Pension Fund Invests in Louisiana Venture Program – Teachers’ system offers venture capital

The state’s largest retirement system has agreed to pump $10 million into a venture capital fund created specifically to help entrepreneurs create new companies in Louisiana.

By:
Ned Randolph
The Advocate
Baton Rouge, LA

http://www.nasvf.org/web/allpress.nsf/pages/9386

The commitment by Teachers’ Retirement System of Louisiana, which is subject to some negotiation, boosts the Louisiana Fund I to $15 million.

The fund was started by the LSU System Research and Technology Foundation to provide seed money and early venture capital to emerging technologies, said Paula Jacobi, the foundation’s chief executive officer.

The fund is expected to close its first funding round with $20 million to $25 million in early October. Its ultimate goal is $35 million, Jacobi said.

In May, the Louisiana Economic Development Corp., which finances private projects on behalf of the state Department of Economic Development, committed $5 million to the fund with the caveat that it only be drawn if the foundation raised another $10 million.

"Now we can draw it down, but we’re not going to do it immediately," Jacobi said. "We have a few institutional investors that are very close to making a commitment, and we’d like to include them in our first-round closing."

Louisiana Fund I will concentrate on licensed technologies in pharmaceuticals, biotechnology, agritechnology, areas vital to economic growth.

It will operate independently of the LSU system, with its own 11-member board of directors. Some of them are LSU chancellors; others are private individuals from the Baton Rouge and New Orleans areas, Jacobi said.

The foundation will also look around the state, in Lafayette and Shreveport, to recruit entrepreneurs and business people with experience in raising capital or developing startup companies.

"LSU was the catalyst to get it going, but our mission is statewide," Jacobi said. "We want to work and provide support and assistance to all of our universities in the technology transfer arena."

The $11.6 billion Teachers’ Retirement System of Louisiana, known independently for its share-owner vigilance, has decided to give a little back to Louisiana, but also with the expectation of solid returns.

"We have done exhaustive research on this particular fund — the structure and the people that are going to manage the fund," Teachers’ Director Bonita Brown said. "I do think it is a good investment for Teachers’ and the state as a whole in helping to commercialize research ideas at all research universities, public and private.

"This will enable investment that the state has already made in wet-labs and into its universities," Brown said.

Normally, a large fund such as Teachers’ Retirement would not expend such resources for a $10 million investment. But under the 2003 Legislative Act 788, pension funds were required to prepare a policy of investing in small and emerging businesses or venture capital funds.

In doing so, Teachers’ discovered a fund that answered a real need for the state.

"It’s pretty exciting because there has never been enough funding for early-stage companies," DED spokeswoman Sandy Deslatte said. "We’ve got to get more competitive with funding availability."

Teachers’ Retirement has always taken its portfolio seriously. It has launched numerous shareholder lawsuits against companies to improve corporate governance, usually seeking changes in management rather than damages.

"I think Teachers’ believes that this is a sound investment that will generate a good return," Jacobi said. "And I think they were impressed with the caliber of person we’re bringing in."

Francis Meyer of A.M. Pappas & Associates was hired to help raise money.

Joe Lovett, who will manage the fund, has managed three such funds affiliated with Harvard University that resulted in 26 startup companies, Lovett told the LEDC board earlier this summer.

"He has an extensive background in this arena," Jacobi said.

The foundation will also look for co-investors, other venture funds also getting off the ground, or funds outside the state that will need investors that know the terrain.

"They need someone on the ground to do due diligence, help company formation, and build a management team," Jacobi said. "Without someone in the state doing it, they are less likely to put their money in Louisiana. Having funds like ours in the state will attract out-of-state investment looking for deals as well as in-state."