GRA’s New venture Fund

According to our good friends Eric Gregg and Allen Maurer at TechJournalSouth, the Georgia Research Alliance is launching a new venture fund (details below). A good move, although I think the amount invested by the state is on the small end. A lot of the research coming out of the universities will require significant amounts of capital (biotech, cleantech, nanotech, etc.) Even though they are getting 3-to-1 matching funds from the private sector, it could/should be more.

Georgia launching venture fund
January 15, 2008
ATLANTA–Georgia is launching the Georgia Research Alliance Venture Capital Fund, Gov. Sonny Purdue told a Georgia Chamber of Commerce Meeting.

The fund will partner the state with private sector dollars to give companies formed around Georgia research university IP early stage financing.

The state is investing $10 million in the fund which will be matched 3-to-1 by private dollars.

This doesn’t help non-research-based ventures at all, but all boats rise with the rising tide, as they say. I still would like to see the state reconstitute and overfund the ATDC’s seed fund, however. It is time they got serious about boosting early-stage fast-growth deals in the private sector. Don’t get me wrong – governmental involvement is very rarely the solution to a problem. But in this case, I think they can send a strong signal, and play an integral role.

I referred a media contact of mine to the ATDC not too long ago. I completely envisioned a role whereby he could offer internal media/public relations consulting services to ATDC portfolio companies. Think about the tremendous advantage that having a free public relations expert at your disposal would bring to a typical startup. I think the ATDC folks liked the idea, but unfortunately, they are a government entity, and are thus susceptible to the normal budgetary constraints that you would expect.

Come on, Sonny. Let’s get it done.  The ATDC has some great ideas for the future, but the impact that they will inevitably have on the regional economy will be directly correlated to their operating budget and their ability to engage the private sector.

Cheers.

georgiagraVenture Capital

1. 

   Lance · January 16, 2008 at 2:47 pm

   I would not exactly call it overfunded, but Georgia has continued to invest in the ATDC Seed Fund. Since the initial $5 million dollar fund was established Georgia has allocated an additional $13 million for the ATDC Seed Fund.

   The Fund invests in Georgia-based entrepreneurial businesses pursuing innovation in the areas of bioscience, and advanced technology. The fund seeks companies capable of leveraging private investment capital to realize a compelling value proposition and deliver significant economic development benefits. The Fund partners with both local and national investors, investing one dollar of its own capital for every three dollars of private investment. Typically, the Fund will invest up to $1 million into any one company and its capital is primarily used to finance the seed-capital needs of its portfolio companies.
2. 

   Scott Burkett · January 16, 2008 at 8:01 pm

   Hi Lance, and thanks for the additional info on the ATDC seed fund.

   Based on your data, I would offer the following thoughts to the powers that be at the State level:

   1) Don’t “allocate” capital to a seed fund. Invest in it – commit fully, and give them an aggressive mandate. I shudder to think what hoops you guys have to jump through to convince someone at the state level to release funds for a seed deal.

   2) $13M is chump change. $13M + $5M = $18M. I’m not sure what year the seed fund was constituted, but if you pro-rate that amount over the 28 year history of the ATDC, that equates to a mean investment level of $640K per year. That is less than the yearly parks and recreation budget of the small town I grew up in. Surely we can do better than that, especially with a Republican governor in office.

   2) Eliminate the 3-to-1 ratio, or at a minimum, reduce it. I understand the need to manage and mitigate risk, but putting a stipulation that other dollars have to be invested in something before the seed fund can engage could have a stifling effect. At a minimum, it certainly reduces the impact that the seed fund could realistically have. Nothing says success like handing someone a checkbook, and then handcuffing them to the chair, just out of reach of the pen.

   My two cents …. as always, my advice is probably worth what you paid for it – nothing, but …. :)

   Cheers.
   Scott
3. 

   Stephen Fleming · January 17, 2008 at 9:34 pm

   Yeah, we know. Unfortunately, the 3:1 match is not a matter of regulation or even legislation… it’s written into the official code (law) of the state of Georgia, and changing it requires a Constitutional amendment. (Establishing the fund required an amendment, which appeared on the ballot in 1999 or thereabouts.)

   Leisure reading:

   http://www.state.ga.us/services/leg/ShowBill.cgi?year=1999&filename=1999/HB1629
4. 

   VOVEE · April 9, 2008 at 5:11 am

   why would an entrepreneur prefer to launch an entirely new venture rather than buy an existing firm.
5. 

   Scott Burkett · April 9, 2008 at 8:02 am

   VOVEE – entrepreneurship comes in various flavors. Some people start new companies, other people buy them, and possibly expand them. In any event, IBM wasn’t created overnight – someone had to take that first step. :)

   Cheers.
   Scott