Like everything with Rick Perry, there’s less to it than meets the eye.
Texas Gov. Rick Perry has distributed $205 million in taxpayer money to scores of technology startups using a pet program designed to bring high-paying jobs and innovation to the nation’s second most-populous state.
But a closer look at the Texas Emerging Technology Fund, one of Perry’s signature initiatives in his 14 years as governor, reveals that some of the businesses that received money are not all they seem. One actually operates in California. Some have stagnated trying to find more capital. Others have listed out-of-state employees and short-term hires as being among the jobs they created.
A few have forfeited their right to do business in Texas by not filing tax reports.
An Associated Press review of the program found that some of the same companies credited with creating a share of the program’s 1,600 new jobs have actually stalled and in some cases blamed Perry’s office for their struggles.
The tech fund works like this: In exchange for money, startups give the state an equity position in their businesses. If the companies are successful, the state recoups its investment or even makes a profit. If they go bankrupt or shut down – and at least 16 have so far – the dollars are lost.
Those failures represent only a fraction of the fund’s full portfolio of more than 130 companies, some of which are clearly thriving. Venture capital funds are risky by nature and often endure losses. About 1 in 4 venture-backed startups fail, according to industry groups. Some studies put the rate of flops much higher.
But questionable job-creation figures and undisclosed business struggles in the fund’s annual report heap fresh doubts about transparency onto the fund, which has long been criticized as too opaque, including in a scathing 2011 report by state auditors.
Julia Sass Rubin, a venture capital expert at Rutgers University who studies economic development, said the lack of transparency runs counter to the private sector, where investors get more detailed information about performance.
“If this were a traditional venture capital fund, this would never fly,” Rubin said.
Funny how the private sector is so much better at doing everything, except giving money to the private sector. The lack of transparency with the Emerging Technology Fund, as well as the Texas Enterprise Fund, is a feature, not a bug.
Targazyme Inc. is one example of a problematic startup. On paper, the San Antonio-based startup is developing stem-cell breakthroughs with 14 employees and the help of $1.25 million in state funds. But the rural address listed for its Texas headquarters is actually a weedy horse pasture. During a recent visit by a reporter, the ex-husband of the CEO was warning his guest to watch for rattlesnakes.
Targazyme founder Lynnet Koh said her company is moving forward but that she left Texas because Perry’s office withheld additional funding, a complaint echoed by other recipients. She now lives in California and said many of the jobs created by the company were short-term hires outside Texas, none of which is mentioned in the fund’s 2013 annual report.
“If you ask me on a scale of 1-to-10 satisfaction with the state, I give it a zero,” Koh said. “Never, ever. Not for any money in the world would I do business with ETF.”
So I guess these are some jobs Rick Perry didn’t manage to steal from California, despite his best efforts. It’s like noting makes any sense anymore. Scott Braddock has more on a tangential subject.