State Small Business Credit Initiative (SSBCI) Q&A

Q&A for Investment Manager RFP

1. Are you looking for individual funds or are you looking for a Fund of Funds to manage the capital allocation? VEDA is looking for individual funds.  These funds may raise outside capital as long as the other Limited Partners are pari passu with the SSBCI funds.
   
   

2. Is an organization eligible to apply if it is domiciled in Vermont, has experience investing in Vermont companies, fund administration, compliance and accounting is based in Vermont, the resources will be held in a Vermont financial institution, the activity of meeting with prospective companies will take place in Vermont and will exclusively serve Vermont businesses with the funding, but the individual managing the fund day to day  is a resident of another state and will be working from his home office when not doing in person meetings with companies? In this situation a remote employee(s) involved in the management of the fund would be acceptable.
   
   

3. The Background and Purpose states that this should be a long-term vehicle for the investment and reinvestment of funds.  The current standard in the VC industry is a 10-12 year fund life.  Does VEDA prefer a 10-12 year fund, whose proceeds are then returned to VEDA, allowing the state to reinvest those funds into new programs, or does VEDA prefer an evergreen fund structure which is designed to operate in perpetuity and recycle capital within the fund vehicle?  VEDA is open to proposals for a traditional 10-12 year fund or an evergreen fund structure.
   
   

4. Some of the information requested in the application may be private and confidential. Will part or all of the RFP, once submitted, be subject to Vermont’s open records law or FOIA requests? A public record is defined in 1 VSA § 317(b) as any written or recorded information, regardless of physical form or characteristics, which is produced or acquired in the course of public agency business. Confidential business records are exempt from disclosure. See 1 VSA § 317(9).
   
   

5. With the state of Vermont as a partner in a new SSBCI fund, will the new fund be subject to FOIA requests? Furthermore, will fund portfolio company trade secrets, financial information, etc. be subject to FOIA requests?  VEDA as an instrumentality of the State of Vermont is subject to Vermont’s Public Records Law. All written or electronic information generated or received by VEDA is subject to the confidentiality and public disclosure provisions of the Vermont Public Records Law. Under the law, business plans, trade secrets, and financial information submitted by applicants are generally considered confidential and are not subject to disclosure.
   
   

6. The SSBCI guidelines detail at maximum annual management fee of 1.71%.  Meanwhile:

   1. The industry standard in venture capital is for the fund to charge a 2% management fee and 20% carried interest (or profit split).  Can a respondent to the RFP propose both a 1.71% management fee and a carried interest split? Yes.
      
      

   2. Is the 1.71% annual management fee based on the total amount of capital committed to the fund over three possible tranches of draw down (this would mimic closely what is standard in the venture industry)? Our current understanding is that the 1.71% annual management fee is based on the total capital committed. However, we expect further guidance from the Treasury Department on this subject.
      
      

   3. The industry standard in venture capital is for the VC fund’s investors to cover certain expenses separate from the management fee (including D&O insurance, fund formation & legal costs, annual corporate filing fees, business registration fees & annual outside audit expenses and tax return preparations).  The RFP states that the respondent must propose an administrative budget including “D&O insurance, formation costs and annual audit expenses” that “must confirm with SSBCI Treasury Department guidelines”.  Do the SSBCI guidelines allow for a) only a management fee of 1.71% and nothing else or b) are there actually guidelines as to paying for the industry standard expenses listed above separate from the 1.71% management fee?  The Treasury Department will be issuing further guidance on what will be considered allowable administrative fees.  Currently, we believe that many of the typical fund expenses not covered by the management fee will be covered under administrative expenses. Still, the final determination will be up to the Treasury Department.
      
      

7. Does VEDA expect / require / prefer any role in the governance of the Fund Manager or in the SSCBI Fund Investment Decision Process?  If so, how? VEDA will not have a role in the investment decision process. Governance may depend on the structure of the fund but will likely be limited to compliance and reporting requirements.
   
   

8. Is investing into a current portfolio company in another non-SSBCI Fund managed by the Fund Manager permissible under the SSBCI guidance?  The insider conflict of interest exceptions are somewhat unclear. Our current understanding would lead us to believe that this situation is not permitted. Further guidance from the Treasury Department would be necessary to fully understand.
   
   

9. What is the timeline or final date for Fund Management Contract completion for the selected Manager(s)?  Contracts will need to be fully executed within 90 days of VEDA signing the approved allocation agreement with the Treasury Department.
   
   

10. Does VEDA prefer / require operational capital reserves by the Fund Manager to be committed too in the proposal in the event this SSBCI program must be subsidized by the Fund Manager given the limiting 1.71% fee structure?

     As an example, there does not appear to be clear / consistent guidance from the Treasury on IF the mgmt fee applies to the "as drawn down" portion of capital or the total committed capital. 

    Unfortunately, we are still waiting on more specific guidance from the Treasury Department and cannot answer this question.
    
    

11. During this submission and proposal review period, Are Fund Manager applicants prohibited under the RFP rules for no contact from fulfilling existing statutory and/or contractual reporting obligations to individuals and officers at VEDA and the Agency of Commerce?  The fulfillment of any current statutory or contractual obligations is permitted.