Montana Fund-of-Fund Launches after Two-year Delay

A long-delayed equity capital program in Montana is on its way to becoming a reality. Montana, which received no venture capital investment in 2006 according to the PricewaterhouseCoopers Moneytree survey, has struggled to attract the interest of venture capital firms. The Montana Equity Capital Investment Act, sponsored by State Sen. Jeff Mangan and signed by Gov. Brian Schweitzer in 2005, was intended to make the state more attractive to outside investors, but never seemed to get off the ground.

As reported in the April 18, 2005 issue of the SSTI Weekly Digest, Senate Bill 133 called for the creation of a $60 million Montana Equity Fund to attract out-of-state investment and increase in-state venture activity. A governor-appointed board was to contract with an outside investor group to capitalize and manage the Equity Fund and a subfund targeted toward investments in strategic industries. The $60 million would be issued in tax credits to investors to offset any shortfalls in scheduled returns on their investments.

The Fund, however, was not created right away. In the subsequent two years, concerns about the law’s constitutionality and the availability of funding continually delayed its implementation.

Gov. Schweitzer finally announced the appointment of five Montana Capital Equity Investment Board members in October to move forward with the fund. When the Board met earlier this month, members decided to move forward with the program and dismissed the idea of filing a "test case" to verify the constitutionality of the law. Instead, the Attorney General, Mangan and other state officials gave testimony relating to the program.

Board members are now ready to move forward with the program and are currently investigating fund-of-fund programs in other states to find a suitable model.

The text of the Montana Equity Capital Investment Act is available at: http://data.opi.state.mt.us/bills/2005/billhtml/SB0133.htm

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