ALBANY — Start-up companies in New York state will have Niagara Falls to thank for some of a $50 million venture capital fund that the governor wants to create.
In documents released Tuesday as part of his executive budget plan, Cuomo said that the New York Power Authority, which operates two large hydro plants downstream of the falls, will be one of the sources of money for the venture fund. The governor also plans to divert money from unpopular economic development programs to the fund.
NYPA officials couldn’t immediately be reached for comment Tuesday, but the power authority already subsidizes state economic development efforts through the ReCharge New York program. According to NYPA’s latest budget plan, it estimates it will be making $65 million in contributions to the state treasury every year through 2016.
The governor sees the need for the venture capital fund because New York lags behind other states in attracting venture capital. Venture capitalists make risky bets on companies — many of which never make it. But they typically get valuable stock in the company in return. Places like Silicon Valley have thrived with a robust venture capital presence.
According to the governor’s office, nearly half of the venture capital in the United States is invested in California companies, while New York companies only attract 4 percent of the total.
Two other critical components are planned to go with the fund. Cuomo also wants to create the Innovation NY Network, which will bring together academics, venture capitalists, patents lawyers and business leaders to promote not only investment in start-up companies but also getting research developed in university labs into the commercial sector.
Stanford University and the Massachusetts Institute of Technology have perfected this practice — known as tech transfer. It is commonplace for top scientists at those schools and their students to form their own companies based on their discoveries that attract tens of millions of dollars in venture funding. The schools, which share in the profits, put enormous resources behind these commercialization efforts.
Cuomo is also proposing the creation of regional high-tech business incubators across the state that will be created on university campuses, a plan he called a “cherry on the cake” for local economic development efforts.
The state’s regional economic development councils will nominate schools willing to host the incubators, and under the governor’s plan, five schools would be selected this year and an additional five selected in the next budget cycle.
Cuomo wants to pass legislation that would allow companies located in the incubators to essentially operate free of state taxes for five years. It is estimated that by 2017, companies in the program will be saving $5 million a year in taxes, freeing money up to expand their businesses.