First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0061.01 Ed DeCecco SENATE BILL 11-174 SENATE SPONSORSHIP Heath, HOUSE SPONSORSHIP Gerou and Riesberg, Senate Committees House Committees Business, Labor and Technology A BILL FOR AN ACT Concerning a state fund of funds. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill establishes the fund of funds advisory board. A fund of funds is a pool of capital that is raised to be invested by a management team in multiple venture and private equity partnerships. The advisory board is required to create a report, which it will present to the finance committees of the house of representatives and the senate, that includes the following: An analysis of any fund of funds created in other states; A recommendation as to whether a fund of funds can be implemented in the state; A recommendation as to the optimal structure for the state fund of funds, if one is feasible; and Identification of any possible sources of public moneys to be invested in the state fund of funds. A copy of the report will be available on the web site maintained by the Colorado economic development commission. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Article 46 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PART to read: PART 4 FUND OF FUNDS ADVISORY BOARD 24-46-401. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) There is a critical shortage of seed and venture capital resources in the state; (b) This shortage could result in entrepreneurs being forced to relocate to raise capital and cause a decline in the number of companies that achieve long-term success in innovative industries; (c) It is vitally important to find new ways to generate venture capital that can be invested in and grow Colorado-based emerging companies, which will grow the state economy; (d) A fund of funds is a vehicle to make and manage investments in private equity funds, which in turn invest directly in private companies; (e) A fund of funds would: (I) Deepen the capital pool; (II) Expand the number of venture capital funds active in the state; (III) Stimulate more investment from existing capital funds; and (IV) Enhance deal flow and financing volume; (f) Twenty-three states currently have a fund of funds; and (g) In order to enhance the success of a Colorado fund of funds, it is necessary to identify a source of public moneys that can be used to leverage additional private investment. (2) In enacting this part 4, it is the intent of the general assembly to begin the process of establishing a state fund of funds by establishing a fund of funds advisory board that will provide a report to the general assembly. 24-46-402. Definitions. As used in this part 4, unless the context otherwise requires: (1) "Advisory board" means the fund of funds advisory board created in section 24-46-403 (1). (2) "Fund of funds" means a pool of capital that is raised to be invested by a management team in multiple venture and private equity partnerships. 24-46-403. Fund of funds advisory board - created - report. (1) (a) The fund of funds advisory board is hereby created in the commission. The advisory board consists of nine members, of whom five shall be appointed by the governor, two shall be appointed by the president of the senate, and two shall be appointed by the speaker of the house of representatives. Members shall be appointed no later than September 1, 2011, with terms that expire on July 1, 2012. The original appointing authority shall fill any vacancy by appointment for the remainder of an unexpired term. (b) A member of the advisory board must be a resident of this state and have experience in venture capital, investment banking, institutional investment, fund management, or banking. (c) Members of the advisory board shall serve without compensation and without reimbursement for expenses. (2) On or before February 1, 2012, the advisory board shall prepare a report regarding a potential state fund of funds. The report shall include the following: (a) An analysis of any fund of funds created in other states; (b) A recommendation on whether a fund of funds can be implemented in the state; (c) A recommendation as to the optimal structure for the state fund of funds, if one is feasible; and (d) Identification of any possible sources of public moneys to be invested in the state fund of funds. (3) (a) On or before March 1, 2012, the advisory board shall present the report to the finance committees of the house of representatives and the senate, or their successor committees. (b) A copy of the report shall be available on the web site maintained by the commission. 24-46-404. Repeal of part. This part 4 is repealed, effective July 1, 2012. SECTION 2. Act subject to petition - effective date. This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 10, 2011, if adjournment sine die is on May 11, 2011); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part shall not take effect unless approved by the people at the general election to be held in November 2012 and shall take effect on the date of the official declaration of the vote thereon by the governor.