Utah Gov. Mike Leavitt Signs $100 Million High Tech VC Fund Law *****Montana Economic development supporters frustrated by MT State VC bill’s demise- State Auditor John Morrison *****

Gov. Mike Leavitt smiled, flourished his pen and to the applause of more than 200 high-tech investors and entrepreneurs, signed into law a new $100 million venture capital fund aimed at boosting their industry.

By Bob Mims
The Salt Lake Tribune

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(The Montana Legislature failed to pass similar legislation that would have increased the economic viability of our State- We need to get similar legislaton passed as soon as possible- Please see the release from State Auditor John Morrison below- Russ)

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Flanked by House Bill 240’s sponsor, Rep. Peggy Wallace, R-West Jordan, other legislators and several executives of the Utah Information Technology Association (UITA), the governor declared the fund will provide the means to lure out-of-state investors to venture-capital-poor Utah.

"This is a major step," Leavitt told UITA’s annual meeting luncheon Thursday at the downtown Salt Lake City Hilton. "We expect it will create another eight to 10 venture capital [sources] here."

The Venture Capital Enhancement Act creates a pool of money, with contributions coming entirely from the private sector, to help underwrite early state technology companies. The fund, which also requires participating venture capital companies to establish offices in Utah, contains a state safety net in the form of contingency tax credits.

Those credits would kick in only after the fund’s own reserves are exhausted, and only if investors’ returns fall below a yet-to-be-set rate that is expected to be 5 percent to 6 percent. Then up to $20 million in converted tax credits could be claimed annually.

Backers of the fund successfully argued during the recent legislative session that similar venture capital pools in other state have never had to resort to their safety nets.

Leavitt said studies have shown of such funds that, "for every $1 million in venture-capital investment, 28 new jobs are created within five years. These are high quality jobs with wages that are 77 percent above average."

The governor said that in recent years, Utah has been able to attract only half the capital available to competitors in other states. Worse, the number of venture capital deals in Utah has eroded from 64 in 2000 to just 26 last year.
The new fund is important in reversing that trend, Leavitt said, but it still remains "just one element in a broad strategy." In addition to freeing up investments, the state also needs to continue improvements to public and higher education, "so our primary . . . advantage continues to be our people," he said.
It is a job that cannot be done without greater involvement by the state’s high-tech industries, Leavitt said, announcing plans to form a political action committee specifically dedicated to promoting technology develop- ment.
"I intend to call upon all of you to become involved, not on a partisan basis, but to drive the important priority of educating people and making Utah a capital for high-tech employment and entrepreneurship."
[email protected]

http://www.sltrib.com/2003/Apr/04042003/business/44775.asp

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Economic development supporters frustrated by bill’s demise

STATE AUDITOR JOHN MORRISON

Helena – Economic development officials joined State Auditor John Morrison this week in expressing regret and concern that a bill creating the Montana Venture Capital Formation Act was defeated on third reading in the Senate.

The legislation, SB 465, was the product of a nearly year-long cooperative effort to develop legislation that would bring venture capital to Montana. The coalition working on the Venture Capital Act included Lt. Gov. Karl Ohs, David Gibson of the governor’s Economic Development Office, the Department of Commerce, the Department of Revenue, the State Auditor’s office and economic development and entrepreneurial leaders from across the state.

SB 465 would have created a private, professionally run venture capital fund in which institutional investors could invest. It was modeled after proven, successful programs in other states. After extensive debate on the Senate floor, the bill passed 27-23 on second reading. Two days later the bill died 25-25 on a nearly party line vote on third reading

"There’s a lot of rhetoric from Republican legislators claiming to support economic development and Montana business ventures," Morrison said. "But when given the opportunity to support a proven economic development model, they let partisan politics override positive policy."

Morrison said the bill’s defeat was particularly disappointing given the support Governor Martz expressed for it in her State of the State Address in January.

"This was the right thing to do for Montana," Morrison said.

Economic development officials from across the state supported the legislation as a valuable tool in attracting business development to Montana.

"I strongly supported the merits of the Venture Capital Formation Act," said Liz Harris, president of Jobs Now Inc., an economic development organization in Kalispell. "The lack of venture funding in Montana places our businesses at a distinct disadvantage and discourages new business formation. Montana has to take some aggressive steps forward or we will continue to fall further and further behind the competition."

Supporters of SB 465 said the legislation would have created an incentive for local entrepreneurs to develop models to compete for the venture capital funds.

"In the economic development world of today, you’re either on the bus or under it," said Russ Fletcher of the Montana Associated Technology Roundtables. "Montana has got to get out from under the wheels as the future rolls by."

Supporters have vowed to work together so the 2005 Legislature fully understands the rationale and need for venture capital in Montana.

"Our legislative process too often is based more on politics than good sense at the expense of our economic future," Fletcher said. "I’m afraid our continual slide further and further behind has got to stop sometime, or we might as well just give up and become one large bed and breakfast with a real estate subsidiary."

Supporters of SB 465 included:

· Montana Chamber of Commerce

· D.A. Davidson & Co.

· National Federation of Independent Businesses

· Blue Cross Blue Shield of Montana

· Montana Economic Developers Association

· Montana Associated Technology Roundtables

· Big Sky Economic Development Authority

· Anaconda Local Economic Development Corp.

· Bear Paw Development Corp. of Northern Montana

· Butte Local Development Corp.

· JOBS Now

· Missoula Area Economic Development Corp.

· Glacier Venture Fund

· Richland County Economic Development Inc.

· Kalispell Chamber of Commerce

· Bozeman Chamber of Commerce

CONTACT: Wendy Raney, 444-2495