SB12-058, Creation of Venture Capital Advisor Board

SB12-058

CONCERNING THE CREATION OF THE VENTURE CAPITAL ADVISORY BOARD

Senator Heath

Staff Name: Laura Brown, Chadwell Murley

What the Bill Does:
SB12-058 establishes the venture capital advisory board. The board will be required to create a report about venture capital investments in the state and what can be done to generate and keep venture capital investments in the state, and then provide the report to the General Assembly. The board will also be required to present the report to the Economic and Business Development Committee of the House of Representatives, as well as to the Business, Labor, and Technology Committee of the Senate. A copy of the report will be made available to the public on the Colorado Economic Development Commission website.

Colorado Context:
There is currently no law in Colorado with regard to a venture capital advisory board. This bill would add Section 4 to Title 24, Article 46 of the C.R.S. According to the proposed bill, the General Assembly has found that there is a critical shortage of venture capital resources in the state. It has further found that this shortage could result in entrepreneurs relocating out-of-state in order to raise sufficient capital for their businesses, which would cause a decline in innovative industries that achieve success in Colorado. Thus, it is important to find new ways to generate venture capital and corresponding investments within the state. A venture capital advisory board would explore current and future venture capital investments in the state. The creation of an advisory board would last only until July 1, 2013, at which point Section 4 would be repealed automatically.

National Context:

• New Mexico has a state program that has generated nearly $2 billion in investments since the early 1990s1
• The Ohio Department of Development has a $1.6 billion dollar project called the Ohio Third Frontier, designed to support early-stage investment projects,2 which
  • has helped launch software start-up companies in the Ohio Valley area
  • has created more than 60,000 jobs in Ohio
• Florida has created the Florida Opportunity Fund under the Enterprise Florida Board, stemming from the Florida Capital Formation Act3, which creates a framework for generating early-stage capital4
• In Maryland, similar legislation creates a state-funded seed and early stage equity fund which makes direct investments in technology and life science companies, and indirect investments in venture capital funds.5
  • The program has allowed Maryland to maintain high rankings in human capital investment, research and development inputs, technology and science workforce, and technology concentration and dynamism.  
• In Utah, the state legislature created an investment and economic development program aimed at attracting venture capital and private equity dollars to the state.
  • The program created a “fund of funds” with approximately $300 million.
  • The fund does not invest money into any company or individual but rather will invest in venture capital and private equity funds. 6

Bill Provisions:

• 24-46-401: legislative declaration, stating that the General Assembly has found there is a critical shortage of venture capital resources in the state that could lead to businesses locating outside the state, and that it is important to find new ways to generate venture capital that can be invested in Colorado-based companies.
  • In order to increase venture capital investment, a source of public money that could be used to leverage private investments may be necessary.
  • This section addresses a “fund of funds” which is a pool of capital that would be invested in private ventures and would aid in the management of investments
  • This section also establishes a venture capital advisory board to explore current and future venture capital investment in the state.
• 24-46-403: Creates the advisory board, with nine members. Five shall be appointed by the governor, and the speaker of the house and the president of the senate shall each appoint two members.
  • The members serve without compensation.
  • Before February 15, 2013 the board shall submit a report to the General Assembly, including a current analysis of venture capital investments in the state, an analysis of state-supported venture capital programs in other states, and what Colorado can do to support venture capital investments in the future.
  • Before March 1, 2013 the board shall submit the report to the requisite House and Senate Committees, as well as make the report available on the commission’s website
• 26-46-404: repeals Section 4 of this Title, effective July 1, 2013

Fiscal Impact:  There is currently no fiscal note available for SB12-058.

1 http://www.inc.com/magazine/20100701/state-funded-venture-capital.html
2 http://www.governing.com/topics/economic-dev/State-Governments-Latest-Venture-Capitalists.html
3 Florida Statutes §288.9621 – §288.9625
4 http://www.eflorida.com/PressDetail.aspx?id=6100
5  Maryland Department of Business & Economic Development
6 The Utah Fund of Funds, http://www.utahfof.com/about.html