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Tech leaders say they're pleased with Legislative session

April 25, 2017

With some help from Indiana Gov. Eric Holcomb, local tech leaders launched a full-court press with their legislative agenda in the 2017 General Assembly.

And, having walked away with a few wins in the budget bill that passed over the weekend, they say they're mostly pleased with the outcome.

Tech leaders, including those associated with the Indiana Chamber's tech-policy group, had mainly asked legislators to make the state's venture capital tax credit transferable; help incentivize more direct flights between Indianapolis and other tech hubs; and give the green light for a trust fund to make venture capital investments in emerging Hoosier tech companies.

The $32.3 billion, two-year budget that legislators passed Saturday night and early Sunday didn't honor the venture capital tax credit request, but did address the other items.

"We feel great about it," said Mark Lawrance, vice president of engagement and innovation policy at the Indiana Chamber. "I think the legislators really stepped up to give us the tools to continue to build out Indiana's future economy."

Probably the biggest legislative victory, tech leaders said, deals with the Next Level Indiana Fund, which replaces the Next Generation Trust Fund originally funded by former Gov. Mitch Daniels' lease of the Indiana Toll Road.

Holcomb asked budget writers permission for that fund to invest in high-growth Indiana companies to the tune of about $500 million over 10 years. The fund had already been making investments in low-risk asset classes such as bonds, but lawmakers gave it the OK to invest in higher-risk asset classes like venture capital, setting the cap at $250 million.

Lawmakers also called for the establishment of a board to oversee the Next Level Fund that would include the treasurer or designee; the secretary of commerce or designee; the secretary of office of management and budget or designee; and two Holcomb appointees.

Also in the budget is a $15 million annual appropriation for the Indiana Economic Development Corp. for a "business promotion and innovation program." Among other things, the fund can be used to "encourage regional development initiatives, incentivize direct flights, and otherwise advance entrepreneurship."

Tech leaders were hoping that lawmakers would make the venture capital tax credit transferable, meaning that investors with no Indiana tax liability would transfer it to a person or entity that does, deriving monetary or some other value. But that issue was effectively tabled and will be the focus of a summer study committee, Lawrance said.

John McDonald, who's CEO of ClearObject and the chair of the Chamber's Indiana Technology and Innovation Council, said despite the few shortcomings, it was a great outcome.

"While we didn't get everything that was a high priority," he said, "I admire, appreciate and commend the leadership of both the House and Senate for listening, understanding and acting to support us."

Although the management of the Next Level Fund has been established, its mechanism for investing money in high-growth Hoosier companies is still to be determined. Tech leaders following the issue, including TechPoint CEO Mike Langellier and Allos Ventures managing partner Don Aquilano, are advocating that fund directors should use a "fund of funds" approach.

Under that method, the money would be invested in venture capital funds that may invest in Indiana companies—but aren't required to.

Langellier said it's unwise to put geographical restrictions on venture capital money when looking for investment firms to steward it. Those firms are more interested in returns than in locations, he said, and putting handcuffs on the cash makes it less attractive.

But the way this could ultimately help Indiana firms, he said, is by having the Next Level Fund using its limited partner status in national venture firms to influence the exploration of potential investments here. If those firms do make an investment, Langellier said, it will include cash from Next Level and from other investors in those funds.

"We are advocating for a fund of funds approach," Langellier said. "It can create a win-win by yielding higher returns that will provide more money for roads and desperately needed venture capital for Indiana's promising emerging companies."

Aquilano said the recipe for how to spur needed venture capital investment in Indiana via a fund-of-funds model exists. "I have firsthand experience of seeing it at work in both Michigan and Ohio," he said.

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