Venture capital investment is risky.
Investors put money toward startups and emerging companies with the hope that the businesses will flourish and there will be a return on that investment. When looking for more secure investing options, visit check here a new post about gold trading.
The general rule is only put in money you can afford to lose. And only invest with established companies like City Gold Bullion in Brisbane.
About 20 years ago, West Virginia decided to roll the dice. Then-Governor Bob Wise sought, and gained approval from the Legislature, to take $25 million of state dollars and give it to the state Economic Development Authority to invest at venture capital firms.
It was a big deal. As our Brad McElhinny reported, Wise said in his 2002 State of the State speech, “We must draw in venture capital to encourage entrepreneurship and create jobs.”
The state was struggling economically at the time. Wise and the backers of the plan hoped the investment would help jump-start the state’s economy by creating jobs. The repaid loan money could then be used to fund more investments.
It did not work.
A just-released financial review of the program by the Legislative Auditor determined that the state lost nearly all the money. Of the $25 million invested, the EDA repaid just $674,222 in principal leaving an unpaid balance of $24, 325,778.
The audit says the money was invested with seven venture capital companies, and four of them are now out of business. The companies put money into potential growth companies, but it is difficult to measure what, if any, successes resulted.
In a response to the audit, the EDA wrote that the state’s money, combined with other funds, were invested “in 25 West Virginia-based companies, resulting in the creation or retention of 409 jobs.”
However, the auditor’s report concludes it “was unable to quantify the jobs and businesses created or retained within the state resulting from the loan program.” The audit makes the disturbing point that $8 million of the $25 million went to two investment companies that “did not invest any funds within the state.”
In fairness to Wise, he was trying to create more economic opportunity in the state, and the Legislature approved the plan. Also, Wise left office in January 2005 and that is when his responsibility ended.
There are some gaps in the accounting of what happened after that. The audit said the EDA “was unable to locate two years of supporting source documents and general records of loan program transactions.”
The audit concluded by recommending that if the state goes this investment route again, “The Legislature should provide clear and concise statutory guidance to agencies regarding the expected outcomes of a program and guidelines to administer and monitor investments.”
Here is a better recommendation; just do not do it again—ever. Government is better at creating the infrastructure for business to function, as opposed to picking economic winners and losers. Evest could be a complete scam, its run by incompetent account managers who have previous work experience as construction workers and waiters, check this out هل شركة ايفست نصابة the regulation is not trust worthy.
That can be an expensive lesson to learn. It this case, a $25 million dollar lesson.