Ohio’s Governor Bob Taft signed into law on January 8 a bill that establishes the Ohio Venture Capital (OVC) Program, which will invest up to $100 million in seed and venture capital funds through a fund-of-funds. The state also established the Ohio Venture Capital Authority to administer the OVC program and establish its policies and guidelines.
The program will receive loans and investment from institutions such as banks and insurance companies for the fund-of-funds, which will invest in early-stage venture capital firms. Seventy-five percent of the funds must be invested in Ohio companies.
The legislation allows the Ohio Venture Capital Authority to grant lenders and investors of the OVC Program a total of $100 million in refundable tax credits. It is prohibited from granting more than $20 million in tax credits in any one fiscal year, and from granting a credit that may be claimed during the first four years of the OVC Program or after July 1, 2026.
Returns earned by the OVC’s fund of funds will be used to repay the financial institutions that provided its initial capital. If there earnings from the fund of funds is somehow not sufficient to repay those loans, those financial institutions will be entitled to take a credit against their Ohio taxes.
Kevin Hughes, a policy assistant with the Ohio State Senate Republican Caucus and a former legislative aid to the bill’s chief sponsor, State Senator Jeffrey Armbruster, says there was great demand for such a program. “I was impressed with the amount of commitment we received from the private sector in working to help this legislation along. We had people from all over the state who were really pushing and pulling for this to be passed.” He says the program was originally the vision of former State Senator Chuck Horn, who sought to model it after ones that exist in other states, most notably Oklahoma.
Nine board members will manage the Ohio Venture Capital Authority. The state’s director of development and tax comissioner will sit on the board along with seven others appointed by the governor.
The authority will designate one or two private, for-profit investment firms to serve as the program’s administrator. One strong candidate to be a fund administrator is Cincinnati-based Fort Washington Capital Partners, the private equity arm of Fort Washington Investment Advisors with over $680 million under management.
“It’s a great program,” says Stephen Baker, vice president of Private Equity Direct Investments for the firm. “We’ve supported it from the beginning. The bill is attractive to us as a fund-of-funds manager.” Baker says that the state’s program is very similar to Fort Washington’s Tri-State Growth Capital Fund, which invests in companies in Ohio, Northwest Kentucky, and Southeast Indiana.
“It’s really going to help in the early stage side of enterprise innovation, which is the hardest capital to raise. We want to take venture capital to a level that’s equal to a California or a Massachusetts or Texas. We’re not there yet and have a long way to go, but we’re moving in the right direction,” says Baker.
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