Gov. Blagojevich is backing innovation and entrepreneurship. It might help him keep his job. It might help you find a job. Last week, Blagojevich announced a $500,000 investment in ARCH Development Partners, which funds early stage ventures in partnership with universities and public sector agencies. The money backs ARCH investments in emerging companies including Northfield-based Akoya, a software company spun out of technology from Peoria-based Caterpillar Inc. The state funds augment a $450,000 investment ARCH made previously in Akoya.

Akoya makes cost management software and has 15 employees. That number is expected to reach 70 employees in 18 months.

Says Blagojevich, "Many of tomorrow's jobs will come from new technology spin-outs. We need to provide entrepreneurs with the tools they need to turn cutting-edge research into successful new companies."

Blagojevich wants to close Illinois' early stage venture capital gap. He also wants to win an election this fall.

Four more state investments

The governor also announced grants of $445,000 for four companies focused on homeland security and software. Cognitor received $120,000 to commercialize its transportation security system. Information Development Consultants received $125,000 to enhance its government soft-ware application. Intellext got $100,000 to commercialize its Watson product for intelligence analysis. TransLumen Technologies got $100,000 to update its product for use by homeland security systems integrators.

Last week's announcements come on the heels of the formation of a $1 million Innovative Now! program financed with state funds.

Innovate Now! is led by CDW CEO John Edwardson, Mesirow Financial CEO James Tyree, University of Chicago President Robert Zimmer and Royal Group President Robert McIlvaine. Innovate Now! aims to make Chicago a globally recognized innovation center. The program focuses initially on boosting innovation in the manufacturing sector.

Announcements backing innovation might be the ticket to push Blagojevich ahead of his Republican opponent, Treasurer Judy Baar Topinka. The moves blunt one of Topinka's successes as treasurer, the creation of the $50 million Technology Development Fund, which invests in Illinois venture funds.

Regardless of the politics involved, investment in innovation is a smart move by Illinois politicians on both sides of the aisle, especially when the investments are made through companies such as ARCH Development or the Northern Trust, in the case of the Technology Development Fund. Direct company grants are riskier and more controversial.

Jack Lavin, director of the Illinois Department of Commerce and Economic Opportunity, says, "There's a tremendous gap in early stage venture funding. Illinois needs to get access to capital. This is a way to do it.

"Akoya has a new innovative product. Innovation leads to investment, to jobs and a better quality of life for the people in Illinois."

Lavin has the backing of the Illinois Venture Capital Association on his ARCH investment. IVCA Executive Director Maura O'Hara, says, "We're thrilled the state is putting funding into early stage focused venture funds like ARCH."

According to the IVCA, in 2005 Illinois companies received only $245 million in venture capital representing 1 percent of total U.S. venture investment. Only 15 percent or $38 million of those funds were invested in seed or early stage companies. Too little investment in early stage companies could mean too few jobs in Illinois.

"The fact that DCEO chose to invest this money with an experienced venture firm rather than directly in early stage companies indicates a very thoughtful approach to jump-starting early stage company growth," O'Hara adds.

Market interference

Cynics say it's a lot of election-year noise. Free market advocates argue that government should stay out of the commercial sector. Simply lower taxes. Create a good environment for business. They could be right.

I think the competition to worry about is from India and China; not between Republicans and Democrats. Lavin's right when he says, "Tireless innovation is the key to survival in the new global economy." If government can catalyze innovation, entrepreneurship and investment in Illinois, I say go for it.

I want the next Google, Microsoft or Netscape founded here, not out west.

Michael Krauss is a Chicago area tech writer and consultant.