By James McNair
Enquirer staff writer

The Third Frontier Project aimed at deepening Ohio's high-tech landscape will receive a financial boost from a source already at hand: the state's worker's compensation fund.

The Ohio Bureau of Workers' Compensation said this week it would invest $30.5 million in seven venture capital firms interested in advanced technology companies.

With a $14 billion investment portfolio, boosting economic development efforts is a newer thrust.

"This will help Ohio become a marquee place for advanced technology companies to grow and thrive," said bureau Administrator James Conrad.

Two of the venture capital funds, Charter Life Sciences and Triathlon Medical Ventures, are in Cincinnati, while another, Early Stage Partners, is in Cleveland. The other four are in Michigan, Minnesota and Pennsylvania, but agreed to give a hard look at Ohio ventures in such fields as biotechnology, fuel cells, polymers and advanced materials.

"While we never would mandate a (fund) manager to do business with only companies in one region or state, we believe these seven firms will promote a proactive business climate in Ohio while developing, retaining and expanding the talent pool of Ohio workers," Conrad said.

The bureau is finalizing contracts and has not decided how it will allocate the $30.5 million to the seven funds, said spokesman Jeremy Jackson. No fund, however, will receive more than $5 million.

"This is part of our overall investment policy," Jackson said. "What it does is encourage venture capital funds to invest in companies in Ohio in industries that parallel the governor's Third Frontier initiative. We're going to encourage them to fund Ohio companies, but it's not a mandate that they only invest in Ohio companies."

About 60 percent of the $14 billion workers' compensation fund is invested in fixed-income securities. Of the rest, about $225 million, or roughly 1.6 percent, goes into venture capital funds that invest in private companies. The bureau reported a 15.7 percent return on its investments in 2003 and an average annual return of 4.79 percent over the last five years.

Gus Long, managing director of Fort Washington Capital Partners, the venture capital arm of Western & Southern Financial in Cincinnati, welcomed the news of the bureau's $30.5 million investment. A Fort Washington fund, the Tri-State Growth Capital Fund, has investment stakes in four of the seven funds, including the three in Ohio.

"I think it's a great thing to see the Bureau of Workers' Compensation support these funds," Long said. "I think the chances of them finding worthwhile deals in the state of Ohio is very high."

Long acknowledged the bureau's fiduciary duty of earning the best possible return.

"It would be wrong to say you have to put 100 percent of your capital into any one geographic regions, but there's a high probability they will make investments locally," he said.

Through one program or another, the Third Frontier Project has sunk $11.5 million into venture capital funds since 2000. All of those funds are based in Ohio.

E-mail jmcnair@enquirer.com