State tries again with investment fund.

• Author: Taylor, Mike
• Position: ON SMALL BIZ

OUT WITH CAPCO, IN WITH THE VENTURE CAPITAL Authority.

An attempt begun four years ago to nurse fledgling Colorado companies along on the backs of taxpayers didn't quite work out, but state government is still bent on jump-starting the private tech sector with public money.

Two years ago this month, ColoradoBiz wrote about a $200 million state program, dubbed the Certified Capital Companies program, or CAPCO, funded with tax credits sold to insurance companies and aimed at financing the growth of small, mostly tech-oriented businesses in Colorado. In that story, ColoradoBiz Editor Robert Schwab posed the question: Was this a boon to the state economy, or a boondoggle?

Among those who seemed to regard it as the latter were conservative lawmakers and Gov. Bill Owens, who had reluctantly signed the legislation to create it. Bob Lee, then the governor's director of the Office of Economic Development and International Trade, said more than halfway through the program's first year that only $8.3 million of the first $100 million available in round one had been invested in job-creating business.

To anyone who has talked to venture capitalists since 2001--the year CAPCO was launched--this sounded frustratingly familiar: lots of cash stockpiled, or so VCs said, but no certainty as to what to invest in at a time when so many darling tech companies were in the process of disappearing in a sea of red ink.

Why not let tech companies sink or swim, Darwinian style? The government didn't turn Boulder into the nation's natural-products capital. Entrepreneurs did. They got funded only if private investors were impressed with their business plan and saw profit in it for themselves. Let the cream of the tech companies rise on their own. That's an extreme conservative view.

Then there was state Rep. Shawn Mitchell (now a state senator), who was philosophically opposed to the government being involved in funneling money into startups at all. He argued that the money would be better spent on health-insurance coverage.

Also, there was no provision under CAPCO for Colorado taxpayers to get a return on their money, as any venture-capital investor should expect.

[ILLUSTRATION OMITTED]

That dissatisfaction, along with regulators determining CAPCO to be costly and inefficient, prompted the state to start over, and in 2004 the state legislature scrapped CAPCO and created the Venture Capital...