Venture vs. Foundation.

So Los Angeles has been finally anointed as a center of venture capital investment. The latest report by Pricewater-houseCoopers shows that $1.8 billion worth of venture capital funds came into the L.A. area last year, more than three times the $513.3 million from 1998. Northern California and New England were the only regions that had more venture money last year. (To recognize how far we've come, consider that venture money coming to Los Angeles totaled just $29.3 million in 1993.)

It's logical to tie economic development with venture capital. After all, this is money that goes toward the financing of upstart businesses -- most of them in the sexy technology arena -- with the expectation that they will one day become much bigger and maybe even profitable. All of which means capital expansion, new jobs and higher tax revenues. What could be wrong with this story?

Well, nothing, on its face. But it's problematic to connect the interests of venture capitalists with those of specific regions or municipalities. While money is indeed coming into L.A. for the purpose of nurturing and developing new businesses, there is no assurance that those businesses will be around a year or two down the road. All that concerns the venture capitalists is being able to make a decent return on their investment, either by seeing these companies get acquired or go public.

In fact, any number of promising young L.A.-based tech companies are being snapped up by the corporate players (as well as by other promising young tech companies). Some will end up staying in Los Angeles as a division -- others will be folded into the acquiring firm and disappear from the landscape. It happens all the time.

L.A. is perceived by many venture capitalists as this huge and quite dynamic farm system, where new ideas get hatched by a half dozen or so respected business incubators, where the area's world-renowned universities stamp out up-and-coming entrepreneurs, and where creative minds tend to congregate (no doubt drawn by the pull of Hollywood).

What's been missing is any kind of infrastructure -- whether it's corporate, academic or governmental -- that has the ability to foster all that talent and keep it here. L.A. does not have the equivalent of Microsoft or Hewlett-Packard or Stanford or MIT or America Online -- nothing that serves as a foundation for the area's technology community, and L.A. has little that spurs the young and the talented to stay here.

There are some signs that this pattern could be breaking up. Just last week, UCLA officials told the Business Journal that they would overhaul the school's much-criticized technology transfer program through which research findings are developed into commercial products and services. That would be an important step in creating a more cohesive technology community.

There also are a few prominent Internet players -- most notably Bill Gross, Toby Lenk, Sky Dayton and Jake Winebaum -- who are making a commitment to developing their businesses out of Los Angeles. They alone can provide the kind of glue that's needed for L.A. to shed its image as a here-today, gone-tomorrow kind of place.