The Northwest Area Foundation of St. Paul, Minnesota, has award­ed a grant to United Tribes Technical College to study the possibility of establish­ing a tribally controlled venture capital company to provide investment cap­ital to Great Plains Indian tribes and reservations seeking economic develop­ment.

It will identify partici­pating tribes and invento­ry reservation investment opportunities in North Dakota, South Dakota, Montana and Minnesota.

Based on this inventory it will identify a service area for the proposed company. The grant is for $138,000.

Once this initial work is completed the investment company will be incorpo­rated and a prospectus developed. The purpose of the prospectus is to create a pool of investment capi­tal through selling shares in the new company.

Initial capitalization of the company will be at $15 to $20 million dollars. It expects to attract investors from tribal, foun­dation, private and federal sources. The company itself will be an indepen­dent for-profit enterprise with its profitability being tied to its capital invest­ments in promising eco­nomic enterprises on the reservations within its ser­vice area.

The need for a stable source of venture capital has long been a glaringly obvious on the nation’s Indian reservations, according to college offi­cials. On the one hand tribes have often been forced to relinquish own­ership and control of prof­itable reservation investment opportunities to out­side non-Indian enterpris­es because they lacked funds of their own.

On the other, when tribes have been able to raise business development funds through federal loans and other sources, the BIA’s Indian Finance Act, the new enterprises invariably start with a built-in handicap; almost all of the cost is borrowed money which is often too great a burden for the new or expanding Indian enter­prise.

The proposed new ven­ture capital enterprise offers a way of avoiding this dilemma. Rather than the tribes being forced to borrow both their invest­ment and operating capi­tal, the new company will purchase minority equity interests, from 25 percent to 33 percent in select­ing tribal business devel­opment opportunities.