Tango negotiating to manage new state venture capital fund

BOULDER ? A private investment company in Boulder is negotiating with the state to become the fund manager of the new Colorado Venture Capital Authority.

Tango Colorado LP, started in 1998 by Boston Chicken (now Boston Market) founder Scott Beck, would be in charge of $50 million in state tax credits, if chosen. The fund manager for the state?s venture capital authority would be in charge of investing the money into Colorado-based early-stage businesses. A concentration of the money would go to firms in rural and urban distressed areas.

Tango competed against four finalists to gain negotiating rights for the fund manager position. The state could hire Tango or it could choose to open negotiations with one of the other three firms ? Lafayette-based CVM Equity Funds LLC, Colorado Springs-based Spruce General LLC or Waveland Colorado, which is based in Milwaukee but has an office in Denver. A decision is expected during the next month or two.

?Tango?s overall submittal was the most competitive in terms of the bids,? said Alice Kotrlik, the director of business finance for the Colorado Office of Economic Development. She said the four vying firms gave written and oral presentations, and the state considered historic financial returns and the quality of business plans.

Since its start in 1998, Tango has invested in about 15 companies. It concentrates on the retail, life sciences and financial sectors. In January, Tango took part in a multiple-company $6.35 million equity financing deal for Boulder-based IZZE Beverage Co.

?The perspective investment (of Colorado Venture Capital Authority) is similar to the investments we?ve already made, so it?s sort of a logical extension,? said Jerome Contro, a partner at Tango.

The possibility of becoming the manager of the Colorado Venture Capital Authority would push Tango into a role of increased public limelight. For seven years, the private equity firm has tried to stay in the shadows, not even posting a Web site.

?We?re different from a venture capital firm because we don?t raise outside capital,? Contro said. All of Tango?s invested money comes from within the company.

Because things would be different for Tango at the Colorado Venture Capital Authority, the company would create a separate entity to manage the fund, if chosen.

The state currently is auctioning $50 million in tax credits to Colorado insurance companies in order to finance the fund. A maximum of $5 million of tax credits is available for each year from 2005 to 2015. At a minimum bid of 80 cents for every dollar?s worth of tax credit, the participating insurance companies will vie for the discounted tax credits that they can later use when paying taxes to the state. Kotrlik said the insurance company bids are in, and the state is reviewing them.

If selected as fund manager, Contro said Tango would likely invest the money in the sectors of life sciences, information technology and retail. These sector investments would be concentrated in the state?s prescribed areas of small early-stage firms, mostly within rural and urban distressed areas.

State lawmakers created the Colorado Venture Capital Authority this past year to replace the former CAPCO, or Certified Capital Company Act, program.

Kotrlik said the new state program attempts to change many of the shortfalls of CAPCO in areas of funding, money distribution and returned profits to the state. Under the Colorado Venture Capital Authority, any money from profitable investments will be returned to the state and then split between the state and the fund manager.

Contact David Clucas at (303) 440-4950 or e-mail dclucas@bcbr.com