Chet Culver: "Iowa can create and manage a venture capital fund"

The Chet Culver web site has revised the "Iowa Means Business" section.

As far as I'm concerned, Culver's political capital has gone from worse to kamikaze:

9) Expanding Capital Availability for High-Tech Start-Ups. Iowa can be proud of our universities and business schools who have created nationally recognized programs to assist high tech start-ups among students and faculty. However, start-ups can’t start up without capital – especially in the technology and manufacturing fields.

(1) Iowa lacks large-scale venture capital investors. This means the start-up businesses we have nurtured at our universities go to out-of-state venture capital firms for the money they need to get started. Too many times an investment comes with the proviso that the company leave Iowa . We must find creative solutions to leverage state funds to encourage venture investment in Iowa-based companies.

Gee, Chet why do professional venture capitalists suggest that some startup businesses leave Iowa? Get a clue. Better yet, ask the professionals why.

This is retarded provincial populism at its worst. Are we not in a global economy?

(2) Iowa can create and manage a venture capital fund, the primary focus of which would be economic development in areas that currently are underserved by private venture capital firms. The challenges of attracting qualified professionals and avoiding politicization of decision-making are substantial, and the program should probably be kept small (e.g., investing $20-25 million annually) until it is clear that these challenges can be overcome. The Massachusetts Technology Development Corporation is a good model for this. It is a quasi-governmental agency that has been making seed stage investments in the $500,000-$1,000,000 range in early-stage Massachusetts-based technology companies for 25 years. MTDC positions itself as being larger and having greater resources than typical angel investors, but smaller than most venture capital funds, which now have fund sizes that generally make it impractical for them to invest less than $3-$5 million in a transaction.

Iowa cannot manage a venture capital fund. Why? We've tried it before.

Several years ago, the State of Iowa funded the Iowa Agricultural Finance Corp, which was supposed to be this venture capital-like fund exclusively for Iowa businesses that had ties to agricultural-related businesses. It should have been a hit, right? It has been a disaster. Take a look at this PDF and see what it "invested" in:

• Rudi's Organic Bakery. $13 million. Failed and moved to Colorado.
  
  
• Wildwood Harvest. $7.1 million. The company has never generated a profit.
  
  
• ProdiGene. $6 million. No employees in Iowa. "Struggled" and was fined by the USDA.
  
  
• Sioux-Preme Packing Company. $5 million. Profitable.
  
  
• Iowa Quality Beef. $3 million. Shut down in 2004 and 540 employees laid off.
  
  
• Ag Waste Recovery Systems. $150,000. No sales, no employees, and is considered an "idle corporation".
  

How stupid does Chet Culver think we are?

(3) I believe like many Iowans that we should work to find a fiscally responsible way to encourage those businesses that meet IPERS’ strict investment requirements to create jobs here in Iowa . IPERS currently invests 7.5% percent of its holdings in private equity across the country, some of it in venture capital (currently $300 million) – with a target of 10% in private equity. I would support continuing to work toward that target, and working to find a way to encourage a portion of the fund’s private equity investments – up to 1% - to be focussed here in Iowa, targeted at private sector venture capital opportunities in growing fields that meet IPERS’ strict investment policies, while creating jobs and increasing returns for the IPERS fund.

Chet's dropped the entire thing about how he wanted an AFL-CIO/union thug-run board of directors that's separate from the IPERS managers, but he still believes in a closed-minded, provincial, non-global approach to "investment" when it comes to gambling with the IPERS pension fund.

IPERS can invest in "early venture" (PDF) type of companies, but this is extremely speculative and usually has a return worse than slot machines. I would be surprised if IPERS has any money directed at these types of companies, especially after the last five or six years we've all gone through. This level of business is what Chet Culver is aiming at with his Grand Plan. Even the Iowa Agricultural Finance Corporation rarely stooped that low.

What does all this show? Either Chet is a puppet for certain special interests (likely), or he's some micromanaging whiz kid who, despite having a career limited to being a lobbyist for Iowa's Big Polluter, a high school teacher, enough of a Democratic legacy to get elected Secretary Of State, and a professional eater, has quite a decorated amateur career in professional money management (unlikely).

I'm not exactly a fan of Jim Nussle, but I hope his campaign tears Chet Culver a new one on this section. Chet Culver has very bad ideas. These sorts of grand schemes, even if they make their way through the Legislature, will just result in more money down a rathole, more scandal, and more problems down the road.

Leave venture capital to the private sector!

Leave money management to the professionals, not politicians and special interests!

Stop meddling with the underfunded retirement plans of state employees!

And to think that the Democrats could have had Ed Fallon.