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Entrepreneurs and VCs say Midwest and rural regions lack venture infrastructure; witnesses urge easier fund formation and local investor engagement
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Summary
Founders and early-stage investors described how limited local VC infrastructure and high fund minimums impede capital formation outside major hubs; witnesses proposed making it easier to form venture funds, lowering minimums and educating local investors.
Witnesses who founded and run startups and regional venture funds described persistent capital gaps for entrepreneurs in the Midwest and other noncoastal regions, and suggested policy and private-sector steps to close them.
Andrew Barnell, CEO of Genoscopy in St. Louis, said raising early rounds from outside traditional venture hubs was difficult: “there are only a handful of early stage venture firms” in St. Louis, he testified, and investors “like to invest in their own backyard.” Barnell said easing formation of venture funds, reconsidering accredited-investor rules, and expanding crowdfunding would help Midwestern startups attract capital earlier.
McKeever Conwell, founder of Rare Breed Ventures, described using Rule 506(c) and an amendment to section 3(c)(1) of the Investment Company Act to accept many small checks; he said that change allowed him to secure 194 investors, 83.5% of whom put up $50,000 or less. Conwell observed that current limits — including LP-count caps that rise at certain fund-size thresholds — effectively force minimum checks to increase and exclude many small investors from follow-on funds.
Members and witnesses discussed practical remedies: tax incentives for local angel investing, state-level incubator support, extending Reg CF/Reg A improvements to improve local access, and easing legal friction for small fund formation. No formal legislative action occurred; members asked for written suggestions and stakeholder input.
