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Bill Could Enhance Venture Capital Activity in Utah

Venture capitalists may have lost their nerve in these volatile economic times, but investment firms and entrepreneurs think the state can assuage some of their apprehension.

BY SHANE JOHNSON
SPECIAL TO THE TRIBUNE

By removing the risk of investing in technology startups, advocates for a venture capital contingency tax credit say Utah can revive itself as a haven for high-tech companies starving for capital.

So-called "seed money" for promising startups has dwindled in Utah from more than $700 million in 2000 to less than $100 million last year.

Rep. Peggy Wallace, R-West Jordan, introduced House Bill 240 to legislators Friday at a venture capital enhancement symposium on Capitol Hill. Flanked by CEOs and venture capital fund managers, Wallace detailed the extensive bill, which supporters expect to infuse the state with $100 million in new investment over the next few years.

Key to the plan is formation of a state-certified, nonprofit capital investment corporation that would funnel funds from high-dollar, low-risk investors into proven venture capital funds.

"A laborious set of professional requirements" would be considered in choosing the state fund manager and an oversight board, said Nicole Toomey Davis, proponent of HB240 and managing director of Cove Mountain Ventures.

Initial outlays to implement the bill could be as much as $250,000, but the bill will get a "zero fiscal note" anyway. "Don’t focus on the $250,000," Wallace cautioned.

It won’t be a new appropriation because the Utah Information Technology Commission agreed to front the start-up money despite its strapped budget, said board member Jerold Oldroyd.

The draw for investors is a 5 percent return guaranteed by the state in the form of a contingency tax credit.
The plan was introduced last year to members of the Workforce Services and Community and Economic Development Interim Committee.

In November, former Rep. Richard Siddoway told the committee it had taken months for members to grasp the complicated concepts in the proposal, and would take at least a year before it could be presented to the Legislature.
But Wallace said she is confident she can guide legislators through HB240 in the next 2 1/2 weeks.

"It’s very straightforward and easily understood," she said.

http://www.sltrib.com/2003/Feb/02152003/business/29698.asp

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