The Nevada Capital Investment Corp. is looking to generate an increase in private equity and venture capital funding over the next few years in an effort to create jobs and attract businesses to the Silver State.
It’s a difficult task: Private equity and venture capital are almost nonexistent.
Funding for startups, for example, has been sluggish at best this year in Nevada, with only one investment completed in the first nine months of 2011, according to data from Dow Jones VentureSource.
This year’s only investment was $7 million by Intel Capital in May to iStreamPlanet, a Las Vegas-based Internet broadcast services company.
In all of 2010, three deals in Nevada collected a total of $30 million, according to Dow Jones VentureSource.
But State Treasurer Kate Marshall isn’t concerned about the challenges she and her fellow board members face as they move as quickly as they can to flesh out the regulations that will allow the Nevada Capital Investment Corp. to begin investing state funds in private companies.
The investment program was created by Senate Bill 75 and approved by the 2011 Legislature. The fund has $50 million to invest from the state’s Permanent School Fund into private equity deals, everything from startups to buyouts of existing companies in Nevada.
The seven-member board is scheduled to meet for the third time Dec. 12 to consider a final draft of a Request for Proposal, or RFP, and continue discussion on the fund’s structure and asset allocation.
At its meeting Monday, the board approved the use of a supermajority vote (5 of 7 members) to approve any investment, as well as approved the launch of a new website and a second draft of the proposed regulations that will guide the board’s future operations.
"This board is economic development-focused, not investment-focused," said Mark Mathers, senior deputy state treasurer.
In terms of fund structure, the board preferred a fund of funds structure, instead of a single manager or having it managed by state staff or board members themselves. A fund of funds is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.
There are different types of fund of funds, each investing in a different type of collective investment portfolio, such as investment fund or private equity.
"We don’t have a history of venture capital funding," said Robert Lind, a board member and managing director of Berkshire Bridge Capital LLC. "Fund of funds seems what states do when they first go into this."
Iowa’s fund of funds, for example, is $60 million, and its asset allocation is 10 percent to 20 percent in early stage, venture capital is 30 percent to 40 percent, 40 percent to 50 percent is in later stage investments and 3 percent to 7 percent set aside for special situations.
Board member Jim DeVolld, former president and CEO of First Independent Bank of Nevada, supported the board’s preference for fund of funds structure.
"It’s the prudent thing to do," said DeVolld. "We don’t want to put all of our eggs in one basket."
He also urged the board to consider at some point approaching the state’s pension fund and other state agencies to see whether they would be interested in investing to grow the fund.
The board members also approved a proposal for them to judge the finalists of the annual Sontag Entrepreneurship Award. The award was created in September after alumnus Rick Sontag donated $1 million to the University of Nevada, Reno’s College of Business. The award of $50,000 will got to a student or group of students who demonstrate an ability and intention to start or expand a business.
Contact reporter Chris Sieroty at csieroty@review journal.com or 702-477-3893.