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Life-Science Ventures Lure More State Pension Funds
By Jim Hopkins, USA Today
USA Today, June 22, 2004
As competition grows for biotech and other life-science jobs, more states are using pension money to lure start-ups in the risky industry.
States from Oregon to Florida are tapping public money to invest in private venture-capital funds because VC firms - the top investors in start-ups - favor areas that already dominate life sciences. Most venture money goes to the San Francisco Bay Area, San Diego and Boston.
States worry they'll miss out on an industry expected to create high-paying jobs making cancer drugs, medical devices and disease-resistant crops. The number of life-science jobs is expected to grow 13% more than overall annual job growth through 2012, says a study by Battelle and other researchers. Pay is at least $18,600 more than the average for all jobs.
But in betting on life sciences, states face plenty of competition and uncertain returns. At least 40 states target the industry, up from 14 just three years ago. The industry is awash in losses. And 30 years after starting, it still has fewer than 900,000 jobs - less than 1% of overall U.S. employment.
Florida agreed in April to pump $350 million into start-ups over the next three years. It wants some of that for state biotech ventures, an industry Gov. Jeb Bush began pushing hard last year.
Bush persuaded state lawmakers in October to spend more than $300 million on a biotech research center near West Palm Beach. He concedes the gambit is risky. "It's not a sure thing," he says.
Florida is investing about $75 million of the $350 million through Grove Street Advisors. The investment management firm is making a special effort to fund life-science start-ups in Florida.
Overall, Florida plans to devote 5%, up from 4%, of its $101 billion in pension money to venture and other private-equity deals.
Where other states are tapping pension money:
.Oregon is steering $100 million this year through 2008 to venture funds that agree to consider Oregon start-ups in life sciences. The money comes from the state's $44.4 billion in pension assets.
.Ohio is pumping about $75 million annually into life-science start-ups, some of which it hopes will locate there and in nearby states. Its pension assets: $59 billion.
.Washington has invested about $60 million in 44 state companies; 22% of the money is in life sciences, a bigger share than its stake in traditional tech ventures. Its pension and related assets: $53 billion.
Overall, states are investing just a sliver of pension assets. What's more, it is unlikely they'll ever match the financial clout of private venture-capital firms. VCs pumped $1.8 billion into biotech and medical-device start-ups in the first quarter, double what they invested last year, researcher VentureOne says.
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