As necessitated by the long-term investment horizon of venture capital, NJEDA seeks to maintain active investment partnerships deploying capital across market cycles. As part of the Edison Innovation Fund, NJEDA has implemented guidelines to ensure that its venture capital investments consistently support the success of emerging technology companies in New Jersey. These guidelines set forth a strategy for staff to review and assess qualifications for venture capital fund commitments in a consistent and equitable manner.
Venture fund managers seeking NJEDA investment will apply through the online application. Applications will be assessed and scored using the guidelines outlined below:
- Quality of leadership: Consideration is given to senior leadership’s length of experience together as an institutional fund manager and investor, as well as, the relevance of experience to the targeted strategy.
- Depth of Resource: Consideration is given to the size and experience of additional team, as well as, the current staffing processes used in order to effectuate the strategy. Succession / continuity planning is considered.
- NJEDA Partnering: The prospective manager is assessed on its ability and willingness to serve as a strategic partner to NJEDA, support the Technology & Life Sciences ecosystem in New Jersey and locate in the State.
- Sourcing: The prospective manager is assessed on its ability to source and track relevant and non-traditional deal flow to maintain an advantage in effectuating the stated strategy, with particular emphasis on New Jersey.
- Strategic Focus: In order to align with NJEDA objectives, the target fund should be focused on early-stage companies with less than $3 million in trailing twelve month revenue prior to investment, diversified across technologies.
- Geographic Focus: The investment offering will be assessed according to the percentage of the total fund identified for investment in New Jersey and to the breadth of exposure within the State. Consideration may be given to funds with a regional or national approach, emphasizing investment in NJ.
- Consistency of Strategy: The manager’s history and degree of past success executing the targeted fund strategy is indicative of its understanding and ability to mitigate associated risks, particularly in an institutional fund structure.
- Performance History: Investment returns on individual funds are reviewed on an absolute basis and relative to peers. Returns across prior funds should be consistent. Volatility of returns within funds should be tolerable relative to the broader asset class. Consideration will be given to first time institutional managers based on individual principal track records.
- History Investing in New Jersey: The amount invested to date in New Jersey by the manager on an absolute basis and relative to peers will be considered in conjunction with the investment return on New Jersey -based companies and the ability to create jobs in the State.
- Fees and Expenses: The manager must represent a budget for the target fund and General Partner. Fees and expenses will be compared to peers and should be sufficient only to effectuate the stated strategy of the investment offering under consideration.
- Incentive and Alignment: Carry (performance incentive) as a percent of profit sharing between the LP and GP should be comparable to peers and properly aligned for the relative risk and reward of the targeted strategy. Within the firm, carry ownership should be equitably spread among the team with consideration for contribution to the success of strategy. The General Partner commitment should be personally meaningful and significant relative to the total fund size.
- Governance: Governance terms should sufficiently protect Limited Partners. NJEDA requires a seat on the Limited Partner advisory board for all investments in excess of $1,000,000.
- Fundraising Status: Stage of fundraising will be considered with respect to the manager’s ability to effectuate the strategy. Participation by other institutional Limited Partner’s in the fund offers an additional validation signal to NJEDA and helps effectuate the value-add.
- Diversity & Inclusion: Venture Capital Firm policies and past investment portfolio are considered to identify commitment to diversity and inclusion across the firm culture and the impact on investment strategy.
At all times, the potential for a limited partnership investment from NJEDA, is subject to the available resources for a 10-15 year fund life.