Jul. 11–The Legislature gave Oregon venture capitalists 100 million reasons to smile Thursday.<\/p>\n
The House unanimously passed House Bill 3613, which attempts to place $100 million of the state’s Public Employees Retirement Fund in Oregon venture capital during the next 4 1\/2 years.<\/p>\n
But because of a few loopholes added to appease critics, Oregon startups are not guaranteed the full $100 million.<\/p>\n
“A lot of the small startups and other emerging companies end up leaving Oregon because there’s not a venture capital market here,” said Rep. Mitch Greenlick, D-Portland, sponsor of the bill, which had passed the Senate on Tuesday. “The Oregon Investment Council should look at Oregon emerging industries as a first step when looking to invest in venture capital.”<\/p>\n
Gov. Ted Kulongoski intends to sign the bill into law, spokeswoman Mary Ellen Glynn said.<\/p>\n
Gerry Langeler, a Portland venture capitalist, said the updated bill’s attempt to place $100 million in Oregon venture capital by Jan. 1, 2008, is realistic. An older version of the bill that passed the House in April had required the council to have up to 1 percent of its investments in emerging Oregon companies “at any given time.”<\/p>\n
The change “makes me feel considerably better,” Langeler said. “It’s not like they’re going to pump this out in two years. I think there’s a reasonable chance Oregon would have done this anyway.”<\/p>\n
The bill instructs the investment council to have “at least $100 million in venture capital investments in Oregon unless, under the circumstances, it is not prudent to do so.” It also says whenever investing venture capital, the council must first look at opportunities in Oregon, unless it is not prudent.<\/p>\n
The “prudent” clause provides a loophole for the council if no viable opportunities are available.<\/p>\n
State Treasurer Randall Edwards said he prefers the updated bill because it doesn’t mandate the investments. The state pension fund already invests less than 1 percent of its $36.5 billion in venture capital, and it has recently decided to increase that amount.<\/p>\n
“We have a policy to look in Oregon,” Edwards said. “This bill just sharpens that focus.”<\/p>\n
Still, the bill might not necessarily fund Oregon companies, said Langeler, the venture capitalist.<\/p>\n
“Oregon is not going to invest directly in startups — they give it to people like us,” Langeler said. “Once they give it to us, we can’t guarantee the money will go to Oregon. Clearly, because we’re in Oregon, we’re going to look here first. But if we didn’t happen to find any, it would be imprudent for us to invest money in Oregon.”<\/p>\n
But Harvey Mathews, a lobbyist for Associated Oregon Industries, said the bill is intended to direct the money to Oregon companies. The council must report to the Legislature on the investments each year.<\/p>\n
“There will be considerable legislative oversight,” Mathews said. “If they are not investing in Oregon-based businesses, there will be further clarification.”<\/p>\n
The definite winners in the bill will be venture capitalists, who typically collect annual fees of 2 percent to 2.5 percent on the investments they manage, said Ralph Shaw, a Portland venture capitalist.<\/p>\n
“The venture capitalists never lose,” Shaw said.<\/p>\n
The Public Employees Retirement System faced a long-term shortfall of more than $16 billion this year, and the Legislature has made several changes to reduce the system’s costs. The system includes retirement accounts for about 300,000 current and former employees of state and local government.<\/p>\n
Shaw said it’s important to avoid dismissing the $100 million as a small part of a $36.5 billion pension fund.<\/p>\n
“It adds up,” Shaw said. “Before you know it, we’re spending billions of dollars in the aggregate on high-risk ventures.”<\/p>\n
The state should consider whether emerging companies are the best choices for investments, said Bill Parish, a Portland investment adviser.<\/p>\n
“I wonder why it’s so wrong to support existing businesses and why we always have to look for a sexier thing,” Parish said.<\/p>\n
State Rep. Patti Smith, chairwoman of the Trade and Economic Development Committee, said the bill could create 15,000 Oregon jobs, given the high percentage of small businesses in the state.<\/p>\n
“There’s exceptional growth potential,” said Smith, R-Corbett.<\/p>\n
The bill also made a technical change that allows the Oregon Growth Account, a lottery-based venture capital fund, to begin looking for investments again. The fund had been drained of uncommitted funds to help balance the state budget.<\/p>\n
Dave Hogan of The Oregonian staff contributed to this report.<\/p>\n
—–<\/p>\n
To see more of The Oregonian, or to subscribe the newspaper, go to http:\/\/www.oregonian.com<\/p>\n
(c) 2003, The Oregonian, Portland, Ore. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n","protected":false},"excerpt":{"rendered":"
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