Murphy: Private partners, not state, will award venture capital
NEWARK – Gov. Phil Murphy said he would like the Legislature to start considering his proposal to establish a venture capital fund, paid for through the sale of tax credits, so that it can begin in 2019, when the state’s current tax incentive programs are due to expire.
In a roundtable discussion with business leaders and private-sector venture capitalist, in the corporate headquarters of Audible, Murphy said the Innovation Evergreen Fund “is a major weapon” in his plan to improve the economy through a program focused on high-wage, high-growth industries.
“For all of the big incentives that we’ve put out there, we’ve not solved any of the riddles,” such as poverty and wage growth, Murphy said.
The plan calls for the Economic Development Authority to auction off tax credits, probably to big companies with a tax liability in New Jersey. The state would auction off $60 million in tax credits a year for five years, hoping to receive at least 90 cents for each dollar in credits, yielding $50 million a year for the venture capital fund.
Winning companies would be selected based on the price they offer and the extent to which they offer to mentor or nurture the startup culture in the state.
Those proceeds would be paired with an equal amount of private-sector venture capital money to invest in startups with, perhaps, at least 75 percent of their employees based in New Jersey.
“The investment decision, thank God for everybody who’s going to be an investor, will not be made by me or anyone in government,” Murphy said. “Although EDA has had a fairly long track record in a fund to funds, and they’ve done pretty darn well I have to say over the years. The decisions on investment will be made by the venture firms. As they should be.”
James Barrood, president and chief executive officer of the New Jersey Tech Council, said the venture capital fund is good but that efforts must be made to ensure there are deserving startups.
“It takes some time, but we can work together to get that pipeline filled with entrepreneurs,” Barrood said. “Because we can have all the money in the world, if we don’t have a pipeline of entrepreneurs and startups, then that money will go elsewhere.”
Murphy said New Jersey is a great destination for people between the ages of 30 and 60, given its high-paying jobs and good schools, tough on older residents because of property taxes – and “lousy in the 18 to 30 range.” He thinks the venture capital fund can help with that.
“We think a startup culture is on the list of what would keep that 18- or 22-year-old in the state, whereas now they’re going elsewhere,” Murphy said.
Michael Diem, senior vice president of business and corporate development for Amicus Therapeutics, suggested that New Jersey could encourage innovation companies by making non-compete agreements illegal in the state, which he said would help people move more easily between companies.
“Silicon Valley and the West Coast has flourished because people leave big companies to start new ones freely. And New Jersey is one of the states where non-competes are actually enforced,” Diem said.
Murphy said “that’s a big idea” but offered no further opinion on it.