In a recent Economist article the authors write about an Ohio venture investment program. It is called Techcolumbus and allegedly provides space and funds for start up ventures, trying to lure high tech to Ohio.
There is a new bond initiative called Issue 1 which is trying to raise $700 million for this fund. The Economist states:
Issue 1, a ballot proposal, would allow Ohio to issue $700m of bonds to finance research and development, the so-called “Third Frontier” programme. To date Third Frontier has supported the likes of TechColumbus, Ohio State University and the Cleveland Clinic. But its funding is due to run out next summer, so politicians, business and civic leaders are waging a frenzied campaign to ensure that Third Frontier survives. Ohio, they argue, must invest in a new economy. Voters, however, have reason to be wary of spending and empty promises. It is unclear that they will support a vision that is, for most, still hazy.
The problem here is that for anyone who knows the venture business you really want several conditions precedent:
1. A management team with a proven record. That means that the investors must now such people. Rarely does some Government entity have a clue. Just look at Greece!
2. A focus on technologies or even broadly based businesses which have a well defined set of returns. I have had investors who on the one hand had high tech and on the other hand had bread factories in Bulgaria. Sometimes those bread factories do well, if you know the bread business. If you do not know the business you are almost certain to lose.
3. A ruthless, yes ruthless, management of the investments so that if they go south one does not throw good money after bad.
4. Transparency to the investors so they see what the returns are. Transparency in a closed environment of accredited investors is possible. Transparency in a public vehicle could result in unfair competitive advantages.
5. Some form of skin in the game from the entrepreneurs and high returns for the investor. The taxpayer should not be a risk taker. Bonds for toll roads, even for a golf course would be appropriate. Yet as every VC knows the bet is on the one in ten that make it. A good VC must all close down the bad company before it bleeds too much. In my experience Government entities have real difficulties with these Darwinian decisions.
Somehow this program looks like a giveaway. Wonder who gets what?
There is a new bond initiative called Issue 1 which is trying to raise $700 million for this fund. The Economist states:
Issue 1, a ballot proposal, would allow Ohio to issue $700m of bonds to finance research and development, the so-called “Third Frontier” programme. To date Third Frontier has supported the likes of TechColumbus, Ohio State University and the Cleveland Clinic. But its funding is due to run out next summer, so politicians, business and civic leaders are waging a frenzied campaign to ensure that Third Frontier survives. Ohio, they argue, must invest in a new economy. Voters, however, have reason to be wary of spending and empty promises. It is unclear that they will support a vision that is, for most, still hazy.
The problem here is that for anyone who knows the venture business you really want several conditions precedent:
1. A management team with a proven record. That means that the investors must now such people. Rarely does some Government entity have a clue. Just look at Greece!
2. A focus on technologies or even broadly based businesses which have a well defined set of returns. I have had investors who on the one hand had high tech and on the other hand had bread factories in Bulgaria. Sometimes those bread factories do well, if you know the bread business. If you do not know the business you are almost certain to lose.
3. A ruthless, yes ruthless, management of the investments so that if they go south one does not throw good money after bad.
4. Transparency to the investors so they see what the returns are. Transparency in a closed environment of accredited investors is possible. Transparency in a public vehicle could result in unfair competitive advantages.
5. Some form of skin in the game from the entrepreneurs and high returns for the investor. The taxpayer should not be a risk taker. Bonds for toll roads, even for a golf course would be appropriate. Yet as every VC knows the bet is on the one in ten that make it. A good VC must all close down the bad company before it bleeds too much. In my experience Government entities have real difficulties with these Darwinian decisions.
Somehow this program looks like a giveaway. Wonder who gets what?
Posts
