Kentucky Highlands was built on the basic premise that significant reduction in poverty in the area could not be achieved without economic growth. There were few job opportunities outside the local school systems, farms, and coal mines. Businesses that exported their products out of the area bringing new purchasing power to local markets were few. This led to a double challenge:
- develop substantial businesses to produce job opportunities for citizens and;
- develop or discover entrepreneurs who could lead the businesses.
For this reason, KHIC entered the world of venture capital in 1972. With the help of grants from the Office of Economic Opportunity and a contract with the Institute for New Enterprise Development, KHIC tested a new technique that would locate aspiring entrepreneurs, choose the most promising and then finance their new business as long as it was located in one of the target communities and promised to hire unemployed residents.
In return for offering hard-to-locate start up capital and fair financing terms, KHIC would take ownership positions. KHIC did not offer low rate financing. If a business was viable, it could afford to pay for its risk capital. This process became known as “development venture capital.” Development venture capital investing involves more active participation with management of the businesses than does traditional venture capital investing.
Throughout its existence, Kentucky Highlands has operated in a fiscally conservative manner. KHIC has moved cautiously to preserve and expand its asset base which includes debt and equity investments, real estate and fixed income investments. KHIC has developed for-profit development subsidiaries to insure its access to capital in the future. The company has subsidiaries which include a Small Business Investment Corporation, an industrial real estate development corporation and a management consulting company.