TEDCO is focused on compliance after a critical legislative audit was released last week, TEDCO CEO George Davis said.
“Change is hard. But I’m up to the task and I think I was hired to do that,” Davis said. “If along the way, we have to learn some things, I’m a quick a learner. We’ll get these compliance issues straightened and we’ll get them straightened quick.”
TEDCO, the Maryland Technology Development Corporation, took control of the Maryland Venture Fund in 2015. That fund had been under the Maryland Department of Commerce.
The audit found issues that included directing funding to companies that were not primarily based in Maryland and investing in companies that had associations with the Maryland Venture Fund’s advisory committee.
The Maryland Venture Fund provides venture capital to early-stage startup companies in Maryland, with the goal of helping companies start, grow and stay in the state. The fund has more than $100 million assets under management.
One part of the audit found that TEDCO had invested more than $4 million in companies whose principal place of business was not Maryland. One company receiving investments totaling $3 million was in the process of moving out of Maryland.
Those companies were not identified in the audit.
Davis noted that all of those companies had a “solid employee base” in Maryland. He also said TEDCO had stepped up its due diligence processes to make sure that investment in outside firms “never happens again.”
“Our mission is 100 percent dedicated to developing economic returns for the state of Maryland and the forefront of that is job creation,” Davis said. “We have no desire to invest in companies outside of the state of Maryland.”
Legislation in the General Assembly would require TEDCO to invest in companies where a majority of employees live or work in Maryland. The legislation could also be amended to require more oversight.
“I still believe that we should have the majority of jobs that are being created by people that either live and/or work in Maryland,” Sen. Cheryl Kagan, D-Montgomery and the legislation’s sponsor, told the Senate Finance Committee Tuesday. “The application process should include verification that they have a presence in Maryland and pledge to retain it.”
The audit also found that more than $21 million from the Maryland Venture Fund was invested in companies that two of the fund’s three advisory committee members were associated with. These investments came before the fund’s transfer to TEDCO, and no investments have since been made in those companies, Davis said.
As part of its actions in response to the audit finding, TEDCO has disbanded the ad hoc advisory group in question, noting that the group never had any authority or formal involvement in the investment approval process.
In December, TEDCO’s Board of Directors created a formal investment committee to provide oversight and consult in the implementation of investment regulations. Those board members are subject to full disclosure requirements.
TEDCO has to work to balance investing while also working with Maryland’s startup community, Davis said.
“We have to balance it. That’s our job,” he said. “It’s not easy. I’m learning a little bit and we have to make sure, and we will make sure, that compliance comes first, period. We have to drive the best performance we can within that compliance. We will make sure that that is up front. … Relative to anything that establishes that it has even the perception of conflict, we’re just not going to do it.”
In 2017 the Maryland Venture Fund received $25 million from the Maryland State Retirement and Pension System. That joined taxpayer money that already goes into TEDCO funds.
None of TEDCO’s other grant and fund programs were mentioned in the legislative audit, but Davis said the agency’s role with taxpayer money should be taken seriously.
“We’re stewards of taxpayer money, regardless of what fund it’s in,” he said. “I take that extremely seriously.”
John Wasilisin resigned from his position as TEDCO’s president and chief operating officer Jan. 31st, the week before the audit was publicly released. Davis said Wasilisin, 63, had been planning to leave TEDCO after nearly 12 years.
“I think John has been thinking about moving on for a while,” he said.