•  
• Tweet
•  
•  
• 

By: Bailey McCann, Private Equity Strategies

Illinois State Treasurer Michael Frerichs has announced a new venture fund that will invest $220 million in emerging tech companies through 15 to 20 private equity funds. The program will be administered by 50 South Capital Advisors LLC, the alternative investments subsidiary of Northern Trust.

Illinois is rare in focusing venture capital investing through the treasurer’s office, according to Illinois Venture Capital Association Director Maura O’Hara. However, Frerichs wants to focus on job creation within the new economy and says his goal is to create 3,600 jobs during the next three years while earning investment returns for the state.

The more than $220 million will come from existing investments and is not entangled in the state budget impasse that involves the General Revenue Fund. The investment is expected to attract more than $400 million in private-sector money, which will further spur interest in the Midwest tech scene that Illinois anchors.

Bob Morgan, managing director of 50 South Capital, will be involved in administering the fund. He says in an interview that he was happy to get involved given the role 50 South has already played in venture capital in Illinois. “As founding members of the Illinois Venture Capital Association we were really excited to be involved with this project,” Morgan says. “There is real energy around Venture in Illinois.”

Chicago already has a handful of startup incubators, including 1871, where the investment plan was announced. In addition to the budding startup scene in Chicago, there are also pockets of companies cropping up around the local universities. According to Morgan, there is enough existing diversity within local VC funds that the target number of 15-20 investments should provide meaningful diversification and exposure for the state’s investment goals.

This is the second investment fund Illinois has put together that focuses on local venture capital. Legally called Technology Development Accounts (TDA), lawmakers in 2002 authorized the initial investment. The funding led to successful Illinois companies including SpotHero, Trunk Club, Sittercity and Diagnostic Photonics. Lawmakers in 2011 authorized a second round of TDA funding, which will begin later this quarter. TDA I created an estimated 3,900 jobs (1,200 direct and 2,700 indirect), according to results compiled by previous administrations. Based on that performance, TDA II should create 3,600 direct jobs and thousands of indirect positions.

“TDA I has been a valuable resource for retaining successful businesses and expanding the Illinois technology ecosystem,” said 1871 CEO Howard A. Tullman. “TDA II builds on the success of TDA I and helps ensure that Illinois remains an attractive place for tech entrepreneurs to grow their businesses and create new jobs.”

“This is an opportunity for Illinois-based VC funds to have a new level of support,” says 50 South’s Morgan. Investments will likely focus on seed stage and series A rounds which will allow Illinois to avoid some of the price inflation common to later stage VC throughout the US.