Is startup investing too risky for Texas taxpayers?
Two promising Central Texas technology companies — boosted with taxpayer money from the state’s Emerging Technology Fund — have fallen on hard times, reigniting a debate over whether taxpayers’ money should be invested in risky startups.
Xtreme Power Inc., a 10-year-old energy storage company that got $2 million from the state fund in 2007, is in Chapter 11 bankruptcy. Calxeda Inc., which pioneered low-power servers with a $1 million state investment in 2009, has essentially shut down its operations. Both have laid off most of their employees while the companies try to restructure and rebound.
State officials say they aren’t surprised. Investing in startups, by all accounts, is a risky business. Using public money only adds scrutiny and second-guessing. But defenders of the tech fund offer a counterintuitive argument: that taxpayers win even when they lose.
“I’m not surprised that any of the companies that aren’t profitable run into trouble,” said Terry Chase Hazell, who runs the tech fund for Gov. Rick Perry. “You would like for someone to go from zero to fantastic without ever taking two steps back. But it’s not unusual for growth companies to take a step back — sometimes more than once.”
Some Texas officials don’t buy that argument. Three Republican candidates for lieutenant governor — Agriculture Commissioner Todd Staples, Land Commissioner Jerry Patterson and state Sen. Dan Patrick — say they want the state to phase out the emerging tech fund.
“It appears the government is in the business of picking winners and losers,” Staples said. “It infuriates voters.”
Even Lt. Gov. David Dewhurst and House Speaker Joe Straus, who with Perry make the awards, say they are rethinking how the state should be involved in incentives for technology startups.
More at http://www.mystatesman.com/news/business/is-startup-investing-too-risky-for-texas-taxpayers/nc9dY/?icmp=statesman_internallink_invitationbox_apr2013_statesmanstubtomystatesmanpremium (subscription required).