Entrepreneurs are the fastest-growing segment of the U.S. economy. But to survive, they have to tap into venture capital. And states have to find ways to increase the amount of venture capital available.

That's the message of a National Governor's Association task force report that was to be presented by Utah Gov. Mike Leavitt at the Hoover Institution on War, Revolution and Peace at Stanford University Monday. The governor is in Palo Alto, Calif., meeting with, among others, venture capitalists, in hopes that more investment dollars can be attracted to help Utah's entrepreneurs. He is also chairman of the association's New Economy Task Force.

According to the task force-commissioned report, states must make "finding ways to nurture the culture of entrepreneurs and the capital that feeds them" a top priority. Only then will states find the venture capital that is essential to drive what the governors are calling "the new economy."

The report's cumbersome title, "Growing New Businesses with Seed and Venture Capital: State Experiences and Options," only hints at the scope of the challenge. While billions of dollars are invested each year in entrepreneurial businesses, most of the money goes to a few key regions, including Boston and Silicon Valley and, recently, Austin, Texas; New York; Denver; and Seattle. Those who live in other areas, including Utah, have a hard time getting from the idea stage into actual production.

Last year, Utah entrepreneurs only attracted about $100 million of the $48 billion venture capital invested in the United States.

Utah takes the need for venture capital very seriously, Leavitt said during a briefing Friday. It is one of seven states that has directly allocated funds for venture investing activities. In 1994, the Utah Technology Finance Corp. received $1 million, which it invested in Wasatch Venture Fund, a small-business investment company based in Salt Lake City. Unlike some other states, Utah's program to "increase access to capital" does not include dedicated state revenues, tax-credit incentives, credit-enhanced notes, state pension or other state fiduciary funds or private lead investors.

In the past, the report says, states have pursued four strategies, focusing on expanding the knowledge of seed and venture investing, promoting entrepreneurs to investors and vice versa, and creating investment capital to fill gaps and also to build a seed and venture capital industry.

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It hasn't all been smooth sailing. The report suggests that the states that have been most successful have been those whose leaders "take the initiative in getting programs launched" and setting up long-term planning. But the investment decisions are made by private-sector managers.

They've also found that building capital is less about money than it is about knowledge, "how the business community understands seed and venture capital, what steps are involved, what are the dos and don'ts and what it looks and feels like to build a world-class company."

It takes a long-term viewpoint to do that and the best programs treat the state as a "valued financial partner" that's entitled to earn a return on the investment.

Flexibility is also key to building a successful program, according to the report. Rather than following "encoded rules," they let trained professionals and "experienced laymen" exercise discretion.

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