More bankruptcies within Gov. Rick Perry's portfolio of Texas startups funded with taxpayer dollars didn't dampen a better year on paper for the Emerging Technology Fund, but behind a reported $30 million uptick is a wrinkle complicating that bottom line.
A new state report is also unlikely to muzzle Republicans who've grown publicly weary of the state playing venture capitalists. Calls to eliminate the fund have become common at GOP campaign stops this primary season, casting doubt over one of Perry's signature initiatives once he leaves office in 2015.
For now, the last annual fund report Perry will deliver suggests improvement; of the $192.7 million the state has awarded to 142 private startups since 2006, fund managers late last week put the value of those investments at $221 million. That's a sharp increase from 2012, when the fund was valued at just $2.4 million above what taxpayers put in.
At least 16 fund recipients have filed for bankruptcy or shut down, including one in January. Those still in business reported modest overall job growth.
"I think we're tracking pretty well for an early-stage fund," said Terry Chase Hazell, who in September took over as the fund manager in Perry's office.
But the $30 million difference between the fund's current value and the money paid out to startups doesn't reflect all the dollars Perry's office has spent to take pieces of private companies.
That's because a $40 million grant to the Texas A&M University System in 2012 was contingent on the fund getting a 20 percent stake in Kalon Biotherapeutics LLC, said Dr. Brett Giror, the interim executive vice president and CEO of the Texas A&M Health Science Center. Kalon was created by A&M to help operate a major federal biodefense laboratory in College Station.
Giror said "the whole project would've gone down the tubes" if the A&M System hadn't agreed to give equity in Kalon as part of the deal. Giror said he thought the center's estimated $42 billion in future economic impact alone would've been enough for the state, but he said fund managers insisted on Kalon as part of the award.
"The state would not have gotten a piece of Kalon if it had not granted the A&M System that $40 million," Giror said.
It's the first time the fund has taken an equity position without directly investing in a company. Hazell called the arrangement a victory for the state since it was getting a slice of Kalon without directly giving the company money, and said she'll explore similar opportunities in the future.
Hazell said she couldn't disclose the value of the state's position in Kalon, but that it was by no means propping up the worth of the tech fund.
"It's not going to be ginormous," Hazell said.
Perry credits the tech fund and the Texas Enterprise Fund, which similarly gives companies taxpayer dollars to companies, as economic engines helping make Texas the envy of the nation in creating jobs. His office stresses taking a long view with inherently risky early-stage startups, and says job creation and outside funding attracted by companies are important performance measures.
But the tech fund that weathered scrutiny from Democrats and good government groups early on now also faces conservative criticism. Top Republicans began speaking more skeptically about the fund as tea party groups panned taxpayer dollars for private companies.
Attorney General Greg Abbott, who is the early Republican favorite to replace Perry next year, says the state shouldn't be picking winners and losers. Last year, the GOP-controlled Legislature replenished the tech fund with $50 million. Perry had sought nearly triple that amount.
Fund recipients still in operation reported 1,661 total jobs in the last fiscal year. But that number includes Kyle-based Xtreme Power Inc., one of the biggest employers in the fund, which received $2 million in 2007 and filed for bankruptcy last month.
In 2012, companies reported 1,236 jobs, which wasn't an entirely accurate snapshot since 10 companies didn't provide employment data that year.