Mark Gritter (markgritter) wrote,
Mark Gritter

Capital Raising Through Arm Twisting

Today's "On Business" column by Neal St. Anthony discusses a plan to create a local fund-of-funds for early stage venture capital:

Local venture capitalists and fund managers have been quietly urging Gov. Mark Dayton’s administration to embrace a privately financed and operated equity fund....

The idea would be for flagship Minnesota institutions, such as U.S. Bancorp, Thrivent Financial and Ameriprise, to perhaps pledge several million dollars each, followed by foundations and perhaps affluent individuals. A fund-of-fund manager, operating under agreed-upon guidelines, would disburse the money to Minnesota and other private equity and venture capital managers.

There's nothing wrong with a little cheerleading for local investment. That sort of boosterism is certainly the governor's job. But showing up at U.S Bancorp's door and asking them to invest more money with local VCs? That goes a bit far too me. Are the VC's going to give up their 2-and-20 on the deal, too? The article doesn't say, and hints at some desire for public-sector involvement.

It would be one thing if Minnesota didn't have venture capitalists to provide early-stage funding--- but we do. Capital crosses borders (especially state borders!) easily, and if local VCs can't raise enough money for their investment funds, they're failing at their job. Why bail them out with cash from Minnesota's successful large companies?

Now, don't get me wrong--- I'd much rather have had a $348m state venture capital fund than a new Vikings stadium. But it's not clear to me that this sort of deal is on the correct side of the line between "the governor provides a little bit of social lubricant for a good cause" and back-room cronyism. Maybe I'm hypocritical, but I'd rather have the state pony up some money if this is a social good, than have VCs propped up by private investments that otherwise wouldn't get made.
Tags: minnesota, rant, startup, venture capital
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