Panel’s tall order: Get cash into startups – Colorado’s new Venture Capital Authority Board faces a tight deadline on a big task – nursing money-starved business startups in the state.

"The biggest struggle people have in starting businesses right now is access to capital," said Thomas Frey, executive director of the DaVinci Institute in Louisville. "Nobody has solved the problem of how do you fund early-stage companies."

By Aldo Svaldi
Denver Post Staff Writer

http://www.denverpost.com/Stories/0,1413,36~33~2336993,00.html

State legislators created the authority, which will raise funds through the sale of $50 million in tax credits to insurance companies over the next 10 years, as an alternative to the state’s controversial Certified Capital Co., or CAPCO, program.

The authority hopes to finance startups more quickly and harvest a bigger share of the gains from the taxpayer-funded investments than under the CAPCO program, said Alice Kotrlik, director of the business finance division at the Colorado Office of Economic Development and International Trade.

To make sure that happens, Gov. Bill Owens named Michael Imhoff, William Sisson, Dick Robinson, Laurie Jones and Dick Monfort as his representatives on the board.

Board appointees from the General Assembly include Rep. Joe Stengel, R-Littleton, one of the legislation’s sponsors, and financial services executives Mike Matthews, Walter Berger and Nick Lepetsos.

The new board has met four times since June 28 and is rushing to assemble a request for proposals for a manager by Sept. 1. It faces a year-end deadline to appoint a manager to find and fund early- stage companies.

By state law, a quarter of the money raised must go to finance companies – either through loans or equity – in rural areas, a quarter to firms in "distressed urban" areas and half into a statewide pool.

Although some venture capitalists laud the authority and what it is trying to achieve, they don’t intend on bidding to run it and consider it an economic development tool.

"We would love to see the companies that come out the other end," said Chris Christoffersen, a Boulder-based partner with Morgenthaler Ventures, a $2 billion venture fund.

The authority should be judged by the number of jobs that funded companies create rather than the returns it generates, he said.

"This is called a venture capital fund, but if you look carefully at the legislative intent and the requirements for success, the venture capital business model will not work," Dave Roberts, a former First Data executive, recently told the authority.

DaVinci’s Frey said the authority will have to accept higher risks than venture funds face and most likely lower returns.

"It is unrealistic that this is a fund that will live on into perpetuity," he said. "We need to be somewhat risk-tolerant."

Kotrlik acknowledges the new fund, which offers a management fee of 2.5 percent of assets, is a hybrid and may appeal primarily to smaller venture capital shops.

"We are trying to merge a venture capital fund with an economic development animal," she said.

Staff writer Aldo Svaldi can be reached at 303-820-1410 or [email protected] .