Some of North Carolina workers’ retirement funds are being put today to grow jobs for tomorrow.
The North Carolina Innovation Fund, a $232.3 million fund allocated by the North Carolina Department of State Treasurer, was established on March 15, 2010. Its goals are simple: invest wisely in order to generate a high rate of return for the state pension fund, and to help prop up North Carolina companies by doing so.
As of writing, the NC Innovation Fund has committed $170 million of the total amount, distributing funds to a total of seven private equity and venture capital firms, as well as co-investing alongside established venture capital firms in eleven North Carolina companies.
On Tuesday, we reported about Treasurer Janet Cowell’s visit to Raleigh startup StepLeader, which received a $4.4 million investment from River Cities Capital Funds, one of the seven firms in which the NC Innovation Fund is invested. Today, WRAL Tech Wire digs deeper, studying the disbursement of funds and the impact the NC Innovation Fund is having in the state of North Carolina.
How the NC Innovation Fund is Managed and Disbursed
The Department of the State Treasurer, said Treasurer Janet Cowell, “came up with the general architecture” for the NC Innovation Fund. Ultimately, how the Fund is invested, said Cowell, is up to the fund manager, Credit Suisse.
Credit Suisse manages the NC Innovation Fund, and is responsible for the disbursement of capital to private equity and venture capital firms, as well as proposing co-investment opportunities.
“I have veto rights,” said North Carolina State Treasurer Janet Cowell in an interview, “but I’ve never vetoed a deal.”
Approximately $70 million has been invested in seven private equity and venture capital firms, said Schorr Johnson, spokesperson for the Department of State Treasurer. This includes an investment in “The Accelerator,” launched at Southeast BIO Forum in Durham, NC, on Nov. 3, 2011, with $35 million from the state’s pension fund. Funds were committed to Hatteras
Venture Partners to support Hatteras Discovery.
Other investment amounts to private firms have not been disclosed, said Johnson. The firms include Carousel Capital, Falfurrias Capital Partners, Frontier Capital, River Cities Capital Funds and Kian Capital Partners.
These partners, said Johnson, make investments in companies as they deem fit. There is no oversight from the Treasurer in how this money is disbursed, once it is committed to a venture capital or private equity firm.
“We really do try to funnel all of the screening through Credit Suisse,” said Cowell, “and it is an extreme due diligence process.”
Nearly $100 million, to date, is invested directly into startup companies, said Johnson, all of which “is in the form of co-investment.”
A co-investment requires an established venture firm to commit to and lead a deal. The NC Innovation Fund, then, can consider if it would like to increase the overall investment amount into that startup.
“Sometimes private equity capital comes from in-state managers,” said Tracy Harris, vice president at Credit Suisse, “and sometimes it comes from out-of-state managers.” This is an opportunity, said Harris, because it enables the state to build relationships with out-of-region venture capital firms.
“We don’t ever invest without a private equity investor alongside us,” said Harris. “One of the things that we’re trying to do is attract outside funds to the state.”
NEXT: Is the NC Innovation Fund Working?