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BackgroundAbout the Ohio VC Statute
The Ohio General Assembly enacted the Ohio VC Statute (Ohio Revised Code) for the purpose of increasing the amount of private investment capital available in this state for Ohio-based business enterprises in the seed or early stages of business development and requiring initial or early stage funding.
To accomplish this purpose, the Ohio VC Statute created the Ohio Venture Capital Authority (the "OVCA"), a public body authorized to implement the Ohio VC Statute. The Ohio VC Statute also authorized the creation of a fund of funds to make investments in underlying venture capital funds in accordance with an investment policy to be devised by the OVCA.
The Ohio Capital Fund has been established to serve as the fund of funds contemplated by the Ohio VC Statute. The Investment Policy is the investment policy that the OVCA has devised pursuant to the Ohio VC Statute to govern The Ohio Capital Fund's investment activities.
Buckeye Venture Partners, LLC Program Administrator
Another of the OVCA's responsibilities under the Ohio VC Statute is to select and retain a program administrator to manage The Ohio Capital Fund subject to the oversight of the OVCA. Pursuant to procedures described in the Ohio VC Statute, the OVCA has selected Buckeye Venture Partners, LLC, an Ohio limited liability company ("BVP"), to serve as the program administrator.
The members of BVP are Fort Washington Investment Advisors, Inc. ("Fort Washington"), a Cincinnati, Ohio-based registered investment advisor and private equity manager, and Peppertree Partners, LLC, a Cleveland, Ohio-based registered investment advisor and private equity manager owned by Fort Washington.
BVP will be the sole manager of The Ohio Capital Fund. The members of The Ohio Capital Fund will be BVP and a trust (the "Ohio Venture Capital Fund Trust"). The purposes of the Ohio Fund are to borrow up to $125 million (the "Indebtedness") from institutional and other accredited investors ("Lenders") and from BVP, and use the proceeds of the Indebtedness to search for, acquire, hold, manage and dispose of investments in venture capital funds organized as partnerships, limited liability companies, corporations or other business entities in accordance with the Ohio VC Statute and the Investment Policy, with 75% of such investments required to be made in Ohio-based venture capital funds meeting certain criteria ("Ohio-based Venture Capital Funds").
BVP will be required to loan to The Ohio Capital Fund an amount equal to 1% of the total Indebtedness (excluding any BVP loans) loaned to The Ohio Capital Fund by the Lenders and BVP (the "Program Administrator Loan"). The Program Administrator Loan must be made on substantially the same terms and conditions as the loans from Lenders. If and to the extent the Indebtedness is not repaid when due ("Losses"), BVP must certify such Losses to the OVCA, and Lenders will be entitled to claim Ohio franchise tax and income tax credits equal to the amount of their Losses ("Tax Credits"), subject to certain limitations and procedures specified by applicable Ohio statutes. However, Losses, if any, experienced by BVP with respect to the Program Administrator Loan will not be eligible for Tax Credits. The Program Administrator Loan must be funded by BVP simultaneously and on a pro-rata basis with takedowns of Indebtedness from the Lenders.
The Investment Policy
In selecting, structuring and making investments in venture capital funds, The Ohio Capital Fund is required to comply with the Investment Policy. The Investment Policy specifies, among other things, certain criteria which a venture capital fund must meet in order to be eligible for an investment by The Ohio Capital Fund, and certain limitations on amounts which The Ohio Capital Fund is permitted to invest in any venture capital fund or group of related venture capital funds. At least 75% of The Ohio Capital Fund monies must be invested in Ohio-based Venture Capital Funds, and up to 25% may be invested in venture capital funds which are not Ohio-based Venture Capital Funds. In addition, every venture capital fund in which The Ohio Capital Fund invests, whether Ohio-based or not, will be required to agree in writing with The Ohio Capital Fund that such venture capital fund will invest at least half (50%) of The Ohio Capital Fund monies it receives in Ohio-based business enterprises in the seed or early stage of development meeting certain statutory criteria ("Ohio-based Business Enterprises").
All underlying venture capital funds must target their investments in Ohio-based companies as a part of their investment strategy. The Ohio Capital Fund's commitment to any one venture capital fund may not exceed $10 million.
The Investment Policy contains other detailed requirements and limitations, and interested persons are urged to review the Investment Policy carefully. A copy of the Investment Policy is available by viewing this PDF (PDF: 84k).