September 6, 2006
Oklahoma Capital Investment Board
Re: Venture Capital Takes Root in Oklahoma
The Oklahoma Capital Investment Board (OCIB) has set aside $12.7 million as a reserve for possible losses from venture fund investments originated in the late ‘90s and other development loan guarantees. This was done through the sale of state tax credits provided by the Oklahoma Legislature for this purpose. This is the first time the Board has created a reserve in its 14-year history.
Venture capital can make a big difference to an economy, as demonstrated by recent impact studies
conducted by Applied Economics, of Phoenix, and the Oklahoma City Finance Department. The jobs and taxes produced as a result of OCIB investments have helped create a $952 million economic impact in the State.
While this impact is large, the cost to the state has been small. The Board has produced these results at an out-of-pocket cost to the state of only $12.7 million since inception of the program in 1992. “This has been an incredibly efficient program for the State of Oklahoma,” according to Senator Ted Fisher, Chair of the Senate Finance Committee.
OCIB has pioneered the idea of regional private equity – attracting professional venture capital to a region where this type of investment had been sparse. While Oklahoma has many hearty souls who risk large sums every day, most stake their claim in the energy business. It is what they know. But the universe is expanding. “The state’s emerging sectors, like bioscience and weather science, and the service sector, are finally gaining the attention they deserve,” according to OCIB President Devon Sauzek.
Some 26 venture capital funds are now active in the state, many with an investment from OCIB, the state’s organization for catalyzing the growth of the local venture capital industry. “When we started in the early ‘90s there were only three local funds,” said Sauzek.
Local companies are finding capital. Oklahoma City-based Premier Parks (renamed Six Flags), with venture capital funding backed by OCIB, grew to become the nation’s largest theme park company. And angel capital is making a mark. Novazyme, an Oklahoma startup launched with less than $10 million of angel capital in 1999, was sold to Genzyme in 2001 for $225 million.
“We think we have the right formula,” said Sauzek. The Board has committed $67.5 million to 17 funds that range in focus from pre-seed technology funds to later stage mezzanine funds. These funds have attracted more than $100 million to Oklahoma projects and an estimated $200 million in leveraged debt. OCIB has also supported over $48 million in development loans and guarantees.
The Board’s investments have generally tracked the performance of the venture capital industry as a whole,” according to Sauzek. “We are pleased with our overall performance, including our support of the NBA Hornets, which not only created enjoyment for the region but also produced a good financial return for the State. Our investments launched in the late ‘90s, however, suffered along with the rest of the industry through the dot.com crash and have been difficult.”
The Board has committed to two new funds in 2006. Mesa Capital Partners Oklahoma invests in small businesses, while Oklahoma Life Science Fund II supports seed stage medical and biotech firms. Additional investments are under consideration.
To learn more about where to find venture capital in Oklahoma call Devon Sauzek, 405.848.9456.