True North for investing public funds in ventures

As Wisconsin gets closer to considering an early stage investing bill, it is important to get the basic principles right. Here’s my take on how to proceed on solid ground:

• The state should invest only in concert with private investment funds, so the private investors are picking the winners and losers with their own money as the major part of any deal. Government and political people should not make those calls; private investment managers should.

• The state should be treated like any other investor, as a limited partner. It should get its money back, with a return, like any other investor.

• The public matching funds should be spread to regional funds across the state as co-investments. The program needs to be statewide. There are entrepreneurs everywhere, not just Dane County.

• A professional money manager should be hired to distribute the taxpayer funds, and that professional should report to a board of sharp business and investment people. The professional manager needs to be clear of political connections on either side of the aisle.

• The fund of funds at the state level should be evergreen. Any return of capital and capital gains should go back into the fund of funds for redeployment.

• The funds should be invested in Wisconsin.

There will be many spins and curves as the various players take their swings at what the fund of funds should look like, some for the good of the taxpayers, some for the good of the various players. (Disclosure: as an angel investor in Southeastern Wisconsin, I have a dog in the fight.)

But, if the basic principles are kept in the forefront, the venture initiative could yield benefits for the state for the long run, in terms of companies created, jobs created, wealth created through exported products and services, new tax revenues, innovations brought to market and returns to investors, including state taxpayers.

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