Texas Emerging Technology Fund: Review & Feedback
Abstract
This Texas Emerging Technology Fund Review & Feedback document serves to: 1) review the Emerging Technology Fund, a State of Texas initiative that served early stage innovation between 2005 and 2015, and 2) collect information and feedback via the form below to help organize perspectives via those involved from Texas’ startup, investor, and government communities. Review and feedback is appreciated to help create future supportive efforts.
1) Review the Emerging Technology Fund
The Emerging Technology Fund Review below outlines major details, followed by the stated praises and criticisms via news articles of the time. Additional items are also highlighted that share counter arguments and give retrospective context.
2) Feedback to Help Define the Future
As we start to define new efforts for this 88th Texas Legislative session, this look back to the ETF has helped inform future efforts. Not only does this serve to carefully study and knowledgeably create a fresh and valuable approach— but is a nod to early and important work done in Texas history spawning innovation. Please use the form below to share (on or off the record) experiences, thoughts, and further ideas.
1) Summary Review
The Texas Emerging Technology Fund, 2005 - 2015
Created in 2005 under Governor Rick Perry as HB 1765, the Emerging Technology Fund (ETF) started as a $200M fund to help provide jobs and develop the economy via R&D support, taking technology from lab to market. The state gained equity via the funding into high-tech sectors such as: medicine, clean energy, robotics, cyber security, and more. The fund was continually revised in 2007 and 2009 adding $100M each legislative session, for a total of $500M in funds to allocate. The actual collective deployment of $422M went to 145 startups and 160+ educational initiatives. The fund money was held in the Texas Treasury Safekeeping Trust Company, as standard practice.
To help scout for new technologies there were seven regional agents inside “Opportunity Zones”, such as the Austin Chamber of Commerce and the Research Valley Partnership for example. Then, a 17 member advisory board of technology leaders, successful entrepreneurs, venture capitalists, and research experts appointed by the governor reviewed companies to meet a set of ETF criteria. Recommendations were then sent to the Governor, Lieutenant Governor, and Speaker of the House for a unanimous stamp of approval to invest from the fund.
In 2015, the fund was put to an end by incoming Governor Greg Abbott when he signed Senate Bill 632. This occurred after an audit was conducted finding a need for more transparency and additional points listed below. This eliminated the startup investment fund and directed half of the total $100M remaining to a new effort named the Governor’s University Research Initiative that recruited top researchers to the state’s university campuses via matching grants.
The other remaining half of the fund went to the Texas Enterprise Fund, known as a “deal closing” initiative helping to attract businesses to the state.
Regarding last fund distributions, the final announcement about this expressed: “Governor Abbott has previously stated that the Enterprise Fund needs to be reformed and has pledged to work with the Texas Legislature to improve the transparency, accountability, efficiency, and effectiveness of the Fund”.
Fund Thesis & Objectives
Incentives for Commercialization Activities: early-stage technology investment funds designed to assist companies in transforming ideas, concepts, and prototypes into commercial viable products.
Research Award Matching: funds create public-private partnerships which leverage the unique strengths of universities, federal government grant programs, and industry.
Acquisition of Research Superiority: funds for Texas higher education institutions to recruit the best research talent in the world.
Stated Criticisms
Some politicians were accused of being too close to the selection and funding of the companies, i.e. received investment after making campaign contributions
More transparency via public portfolio fund tracking was needed, as there was limited public monitoring of recipient performances and expenditures
Return on investment was low and comparable to US Treasuries
Some jobs were said to have been created outside of the state and/or have left the state
There appeared to be a high dollar amount per job
A state representative remarked that government isn’t very good at venture capital
Lack of public access to the decision making process in funding
More accountability needed from ETF officials
Stated Praises
A notable achievement was that the fund was the most active seed fund in the country at the time
It was crucial to obtaining seed stage money in the financial downturn beginning in 2008
Useful to filling the capital gap that existed between seed funding and venture capital funding
Other states could not afford to do an ETF program at the time, which made Texas stand out and remain competitive
The initiative gave rise to unique collaborations between regions across Texas, and between the universities
According to the ETF council, it produced about 6,000 jobs and more than $1 billion in economic value
Additional Comments For Context
Other state funds have shown to do transparency well and easily solved for the issue via regularly released detailed and public portfolio management
On a related note, it was also stated that some job creation numbers weren’t posted as it would be a competitive disadvantage of that private company
Universities/University of Texas receives already significant research funding. UT has the largest US university endowment, ahead of Harvard, and then Yale, etc
When jobs were created outside the state or left the state, some of the funds Texas received were actually also part federal funds… so not a completely lost cause, and represented a very small percentage
The Texas Enterprise Fund where half the remaining ETF balance went is for general technology businesses and does not actually pertain to startup technology
Media can portray an angle of sensationalism, and many journalists (especially at the time) were not as educated on startup & R&D investing as well as they are in the current days 10+ years later
It was political as well: “Austin economist Brian Kelsey, principal of economic development firm Civic Analytics, called the elimination move unfortunate, but said it’s not surprising “given Abbott’s skepticism about the state’s role in economic development under Perry. Even critics of incentives in general viewed the ETF in a more positive light than some of the other tools, especially the Enterprise Fund,” Kelsey said. “Not every firm wants the state as an equity partner, but overall the ETF has been a valuable tool for supporting innovation-based economic development in Austin.”
2) Submit Feedback
Emerging Technology Fund Feedback Form
External Sources
https://www.tpr.org/education/2015-06-05/abbott-signs-higher-ed-bill-ending-fund-touted-by-perry
https://www.ntxrcic.org/etf.html
https://www.govtech.com/budget-finance/texas-gov-abbott-abolishes-rick-perrys-emerging-tech-fund.html
https://gov.texas.gov/news/post/governor_abbott_proposes_to_eliminate_emerging_technology_fund_establish_ne
https://www.bizjournals.com/austin/print-edition/2013/02/08/lawmakers-may-come-down-on-etf.html
https://www.bizjournals.com/austin/print-edition/2012/04/27/state-etf-wont-run-dry-in-2012.html
https://fortworthbusiness.com/technology/closing-of-perrys-tech-fund-leaves-gap-in-texas-emerging-technology-funding/
https://www.siliconhillsnews.com/2015/10/21/texas-emerging-technology-fund-still-benefiting-life-sciences-startups/
https://meettemple.com/regional-center-for-innovation-and-commercialization-to-help-support-projects-bring-in-research-and-create-new-jobs/
https://www.lubbockonline.com/story/opinion/columns/2010/09/30/texas-getting-it-right-emerging-technology-fund/15247086007/