Much-needed Montana venture capital bill should pass

Small, entrepreneurial business could well shape Montana’s future.

Across the country, small companies create three out of every four new jobs.

When they grow, they add to the job pool, the tax base and the community as a whole.

When they fail — and about half do — one big reason is the lack of sufficient money.

Entrepreneurs in many parts of the country can seek out venture capital to help fund their growth. But that kind of seed money is almost unheard of in Montana.

Senate Bill 133 is an attempt to change that.

Wednesday the Senate passed the bill on a 31-18 vote. We urge the House to approve it as well, then pass it along to Gov. Schweitzer for signing.

Based on a very successful model in Oklahoma, SB133 creates a "fund of funds" to bring private investment to Montana.

Some $60 million from private institutions and investors would capitalize the equity fund.

The money would be invested in a number of venture capital partnerships that support a broad range of capital to entrepreneurs and commit to investing in Montana.

The fund has two goals:

# Provide a bond-like rate of return — probably 4 or 5 percent.

# Evaluate investments on the basis of their impact on Montana.

There’s no question that businesses here are desperate for new capital.

A study last summer by Credit Suisse First Boston determined that Montana has the immediate need of $50 million to $250 million for small businesses.

Establishing the equity fund sets up the infrastructure — already in place in many other states — to provide that kind of investment.

The downside? If the fund fails to reach its guaranteed rate of return, the investors receive state tax credits.

In a decade of operation in Oklahoma, that’s never happened.

In fact, with an investment of $100 million in private funds, that state’s program is projected to return $400 million in new capital for businesses.

SB133 has broad support from Montana business organizations.

"This bill is truly non-partisan and could easily be the most significant economic development legislation passed this season," according to a statement from the Montana Ambassadors, an organization promoting a strong business climate in the state.

The fund would be managed as a private program with appropriate public oversight.

Supporters say that over the next 10 years it could provide $120 million or more of new investment capital for small businesses in the state.

SB133 facilitates the kind of public-private partnership that’s needed to help nudge Montana’s economy forward.

It deserves the full support of the Montana Legislature and Gov. Schweitzer.

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