Recent VC Developments in the States…

The availability and use of equity capital for early-stage investments varies greatly across the country. Seen as an integral component of most tech-based economic development, access to venture capital (VC) is on the agendas of several states — but several different approaches are used to address the problem. Recent announcements in four states illustrate the point:

Florida

A small portion of Florida's pension fund will go toward venture capital investments, according to the Orlando Sentinel. Though not widely publicized, the state's pension fund managers have decided to invest up to $400 million in venture capital funds — barely one-half of 1 percent of Florida's pension, which is $90 billion-plus. The Sentinel reports the move should help Florida rebound from its "worsening" venture scenario. Florida has experienced a decline in the venture dollars its companies have received, from a 3 percent share of the U.S. total three years ago to 1 percent today.

Iowa

Gov. Tom Vilsack announced on Monday the creation of a $5 million venture capital fund to help Iowa's start-up companies grow, the Associated Press reported. The Iowa First Capital Fund is fully funded by private money and is presently worth $5 million, thanks to an initial investment by the insurance company AEGON, which has offices in Cedar Rapids. Corridor Management Co., a newly formed corporation based in Cedar Rapids, will manage the fund and will focus mostly on projects in the Cedar Rapids-Iowa City area. The fund is expected to increase to as much as $10 million in the coming weeks, with AEGON pledging to kick in another $5 million if the program is successful. The AP adds:

Vilsack and AEGON officials said the investment fund was established as part of the Iowa insurance industry's commitment to statewide business growth. It also keeps an industry promise made when the Legislature agreed to reduce taxes on insurance premiums in an effort to keep Iowa competitive with other states trying vying for growth and migration in the insurance industry.

Massachusetts

Even in states flush with venture capital, relative to other states, the Massachusetts Pension Reserves Investment Management Board has decided to commit two percent of its $28 billion in assets for economically targeted investments in economic development and housing projects. Types of investments to be considered include seed funding for industries "overlooked" by private venture capitalists. Manufacturing and services are singled out in the Boston Globe coverage of the decision.

Oregon

Gov. Ted Kulongoski signed HB 3613 earlier this summer, requiring that the Oregon Investment Council have at least $100 million in venture capital investment in Oregon businesses by Jan. 1, 2008. Like Florida, Oregon's venture capital funds will come from its pension fund, which is managed by the council. The bill is available in its entirety at: http://www.leg.state.or.us/03reg/measures/hb3600.dir/hb3613.en.html