The idea behind Gov. Martin O'Malley's plan to promote high-tech startup companies in Maryland is absolutely the right one. Maryland's greatest economic development potential doesn't lie in attracting big companies to move here, or in resurrecting huge industrial facilities like Sparrows Point, but in leveraging its assets in medical and scientific research to spark hundreds or thousands of new businesses with the potential to compete globally. But there are real questions about whether his proposal to invest $100 million over five years in a new venture capital fund is an effective way to do it.

State venture capital funding is not new in Maryland or in other states, and to the extent that the governor's proposal learns from the failures in other parts of the country, it's a good thing. The plan calls for half of the money to be invested directly by the Maryland Venture Fund, which has been successful overall in its previous investments — the $25 million the state invested produced $61 million in returns and 2,100 jobs. The other half would be allocated to three or four private venture capital firms to invest. Those firms would be selected by a third-party professional, and they would be expected to return the state's principal plus 80 percent of the profits from the ventures they fund. Other states have handed money to politically-connected venture capital firms and have gotten no return on principal and a much smaller share of the profits.

But if the state fund is operating just like a private venture capital fund, the only thing that would make it worthwhile would be if it was substantially increasing the overall pool of money available to startup companies. This plan wouldn't do that. Administration officials say the idea is that the state's money would unlock much larger amounts of private funding, but the area already has a significant presence of venture capital investment. Investing $20 million a year wouldn't come close to restoring the levels of venture capital available to startups in this region before the 1990s tech bubble burst, or even before the current recession hit in 2007. According to the National Association of Seed and Venture Funds, private venture capital investment in the Washington-Baltimore-Northern Virginia area was about $690 million last year. Mr. O'Malley's proposal would expand that pool by about 2.8 percent.

That's hardly transformational, particularly given the state's avowed desire to avoid specifying what industries will be eligible for the investments. State officials have pitched as a virtue their idea that they will let the quality of available opportunities dictate where the money goes and avoid creating "carve-outs" for particular sectors. What that will mean in practice is that the investments will be scattered over a variety of tech sectors.

Contrast that with the state's program of grants for stem cell research. That made sense because it was concentrated in an area where federal investment (at the time) was cut off and which was new enough to not attract sufficient private investment. It was a sector that was a natural for Maryland, given the amount of biomedical research already under way at the National Institutes of Health, the Johns Hopkins University and the University of Maryland, and it dovetailed with pre-existing investments in lab space and other facilities. Because the money was concentrated, the grants were large enough to make a substantial difference on whether research continued here or moved to another state. Plus, it furthered another goal of the state — improving its residents' health, an endeavor on which Maryland already spends billions every year.

If Maryland concentrated its efforts on another sector that capitalizes on the state's unique strengths — cybersecurity would be a good example — $20 million a year might make a real difference. But the state's plan of funding 20 to 40 companies a year with investments averaging $500,000 would, at best, add a tiny push to what private investors are doing already. That's the same flaw that has limited the effectiveness of a job creation tax credit the administration pushed through. It gave businesses that hired people off the unemployment rolls a $5,000 tax credit, and it was budgeted at $20 million. Since March, when it went into effect, businesses have claimed just 1,550 of the 4,000 possible credits, even though the private sector had added more than 10 times that many jobs during that time.

Another key difference between the stem cell program and the Invest Maryland fund is that the stem cell grants are paid for through current-year tax revenues. The venture fund would be capitalized by auctioning off tax credits to insurance companies that they could cash in starting in 2015. That's a more transparent version of how other states have set up funds like these, but it nonetheless amounts to borrowing money from the future to pay for something now. And although the state has generally been successful in its previous forays into venture capital, the exercise is not risk-free.

It's not wrong for the state to take some risks to secure its economic future, but as legislators consider the specifics of Mr. O'Malley's proposal, they need to make sure the potential rewards are big enough to make those risks worthwhile. As it is, this idea appears too unfocused to do much good.