And now a word from Mr. Wright…
Posted on April 21st, 2008 – 1:49 PMBy Thomas Lee
Interesting comments from Philip Wright, managing partner of Eden Prairie-based BrokerBank Securities Inc. Do you agree?
The State of Minnesota is sorely missing risk-takers these days. Innovation is there, but the financiers want surethings and vc’s are usually owned by very conservative investors with limited time horizons. Almost all will not invest until there are strong revenues. In addition, we are now in a recession. This is the time whenVC’s should be investing heavily, but they are still thinking about three to four years ago. The “Venture” aspect has been lost and going public in an ipo is almost impossible due to some very onerous regulatory requirements made for big companies but shoved down on small companies. Politicians created this mess. That is why things are weak and will continue to be weak until there is leadership to create a healthy investment environment. Our sister State of Wisconsin offers very good tax incentives to the financiers of start-ups in that state. Why are we not doing this here ? We will just lose more jobs. That is our solution. Could Medtronic have been able to raise funds in this environment if it were starting up ??? Not a chance.
2 Responses to "And now a word from Mr. Wright…"
Phil - these are issues that the members of LifeScience Alley are facing everyday - and our organization has been working with them, Minnesota’s political leaders and others to find solutions, often looking to Wisconsin for inspiration. I’d love to hear your thoughts about what is going on and your thoughts about some of the proposals we have been advancing - you can contact me at fjaskulke@lifesciencealley.org or 952-542-3077 (main line, ask for Frank)
Act 255 in Wisconsin changed the early stage investment environment for start ups dramatically. $ 3.0 million in state tax credits stimulated almost $ 18 million in private investment in nearly 30 early stage Wisconsin technology companies since the legislation was enacted. I had the unique experience of witnessing this first hand as the Business Development VP for Nerites Corporation in Madison while raising money from local angels in the Madison area. Nerites has since gone on to have a very successful institutional Series A round and is now on a high growth trajectory. None of which would have happened without Act 255. The side effect of this legislation is that it created a tool by which the private investment community was incentivized into making higher risk but well grounded investments. In other words, it allowed for the gap funding needed by early stage companies to get through a proof of concept to demonstrate viability to institutional investors based upon technical and managerial merit. If the state wants to help the start up community, passing legislation like Act 255 is a great way to do it. Otherwise, forget trying to artificially stimulate job growth by creating more quazi state sponsored and under funded “alliances” and “zones” which only sews confusion and erodes credibility with the investment community. We past that point years ago. The immediate issue is to pass legislation that will target and stimulate sound investments by professionals into great technologies and management teams, then get out of the way and watch growth happen.
