Ventana Capital’s Tom Gephart Seeks $5 Billion (With a “B”) from Feds to Support VCs

3/16/10Follow @bvbigelow

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investments made from the firm’s fourth and fifth funds, Gephart says they decided to end their fundraising when they realized that Calpers and Calsters, the state’s big retirement funds for public employees and teachers, were clamping down on their institutional investments in venture firms.

When I met Gephart a few weeks ago, during a break at the La Jolla Research & Innovation Summit, he told me, “I didn’t totally retire, but I kind of relaxed. Then, in 2009, we all sort of collectively realized that the biggest issue these days is jobs.”

Gephart says he’s created an organizing committee to rally support for his proposal with help from Andy Policano, the dean of the UC Irvine Merage School of Business, and Malin Burnham, a longtime San Diego civic and business leader. Gephart told me he’s discussed his plan with Mark Heesen, president of the National Venture Capital Association, and has explained it to VCs in Michigan, Texas, and elsewhere across the country.

Gephart tells me he has his eye on $30 billion the Obama Administration has designated under the economic stimulus package for job creation among small-to-medium businesses. He maintains that venture capital, as an industry, is probably the best small business jobs creator that exists today. “We’re very focused on strategic meetings with leaders around Obama,” Gephart says. “We’ve approached them about setting aside $5 billion as an equity component that would be managed in 20 regional funds by existing VC entities.”

While $5 billion might seem like a very big number for the federal government to be doling out to a single venture firm, Gephart says that dividing the funding among 20 venture capital firms would provide a more-reasonable $250 million for each firm to invest and manage. To oversee the dispersal and manage other issues, Gephart says he created Catalyst Funds in September. “We would be the fund-of-funds manager, and would work with the 20 other fund managers,” Gephart says. “Each regional fund would be expected to invest in about 20 companies in their specific region. Each region as you know has specific entrepreneurial needs.”

Mike Elconin, a past president of the San Diego Tech Coast Angels, says, “There is a move afoot in Washington to help in the formation of new companies. There’s also a realization that technology and innovation is important to the economy of the U.S., and that small companies are the best generators of jobs.

“The idea of setting up a fund that would be administered by VCs is appealing,” Elconin says. “But personally, I think it’s got a tough row to hoe these days in Washington—and I’m a Democrat.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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