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A massive venture capital fund that pumps money into Great Lakes businesses is crucial for the economy of the region to move beyond its Rust Belt status, says a white paper released Friday by the Brookings Institution public policy think tank.

The report, Turning up the Heat: How Venture Capital Can Help Fuel the Economic Transformation of the Great Lakes Region, calls for the creation of a $1 billion to $2 billion venture capital fund that would feed smaller funds investing in businesses and startups across the Great Lakes states, including Ohio.

The fund, which could be underwritten by a mix of public- and private-sector donors and individuals, would be able to help the region transition from a primarily manufacturing-based economy to a knowledge-based one, the Brookings Institution paper suggests.

“Venture capital investing is typically focused on the technologies, products, workforces and companies of the future,” the report says, noting that information technology, bioscience and clean-tech companies tend to be the winners.

All three are areas are focused on by Ohio’s $1.6 billion Third Frontier development program, which the report by the Washingston, D.C.-based think tank identified as a regional leader.

The report also makes the case that a massive regional fund increasing venture capital outlays in Ohio and other Great Lakes states would send a message to investors and business executives about the area’s potential. It would rebrand the region’s communities “as innovative and creative talent centers, rather than industrial backwaters,” the white paper said.

While the region has historically lacked enough deals to support significant venture capital activities, the report said that shouldn’t be the case. The region’s assets include being a research-and-development powerhouse, as well as consistently graduating more than a third of the nation’s university science and engineering graduates.

To build a greater source of venture capital in the region, the report suggests:

• Stakeholders working in concert with each other, not independently.

• Combining smaller venture capital initiatives to create greater scale.

• Effectively guaranteeing that any venture capital activity yields competitive returns.

“What is needed is more work, not more thinking and planning, not finding a previously unappreciated ‘right’ answer,” the report says. “More work is needed by investors and entrepreneurs to identify and do deals, the essential work that only venture capitalists and the executives of their portfolio companies can do and that will earn them the returns that they and their investors expect.”

The report itself can be found at www.brookings.edu.

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