invaluable."    The ability to access capital, however, is only one of the necessary ingredients needed to build a technology sector and boost economic development.
   Other crucial elements include the presence of entrepreneurs and a nearby academic institution that provides a constant flow of new talent and ideas, according to Matthew Kazmierczak, AEA's Washington, D.C.-based vice president for research and industry analysis.
   Access to financial resources, "is definitely an enabler," explains Kazmierczak, "which isn't to say there aren't examples that haven't done well without VC funding. But traditionally they have anchors – a major tech company or university nearby." The classic example, he adds, is Redmond, Wash., "which received a huge boost from Microsoft and Microsoft spin-offs locating nearby.
    "Having VCs and angels in the neighborhood is always preferable, because it makes it easier for start-ups to get going," Kazmierczak continues. "And start-ups are crucial to the area's economic development health. Of course, you can have the techies, the VCs and the universities and fail, because there's no cross-pollination between them. There has to be a community, rather than disparate entities. And you need to have the right classes being taught, the right students graduating with the right skills."
   A broad entrepreneurial marketing focus is also essential in regional success, maintains Jim Mikels, co-founder and vice president of Golden Capital Network, which works to connect start-ups, angels and VCs.
   "Exponentially, the most important thing for a regional economy is the presence of innovation entrepreneurs that are tackling national or global markets," says Mikels, whose company is building a fee-for-service consulting business to assist municipalities in cultivating a venture economy. "Those entrepreneurs can be small or very big.
   "They are game-changers, though, who require risk capital and have the potential to significantly alter the regional landscape through the types of jobs and the amount of wealth they create," he continues. "They have the ability to spur entire clusters of innovation activity and completely alter their region's economic landscape."
   Regions need to have a mix of angels investing their own dollars for the early stages and VCs to continue a flow of funding, says Mikels. But no amount of capital in close proximity can build a regional tech-based economy, he adds, unless there's a mechanism to connect the entrepreneurs "together with your potential sources of early-stage capital."    Even regions that have a VC presence in place work hard to bring the entrepreneurs together with sources of capital.
   In New Hampshire, the annual "Peak Pitch" is staged at a ski area. Entrepreneurs who aren't afraid of heights get 10 minutes to make a pitch to a VC while on a ski lift, or they can meet the VC firms in the lodge. "On a more traditional level we have conferences for local entrepreneurs and students," Ferneau explains.
   "Most VCs are like ice fishermen: They cluster together and wait for fish to come to them," he continues. "And they cluster around holes in ice of Silicon Valley and Boston." In contrast, areas that lack such deep financial resources have to operate "like a fly fisherman and attract VCs to your community," Ferneau adds.
   Like many regions, the Upstate New York business community holds an annual contest to attract VCs, the Tech Valley Summit $100,000 Business Plan Competition. "[The event] stimulates VC investments in the region by displaying the best companies for that year to outside investment professionals worldwide," says Wright. "As a result, one of our companies receives VC funding."
   As creative as those efforts are, some experts view them as only stopgap measures. To build a strong tech economy, they say, it really helps to have sources of capital nearby.
   To lure those sources, regions need to work like fly fishermen, Kazmierczak says, realizing that VC firms tend to seek projects, people and locations that are established.
   "Going someplace new provides a new element of risk," Kazmierczak explains. "The time it takes to vet ideas is tremendous, which is why many VCs go back to the tried and true. When looking for the gems, they tend to look for places that are known to have them."
   "Good research universities that fund research" can help in attracting VCs, Hulecki offers.
   The VC community also looks for examples of major corporations in a region that are funding R&D, such as the General Electric Research Center in Schenectady, N.Y., just west of Albany.
   States can play an important role as well by providing incentives, whether in the form of tax abatements or job training, or through grants for hiring employees or pure research. Such states are sending a sign that they are building the sort of idea pool that can pay off in healthy companies down the line.    But what strategy should areas without a VC presence follow?
   "They need to organize early-stage risk capital and entrepreneur flow," Mikels advises. "And they need to provide expertise and connections to other successful regions that have a track record and consistently focus on the sector."
   Mikels supports the idea of staging an annual venture forum. But he adds that between the occasional event, regions need to make a "consistent effort to reach out and connect" to angels and VCs, which is the rationale behind his firm's Venture Communities initiative. For a set fee per year, communities receive the Golden Capital Network "formula."
   "We provide a formula for conducting successful entrepreneurial events, plus our training and advice to entrepreneurs, angels and regional coaches," Mikels explains. "Members also have access to an innovation news wire that allows them to consistently broadcast their successes to a national network of media, investors, name experts, entrepreneurs and fellow communities engaged in this activity."
   Ultimately, though, the decisive actions must emanate from the grassroots, he adds.
   "It's up to the local communities to turn the crank [to attract VC capital]," Mikels says, "just as they would in any economic development effort."

   Author Amy Zuckerman coined the term "hidden tech" for a Feb. 10, 2002, article in The Boston Globe Magazine. She is founder of Hidden-Tech, the networking organization for virtual companies that's based in western Massachusetts.