MADISON — Legislation to bolster venture capital investments in Wisconsin companies was unveiled last week at a Capitol news conference held by the bill’s main sponsors, Sen. Randy Hopper, R-Fond du Lac, and Rep. Gary Tauchen, R-Bonduel.
Dubbed the Wisconsin Jobs Act, the bill is expected to be introduced within days with bipartisan support. The focal point of the legislation is the creation of two funds totaling $400 million under the umbrella of a new Wisconsin Venture Capital Authority. The complementary funds – the Jobs Now Fund and the Badger Jobs Fund – are designed, respectively, to address Wisconsin’s short-term and long-term investment needs.
The Wisconsin Jobs Act builds on the success of the widely acclaimed and often duplicated Act 255 Tax Credits, which were passed in 2005 and enhanced in 2009. Those tax credits have helped enhance early stage investing in Wisconsin – but largely at the “angel” capital level, thus creating a need for follow-up investing by venture capital firms in emerging companies.
The bill will include provisions for governance of the independent authority; management of the Jobs Now and Badger Jobs funds; criteria for investors and eligible companies; and accountability standards.
The Jobs Now Fund will be a rapid-response fund. It would issue $200 million in tax credits to insurance companies over time for investments in certified capital funds. The tax credits would be for 80 percent of the value of the investments made, so $200 million in credits could attract $250 million in investments. The credits could not be claimed for a minimum of five years, so the money would be put to work long before the credits are paid.
The fund will eventually create a source of revenue for the state’s general fund through returns on investments. It is a modified version of an approach used in many states.
The Badger Jobs Fund is a longer-term tool. It would invest in qualified venture capital funds on a “fund of funds” basis. The authority could issue up to $200 million in private placement bonds for the Badger Jobs Fund, with the bonds supported by investment returns, the incremental growth of state tax collections from financed companies, and contingent tax credits.
Bonds would not be a debt of the state, and no more than 15 percent of the funds could go to any single venture capital firm. For every $1 a qualified venture capital fund receives from the Badger Jobs Fund, it would need to raise $3 on its own.
Some 30 states have enacted programs to enhance investing in early stage companies, including most of Wisconsin’s neighbors.
“With its pump primed by the Act 255 credits, Wisconsin must now develop the economic infrastructure to ensure the consistent flow of risk capital,” said Tom Still, president of the Wisconsin Technology Council. “At present, there is a ‘valley of death’ in Wisconsin’s financing continuum, and this bill would help many jobs-creating companies in crossing that divide.”
A joint-hearing of both the Assembly Committee on Jobs and the Economy and the Senate Committee of Economic Development is expected to be held. The time and location have not been announced.
The legislation and Wisconsin’s general venture capital climate will be the topic of the upcoming Wisconsin Innovation Network luncheons in Milwaukee (May 12th) and in Madison (May 24th). Visit www.wisconsintechnologycouncil.com/events to register or learn more.