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Tuesday, July 26, 2005

Granholm Signs $150 Million Michigan Venture Fund Into Law

LANSING – The Venture Michigan Fund was signed into law by Gov. Jennifer Granholm and experts say the fund will soon pump $150 million into promising technology companies in Michigan, helping Michigan diversify away from heavy dependence on the auto industry and manufacturing.

Mitch Mondry, president of the Michigan Venture Capital Association, who helped spearhead the legislation that was introduced by Michigan Sen. Mike Bishop, said there are venture capital firms already lined up waiting for the first RFPs from the fund managers, Credit Suisse First Boston.

"We’re fortunate because two things have happened that will let the state put the money to work," Mondry said. "We have the amendments that permit the fund manager to go forward and we have a fund manager. The process will accelerate and the fund manager will put out RFPs for VC firms to request the money."

Mondry said the Venture Michigan Fund is just one more piece to the funding puzzle added in the past few years in Michigan. More Venture funds have been raised in the state; there have been new efforts by governments and universities to remove the road blocks to technology commercizlization; and management talent to make those transfers move smoother have been recruited to Michigan.

Granholm signed SB 525 late last week before she left for her Japanese trade mission. Michigan Treasurer and Venture Fund President Jay Rising said the legislation took care of several issues.

Deadline for IRS Certification

The original bill contained an unrealistic deadline for the certification of the VMF's non-profit status by the IRS. SB 525 extends the deadline until August, which is adequate, given that the IRS has approved the VMF's non-profit status.

Number of Fund Managers

The bill removes a provision limiting the VMF to having one fund manager at a time.

Federal Deductibility

To prevent adverse federal tax treatment for lenders, it was necessary to convert the state tax credit for any loss to a state tax voucher.

Lending of Credit

Under the original legislation, there was uncertainty as to whether a lending of credit existed contrary to Michigan Constitution’s proscription under Article 9, Section 18 that the credit of the state may not be pledged to any public or private person, association or corporation. The contingent tax credit could be considered a state guarantee and therefore a lending of credit for 2 reasons: One, the tax credits are refundable and, second, the State “steps into the lenders shoes” whenever a tax credit is utilized.

Michael Cole, managing director of the Ann Arbor Angels, a group of high net worth individuals who invest in start up companies, said the Venture Michigan Fund might appear to be a small shot in the battle to diversity Michigan’s economy for the 21st century, but “assuredly has the potential to significantly influence the outcome.”

Cole said there are two key elements which should be understood by everyone: The investment multiplier effect of the fund at the base level is in excess of $1 billion. And if successfully executed the Michigan Venture Fund will provide the state with targeted no cost economic stimulus.

“Final passage of this legislation is a positive step in a very competitive battle to continue to differentiate Michigan's Technology Corridor as Mid-America's leading center for life science and technology business,’’ Cole said.

Author: Mike Brennan
Source: Mitechnews.Com

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