Missouri Governor Highlights “Innovation Fund”

David Nicklaus reported yesterday at the St. Louis Post-Dispatch Online that, “Gov. Eric Greitens wants Missouri to support entrepreneurs on a much larger scale than it ever has, but he doesn’t want bureaucrats picking winners and losers.

“His solution is something he’s calling a Missouri innovation fund, which would be launched with borrowed money and turned over to private fund managers. The money would flow through Missouri Technology Corp., which had been making investments in early-stage companies until its budget was slashed this year.

“Greitens mentioned the innovation fund Thursday at an economic development conference in St. Louis, during which he also laid out other initiatives for improving the state’s economy.”

Mr. Nicklaus explained that, “Drew Erdmann, the governor’s chief operating officer, refers to the innovation fund as ‘MTC version 2.0.’ If the Legislature agrees to issue bonds, and make debt payments at the same level it was funding MTC in the past, he says the state could create a fund of more than $100 million.

“Fund managers could raise additional money from private investors. The fund would have to invest in companies with a Missouri presence, but apart from that restriction the managers could invest wherever they saw the biggest potential return.”

The Post-Dispatch article added that, “Some of the problems could be solved by hiring multiple managers and carving out, say, a separate fund for seed-stage investments or funds for specific industries such as health care, agriculture or software. The more you constrain a fund, however, the harder it is for the manager to achieve good investment results.

Jerome Katz, professor of entrepreneurship at St. Louis University, liked the MTC’s old model, in which the state invested alongside private investors but in relatively small amounts. He said the innovation fund ‘would be better than to have nothing, but the difficulty is going to be in the details.'”

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