A little-noticed section of Governor Cuomo’s State of the State “Opportunity Agenda” calls for investing another $100 million in state money in startup companies—even as federal auditors probe Innovate NY, the state’s original dalliance with venture capital (VC).
First reported by Newsday’s James Madore, and later examined in this space, allegations of improper activity and lax state oversight in the “Innovate NY” VC program sparked an ongoing audit by the US Treasury Department’s Inspector General. The Empire State Development Corp. (ESDC), which oversaw Innovate NY, subsequently suspended all VC investment on Long Island.
In December, Gov. Cuomo announced a new VC program under a different name; unlike Innovate NY, which distributed money from the federal government and Goldman Sachs, the New York State Innovation Venture Capital Fund used $50 million in state money. Under the governor’s latest proposal, the ESDC’s investment will grow to $100 million. However, the sum is not appropriated or even mentioned anywhere in the FY 2016 Executive Budget documents, so it is not immediately clear where the money will come from.
As described on page 67 of the “Opportunity Agenda” briefing book:
The New York State Innovation Venture Capital Fund will be expanded from $50 million to $100 million. These funds will accelerate technology commercialization in New York State by making equity investments in high-growth technology companies that leverage the State’s industrial and cluster strengths.
As state Comptroller Thomas DiNapoli recently reported, ESDC “provides little public information regarding the results of taxpayer-funded investments in its initiatives.” In the case of Innovate NY, ESDC has never stated whether the initial investments, made in the second quarter of 2012, were ever recouped—let alone whether they turned a profit. And with over $4.2 billion in venture capital invested in New York in 2014, the very need for New York State to be financing startup companies remains highly questionable.
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