Twenty-seven minutes into a speech outlining his broad-based vision to jump-start — and re-create — the New Jersey economy, Gov. Phil Murphy paused to give warning to the crowd of more than 600 top business leaders, economic development professionals and elected officials.
“I would say, lock it in here for the next minute or two, because, in addition to growing and shrinking the inequities and poverty, this is the big idea today,” he said.
With that, Murphy introduced the New Jersey Innovation Evergreen Fund, a $500 million plan with which he aims to dramatically increase the amount of venture capital investment in the state.
“(This will) supercharge the return on venture capital into our state, carrying the proceeds on competitive auctions of new state tax credits with private venture capital funds to make joint investments in a diverse array of New Jersey-based startups,” he said.
Corporations, he said, will bid on new Economic Development Authority tax credits.
“The winning bidders will be the ones who offer both the best price and the best commitment to help entrepreneurs through mentorship, networking and other resources,” he said.
The reasons for the fund are obvious, he said. The numbers spell it out.
Murphy pointed to the $33 billion of venture capital dollars that have been invested in the New York City metropolitan area in the past five years — noting how New Jersey did not benefit as much as it could have.
“Fewer and fewer of those dollars came into New Jersey,” he said. “This Innovation Evergreen Fund will help bring them back.”
Reaction to the plan was positive.
Bob Doherty, the New Jersey head of Bank of America — the bank that has more dollars invested in the state than any other — said he welcomed the plan.
“I think it’s awesome,” he told ROI-NJ afterward. “I think we have to build the economy through establishing new businesses. The fact there are different types of institutions that invest in businesses at their different stages is important to recognize.”
Doherty was quick to point out that increasing regulations make it difficult for Bank of America to invest heavily in the startup space, though it certainly participates.
“(We) tends to work with well-established small and medium-sized businesses,” he said. “We don’t do startups easily.”
Doherty welcomes more investment players.
“I say more power to it,” he said. “It’s needed, it’s necessary and it’s an important part of the spectrum. We’re an important part of the spectrum, but not necessarily at the startup part of it. It’s a great vision.”
Aaron Price, the head of New Jersey Tech Meetup, also saw the fund in a positive light.
“I think it makes capital more accessible in New Jersey,” he said. “Now, if you’re a VC thinking about investing in the region, you can now double their funding right out of the gate.
“At the same, it’s one less meeting that an entrepreneur has to have. I think it’s a great step forward for New Jersey entrepreneurs to be able to raise capital from professionals in a competitive market.”
Price views it as a step forward.
“Not one thing is going to fix this issue, but a lot of steps like this will make a lot of entrepreneurs take New Jersey seriously as a place to set up business,” he said.
Murphy’s certainly counting on it.
He sees the fund drawing a bigger pool of investment dollars on a scale that will help New Jersey compete nationally.
“State-level venture capital funds have thrived elsewhere, but, with our talent and our location, the Innovation Evergreen Fund can help us become the model for our country.”
Murphy said the program will work with other new programs at the EDA.
“The Innovation Evergreen Fund will be a powerful tool to bring new startups to our incubators and accelerators, where they can already benefit from NJ Ignite, the EDA’s new collaborative workspace rent initiative,” he said. “(This will help startups) put more of their initial funding into research and development instead of into overhead.”
Tim Sullivan, the CEO of the EDA, feels the program not only can help grow the economy, it can help the state face its biggest problem — a more than $100 billion debt due to missed pension payments and overly generous health care benefits.
“The governor’s take on this, is one of the ways we solve that puzzle going forward is we have to grow faster and grow our way out of this,” he said. “You have to invest to grow. The current programs have been running at almost a billion dollars a year of investment. We think we can bring that number down, but get more for our money. That’s part of how we are going to solve that puzzle long term.”
