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State’s venture fund authority eager for its opportunity

Gov. Martin O’Malley installed a nine-member board Wednesday to oversee the state’s planned venture capital fund that, if all goes as planned, will pump at least $70 million into young, high-tech companies.

“For a modern economy to create jobs we need to make modern investments,” O’Malley said before swearing in the Maryland Venture Fund Authority board members.

Invest Maryland was O’Malley’s top economic initiative in the past legislative session and, according to the Department of Business and Economic Development, is the largest economic development program in Maryland’s history. It is designed to enable entrepreneurs to capitalize on the research done at government and university labs in the state.

“It will get venture funding flowing again,” O’Malley said.

Peter Greenleaf, the president of MedImmune Inc. in Gaithersburg and the chairman of the authority board, called Invest Maryland “a progressive opportunity, and one that not every state is capitalizing on.”

MedImmune is touted by state officials as a modern Maryland success story to be emulated by beneficiaries of Invest Maryland. The company was started with a venture investment in the early 1980s and has grown to 3,500 employees worldwide, with the vast majority in Frederick and Montgomery counties.

In 2002, the company started MedImmune Ventures to make investments in growing biotech companies, an activity that could be supplemented by Invest Maryland.

“This is taking a much-needed source of capital and injecting it into businesses in Maryland,” Greenleaf said.

The venture board held its first meeting Wednesday to start to cobble together the foundation of the program. The board’s first task is to hire consultants to auction off the tax credits that will fund the program and hire venture capital firms to invest the state’s share of the auction proceeds.

With $100 million in insurance premium tax credits available — the legislature cut the program from the $142 million in credits O’Malley wanted — and a price floor of 70 cents on the dollar, the program should bring in at least $70 million if all the credits are sold.

DBED expects the credits to fetch more. A Colorado program with a similar auction process sold its credits to the highest bidders for an average 86.2 cents.

Insurance companies will pay one-third of the cost of the credits per year from 2012 to 2014. The credits will be applied to their premium tax liabilities evenly between 2015 and 2019. Each yearly infusion of capital will be divvied up — two-thirds will be invested in private venture capital firms and the rest will fuel state-funded programs.

The auction could be held as early as Feb. 1, and winning bidders will be chosen by May 1. The first payments for the tax credits are due a month later. The state could begin making investments by June.

DBED estimates that investments would be made in 40 to 80 companies a year. The investments made by the state will focus on early-stage firms where there is more risk, while the private venture capitalists will target more mature growth-stage companies.

The state will receive all of the principal and 80 percent of the profits of successful investments to bolster its general fund. Future governors would have to appropriate more money to the program to keep it running.