Slater fund track record mixed bag

'Ultimately, we want to take this $10 million in investments annually.'

Judged purely as an investment vehicle the Slater Technology Fund, which has returned $3.4 million on investments of $23.4 million, comes up short, concede managers Richard G. Horan and Thorne Sparkman. More

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TECHNOLOGY

Slater fund track record mixed bag

'Ultimately, we want to take this $10 million in investments annually.'

Posted 4/30/12

Judged purely as an investment vehicle the Slater Technology Fund, which has returned $3.4 million on investments of $23.4 million, comes up short, concede managers Richard G. Horan and Thorne Sparkman.

As a job creator, however, the 3,513 employment-years of work, much of it high-paying, generated by seed-stage companies Slater entities have invested in from 1997 through 2011 look much better. And most importantly, Slater managers say, is the $394 million in follow-on investments the companies have raised from other sources, amplifying every $1 in taxpayer money spent with $16.69 in private capital, according to figures provided by the fund to Providence Business News.

But in the 15 years since Slater began investing, the effectiveness of public venture-capital programs remains difficult to evaluate, though they are a significant part of the state’s economic-development strategy and are set to become an even larger part over the next few years.

State leaders have found Slater an easy target for budget cuts even as they back the fund for federal money. After $1 million was cut from the Slater budget in 2010, Gov. Lincoln D. Chafee has proposed cutting $500,000 from the state’s $2 million contribution in his fiscal 2013 budget, although he said it is not a reflection on the fund’s performance or its value.

This year Slater started receiving a $9 million infusion of federal funding to bolster what has been a shrinking annual state contribution.

And now other public economic-development agencies are dabbling in equity investing.

This winter, the R.I. Economic Development Corporation, which was central in Slater’s $9 million grant, made its first direct equity investment when it took a small stake in smart-grid company UtiliData through the state Renewable Energy Fund. When the UtiliData deal was approved, EDC officials said it was a model for future economic-development investments.

And Providence, in a joint project with Slater, startup-accelerator BetaSpring and the Cherrystone Angel Group, is investing a $1 million federal grant in $50,000 equity-convertible loans to companies that promise to stay in the city for a year.

Unlike return-driven private funds, public funds generally work towards multiple goals not necessarily tied to maximum capital returns.

Traditionally, job creation has been at the center of almost all public economic-development efforts, whether they employ venture-capital tools, straight grants or business-incubation assistance.

That was especially true for Slater, which in its earlier years was actually five separate “Centers of Excellence,” focused on spurring economic activity in distinct sectors, including design and marine technology.

In those early years, Slater operated mostly as a grant-making body with little or no eye toward recouping its investment, let alone generating healthy returns.

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