From VentureWire, it seems that Pennsylvania has given venture investors a “put” on investments in that state. If they lose money on venture investing, well … they can put 50% of the losses back to the state. Assuming I haven’t misunderstood, this is one of the nuttiest things I have read in some time.
Pennsylvania Lures Investors With Promise To Stop Losses
By Giada Cardoletti
Early-stage investments in Pennsylvania companies come with a safety net these days for those venture capital firms who qualify.
The state of Pennsylvania will kick off in early 2006 a new program that will provide to eligible VC investors a 50% reimbursement on losses incurred on Pennsylvania-based investments, after seven years.
To qualify for the “Venture Guarantee” program investors must make a $15 million minimum commitment in a Pennsylvania-based business focused on technology or biotechnology and open a Pennsylvania office staffed by a partner-level employee. Other qualifications investors must meet include a demonstrated positive track-record and expertise in the proposed industry segment.
The program’s goal is to provide economic stimulus and job growth to the less metropolitan areas of the state outside of Philadelphia and Pittsburgh, by guaranteeing up to $250 million in losses of equity investments made in Pennsylvania companies.
To paraphrase writer P.J. O’Rourke, giving money and put protection to venture capitalists is like giving whiskey and car keys to teenagers.