MassVentures

This is a Massachusetts State Auditor performance audit of MassVentures, covering selected activities from July 1, 2012 through June 30, 2014.

“This report details the audit objectives, scope, methodology, findings, and recommendations for the audit period, July 1, 2012 through June 30, 2014.”

Auditors reviewed MassVentures because it invests public-backed resources in Massachusetts companies and reports whether those investments help create jobs.

“In this performance audit, we reviewed and assessed selected financial and management activities of MV, including the criteria it used in making venture-capital investments; its management of these investments to ensure an appropriate return; grant awards that it administered on behalf of other funding programs; and the collection, verification, and reporting of data regarding jobs created in Massachusetts as a result of its capital investments.”

MassVentures’ main public purpose is to help startup companies and increase employment in Massachusetts, so accurate job numbers matter for judging whether it is working.

“Chapter 497 of the Acts of 19781 established the Massachusetts Technology Development Corporation, now MassVentures (MV), as a quasi-public corporation to provide financial assistance to startup companies in Massachusetts, with the primary purpose of increasing employment in the state.”

For an ordinary resident, the key issue is whether a state-created investment organization can honestly show that its investments are creating Massachusetts jobs.

“The report shall contain the number of additional jobs created and the number of persons hired as a result of the activities of the corporation.”

The auditor’s bottom line was that MassVentures fixed one earlier problem by reporting only Massachusetts jobs, but it still needed better ways to collect, define, and verify job data.

“During our current audit, we determined that MV had implemented our prior audit recommendation to include only jobs created in Massachusetts in its reports to the Legislature.”

The auditor recommended that MassVentures require companies to submit job surveys, verify the job data, and clearly define what counts as a created job.

“MV should establish a process for verifying the jobs-created data that it receives from the companies in its investment portfolio.”

The finding is significant because job creation is a key measure of MassVentures’ success, and the auditor said the agency did not yet have a strong enough process to measure it accurately.

“As a result, MV lacks an effective process to accurately measure its overall effectiveness in creating jobs in Massachusetts, which calls into question the accuracy of the jobs-created information MV is reporting to the Legislature.”

In plain English, MassVentures is a state-created investment organization that puts money into technology startups, usually in exchange for stock or notes, and expects those companies to keep a meaningful presence in Massachusetts.

“In return for this funding, MV gets stock or notes from the company.”