A Home-Grown Solution to Nevada's Private Equity Problem
By John Solari
RENO, Nev. (J. A. Solari and Partners) -- There are hotbeds of venture capital and private equity funding, locations like Silicon Valley where funding washes around town in waves. And then there are markets like Nevada.
The state has all the ingredients for a booming entrepreneurial economy -- close to the West Coast's largest population centers and international distribution channels, filled with affordable real estate, and featuring on of the most business-friendly tax structures in the nation. But often the thing holding Nevada companies back was the lack of deep-pocketed private capital funding sources.
But instead of simply accepting its fate as a state that is a second- or third-tier choice for private equity and venture capital firms, Nevada got to work building home-grown private capital funding from scratch.The idea began as a common-sense way to solve two problems at once. The state's investment strategy for a $310 million fund that financed kindergarten through high school education had became mired in government bond-buying strategy that meant it was growing at a rate of one percent, and losing money to inflation. Nevada Treasurer Kate Marshall saw an opportunity to grow school fund revenue by putting $50 million of that money into private equity deals, and to support Nevada companies by mandating much of the money would go to companies located within the state. The move is part of a nation trend in public investment. State governments across the nation are finding value in in-state investment programs that both increase investment yields and keep investment close to home where it will grow the companies that pay taxes and employ workers within the state. While large states like New York and California have sizable in-state investing programs, it is places like Nevada, under-served private capital markets with strong potential for business growth, that are seeing the biggest benefits from the investment strategy. For Nevada, in the midst of retrofitting its economy from a gambling and mining past to a green energy and technology future, the investment strategy is paramount. The state commitment to invest within Nevada is attracting other capital partners who will co-invest in private equity deals that will finance the state's transformation.
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