In a slam-dunk vote, the N.C. House sided with Gov. Pat McCrory to create a new venture capital fund for startups totaling $40 million. It’s part of the House-approved budget, which passed by a wide bipartisan margin. But what will happen in the Senate?

Rep. Paul “Skip” Stam, R-Wake, tried to block the venture fund creation in an amendment as the House debated overnight Thursday on the $22 billion spending plan.

But if the General Assembly debate had been reenacted on ESPN, he would have been posterized by the vote.

The ammendment was crushed, 74-40.

“We’re gambling and hoping to win,” Stam said, according to WRAL’s Mark Binker.

But fellow Rep. Leo Daughtry, R-Johnston, would have none of that.

Wrote Binker: “Daughtry said that Stam’s line of logic showed him to be ‘one of the greatest thinkers of the 20th century. But we are in the 21st century.'”


Politics isn’t beanbag.

So what happens next?

“I don’t have any real insight into what the Senate may or may not do. I suspect, there is sympathy for the idea, as well as a lot of concern similar to what Stam expressed,” Binker tells WTW.

But here’s the key:

“If you are a backer of this idea, the important thing is the issue is alive for the final conference budget that will be worked out between the two chambers,” Binker explained.

“The House and Senate budgets are really negotiating positions. It is now the house’s position that the state should create this venture fund. Although it doesn’t always work out this way, that’s the view point they should take when they sit down to negotiate.”

Fund is part of innovation strategy

The venture fund is a piece of an innovation plan McCrory outlined in January.

Key points include:

  • Investing $120 million in new venture capital companies. To get state funding, the companies would need to raise at least $2 of private capital for every $1 of state money invested. Those companies would then invest in innovations developed in North Carolina.
  • Creating a $10 million per year program to help start-up companies make the transition from concept to a marketable product.
  • Eliminating the state’s capital gains tax rate for “innovation-related companies.”
  • Taking steps to lure North Carolina natives involved in innovation home to the state.
  • Creating a crowd funding program as a way of generating more capital for start-up companies.

Crowdfunding has yet to happen, but backers aren’t giving up hope.

An investment dividend?

Binker noted that the budget included a provision that “would take $40 million from the escheats fund to invest in startup businesses. Escheats are funds that the state is holding in trust for people who unintentionally abandoned tax refunds or business payments.”

Rep. Nelson Dollar, a Republican, pointed out that such a fund would draw more private investment.

“The state of North Carolina needs more venture capital,” Binker quoted Dollar as saying.

Dollar pointed out a well-known fact among startups, investors and economic developers in North Carolina: Venture capital in this state is sorely lacking, especially from local sources.

Yes, syndications and a lot of road work by entrepreneurs who are traveling all over the country in search of investors, are bringing money back to North Carolina. But a new local source of deals would show that North Carolinians have real skin in the game.

“It’s a real problem for job development,” Dollar said of the capital challenge.

Binker noted that backers of the fund believe venture investments could deliver “better returns for the escheats fund by making the investments. Those returns go to help needy students.”

Critics are concerned about who will be appointed by the Governor and the General Assembly to oversee the fund – if the Senate goes along.

Will they be cronies?

Binker pointed out that Rep. John Blust, another Republican, criticized the fund’s oversight.

“Those with political connections are going to get the capital,” Blust said. “It’s just an invitation to crony capitalism.”​