Steven Lazarus had just sat down after accepting a lifetime achievement award from the Illinois Venture Capital Association when he was approached by an up-and-coming state senator with an unforgettable name.

It was December 2003 and Barack Obama—who was in the middle of an uphill battle for the U.S. Senate—decided that the most important place to be was the IVCA’s annual awards dinner.

“He came over, pulled out a chair, and spent the next half hour interrogating me on the subject [of venture capital],” recalls Lazarus, co-founder of Arch Venture Partners. “He asked very tough questions. He showed a deep curiosity about the whole process of venture investing and developing technology ideas into businesses.”

Obama may very well be the first U.S. president who actually understands—and appreciates—the role of venture capital. A number of VCs worked on his presidential campaign and on his transition team—and as of early January he had rewarded two of them with plumb jobs. He chose Julius Genachowski of Rock Creek Ventures to be head of the Federal Communications Commission and Karen Gordon Mills of Solera Capital to run the Small Business Administration.

And in what could be a boon for the entire venture industry, Obama has repeatedly spoken about the need for a $150 billion green energy program to stimulate and remake the U.S. economy.

Venture capitalists who know Obama from his days as a state senator say he has a favorable view of the industry. For example, he sponsored legislation in 2003 that was aimed at stimulating early stage investing in Illinois. That bill eventually led to the allocation of $75 million to be invested in about 20 venture firms via the Illinois Technology Development Account (TDA). Among the firms that count the TDA as a limited partner today are DFJ Portage Venture Partners, Duchossois Technology Partners and OCA Ventures.

“He was very helpful because the way the [TDA] fund was originally proposed, in our view, was more of a pork barrel activity than a venture capital activity,” says Steve Beitler, managing director of TDA-sponsored Dunrath Capital.

Beitler, who raised money for Obama while serving as chairman of the Illinois Venture Capital Association, says the future president favored the state working with professional managers rather than making direct investments in startups. “We were able to craft legislation he introduced that produced a structure for a fund that was more appropriate to steward the government’s money,” he notes.

The TDA still exists and efforts are underway by Illinois Treasurer Alexi Giannoulias (an Obama fund-raiser and pickup basketball teammate) to triple its funding to $225 million, or 3% of the state’s investment portfolio.

“The time the venture capital industry invested in [Obama] was well spent,” says Dan Shomon, a key aid to Obama in the Illinois state senate. “Now they have somebody in the White House who, while not a knee-jerk supporter, understands their issues.”

En route to the presidency, Obama often signaled his intention to work with VCs to address national problems. Cleantech appears to be the sector where the Obama team will most closely collaborate with the venture industry. During the campaign, Obama repeatedly spoke of his desire to use venture capital as part of a proposed $150 billion green energy program. In addition, he proposed the creation of a $10 billion “Clean Technologies Deployment Venture Capital Fund” back in November 2007.

While the administration has been light on specifics so far, the venture industry welcomes attention to the sector.

“The [Obama] transition team recognizes that venture capital plays an important role in new job creation,” says Ray Lane, a managing partner at Kleiner Perkins Caufield & Byers who has met with Obama’s transition team.

Lane believes the administration’s relationship with the venture industry will be centered around project selection. “It will be all about the companies that are funded,” he says, adding that government intervention in the cleantech space will likely come in the form of tax incentives, loan guarantees and purchasing mandates. While portfolio companies will benefit, Lane sees “no thesis” for the federal government directly supporting firms that target clean technology industries.

Shortly before the election, Lazarus and Bob Nelson of Arch Venture Partners spoke with Austan Goolsbee, Obama’s key economic advisor, about the role of venture capital in addressing cleantech issues.

“There’s going to be a role for the government to increase the funding for breakthrough ideas and bridge the gap for companies at universities and national labs that don’t have venture funding yet,” says Nelson, a lifelong Republican who moved across the aisle to raise money for Obama. “We are not going to solve these problems through incremental technology, but by using the leverage of the government early on to incentivize the private sector to take bigger risks.”

National Venture Capital Association President Mark Heesen is encouraged with Obama’s choice of Stephen Chu as Energy Secretary, noting that Chu is committed to supporting basic R&D initiatives. Chu, director of Lawrence Berkeley National Laboratory, is well known in venture capital circles and has spoken at a number of cleantech gatherings.

From a political perspective, it will behoove the Obama administration to target cleantech companies and sectors that can deliver the most immediate payoff.

“He’ll place an emphasis on the kinds of research and projects that have a short ramp to market acceptance,” predicts David Wilhelm, a partner with Hopewell Ventures and a frequent surrogate for Obama during the campaign. “I take Obama very seriously when he says he intends to allocate $10 billion to venture-related activities in the field of alternative energy.”

At the end of Bill Clinton’s presidency, Wilhelm was involved in the creation of the New Markets Venture Capital program at the SBA. That program, which died in 2002, provided dollar-for-dollar matching funds of investment capital and grants raised by companies that were based in poor areas. Wilhelm believes elements from this program deserve a “second look” under Obama.

“We need to explore every possible idea to take advantage of the renewable energy moment,” he says.

Only time will tell if Obama will turn out to be the VC President his venture capital supporters hope he’ll be. In the meantime, VCs like Lazarus of Arch Venture Partners will have to be content with the amazing stories they can now tell their grandkids about their personal meetings with the 44th president.

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A week before his inauguration, Barack Obama chose Julius Genachowski, co-founder and managing director of Rock Creek Ventures, to lead the Federal Communications Commission.

Genchowski, who was a classmate of Obama’s at Harvard Law School, was the second VC to be named to a high-profile position by Obama. Since several other venture capitalists played key fund-raising and transition roles for the new president, it’s possible that other VC supporters could land important jobs in the Obama administration.

Before naming Genchowski as FCC chief, Obama chose Karen Gordon Mills, founding managing director of Solera Capital, to run the Small Business Administration. For decades, the SBA was a key player in the venture industry, matching limited partner commitments to eligible firms. It is unclear if Gordon Mills intends to restart the VC program after it was discontinued by the Bush administration. Contacted shortly before the inauguration, a spokesperson for the SBA said it was “premature” to speculate on how the SBA might change.

Other VCs with close ties to the Obama administration include Tom Wheeler of Core Capital Partners, who worked on the transition team, and Mark Gorenberg of Hummer Winblad Venture Partners and Ted Dintersmith of Charles River Ventures, both of whom helped Obama with fund-raising. —Brad Spirrison