Polaris Fund aims to tap Alaska's investment potential.

• Author: Murray, Marjorie
• Position: Alaska Industrial Development and Export Authority

Polaris Fund Aims To Tap Alaska's Investment Potential

Alaskan entrepreneurs may not have to go so far from home to find venture capital if the Polaris Fund fulfills its promise to deliver future funding. Set up by the Alaska Industrial Development and Export Authority (AIDEA) in February of last year, the fund is expected to create a $30 million investment pool to provide capital to young Alaska businesses.

"There really is no venture capital industry in Alaska," says Palo Alto, Calif., financier Timothy Draper, one of the fund's three managing partners. "Our goal is to pioneer its development in the state."

AIDEA seeded the Polaris Fund with $3 million and will invest another $3 million at an undetermined later date. The partnership agreement with AIDEA also required the three risk-fund managers to put 1 percent, or $60,000, of their own assets into the fund.

Using the AIDEA funds, Polaris plans to develop a portfolio of Pacific Rim investments to take to other investors, such as pension funds, to expand the pool to $30 million. The fund's three risk managers must reach this goal in 10 years or the agreement with AIDEA self-destructs. So far Polaris has invested nearly $1.5 million in seven startups.

"When you're talking about raising venture capital, you're always talking about the long term," says Bert Wagnon, executive director of AIDEA from May 1982 to May 1991. Asked whether Polaris could be the core of an Alaska venture capital industry, Wagnon says, "There's some skepticism about that. But if it happens, it won't be overnight."

The Polaris Fund is the brainchild of the AIDEA board of directors and its chairman, Jack Jessee, who want to build an investment pool for young Alaska companies struggling to find venture capital. Funding Polaris is consistent with AIDEA's mission to encourage growth of the industrial and manufacturing sectors in Alaska's economy. AIDEA itself is financed by state assets and by the sale of bonds.

"I've had my doubts about Polaris because the state tried a similar thing before and it didn't work," says Wagnon. "But I think having private partners outside the state will increase its chances of success."

AIDEA is a limited partner in the fund and has no direct authority to choose the investments. Draper, Alaska businessman James Yarmon, and Boston financier James Lynch will make the investment decisions. "Their decisions will be strictly economic, not political," says Wagnon.

Draper agrees. "Any business that...