A hard-to-pass proposal to use tax dollars to boost private investment in Wisconsin start-up companies could find its way into the next state budget bill, giving it a pathway through the legislative traps that ensnared it last session, a key state senator said Tuesday.
Also Tuesday, the fix-it executive for Gov. Scott Walker’s troubled jobs agency said he was focusing on repairing the high-profile mistakes made in its first year.
Sen. Alberta Darling (R-River Hills), the co-chairwoman of the Legislature’s Joint Finance Committee, said that Walker’s budget proposal would be the preferred vehicle for passing a venture capital initiative.
Members of a working group formed by the Wisconsin Economic Development Corp. have been building consensus to use $150 million to $200 million of state tax dollars over six years, said Bryan Renk, executive director of BioForward, a trade organization for Wisconsin’s biotech industry.
The money would be used in a fund that would invest in state-based and out-of-state venture capital funds, Renk said. The out-of-state funds would be required to open a Wisconsin office and match every state dollar with $2 of outside money. The state money would also be used for a smaller angel fund that would invest in selected deals, putting in $1 for every $1 of angel investment, he said.
To keep politicians from interfering in its work, the fund should also have a competitive bidding process and professional managers who would, in turn, put the money into smaller privately managed investment funds, said Tom Still, Wisconsin Technology Council president, who was on a panel with Darling at a conference in Madison.
Supporters are eager to produce a measure that would help accelerate the progress of start-ups because research by the Ewing Marion Kauffman Foundation and others says all net job creation comes from new and young firms under 5 years old.
Both Darling and Sen. Tim Cullen (D-Janesville) said they are confident a venture capital bill could pass in the coming Legislature, which will be controlled by Republicans. Last session, lawmakers from both parties failed to agree on a bill, partly because of a much-debated plan to give some of the money to out-of-state companies known as certified capital companies, or CAPCOs.
The CAPCOs had managed $50 million of state-sponsored funding a decade earlier and produced just 202 new jobs for Wisconsin, at a cost of more than $247,000 per job, a Journal Sentinel analysis found.Cullen said that he and Darling believe it is more feasible to use state tax money to fund a venture capital program rather than use more costly borrowed money, an approach that is not popular with conservative Republicans in the Assembly. He said it is also important to overcome perceptions that the bill would benefit only wealthy investors and only businesses in Madison and Milwaukee.
Still agreed and said supporters must convince lawmakers that the bill is about creating jobs and not enriching insider investors. The program should have safeguards such as competitive bidding to insulate it from politics, he said.
Also Tuesday, Reed Hall, the former executive director of the Marshfield Clinic, spoke briefly at the conference about his work as the interim chief executive officer of the Wisconsin Economic Development Corp., a quasi-public authority Walker championed as a replacement to the state Department of Commerce.
Hall was hastily brought on to lead the WEDC after it was disclosed that for more than a year, the state’s flagship jobs agency lost track of nearly $9 million in past due loans. Paul Jadin, the previous head of WEDC, took a new job running the Madison-based economic development group Thrive; his permanent replacement has not been picked yet.
“Life changes fast sometimes,” Hall said of the overnight decision that he had to make to respond to Walker’s request for help.
“We’re cleaning up some of the growing pains that we’ve experienced,” he said.