The national economic downturn that occurred in 2008 has made it difficult for new companies to sell stock to the public and has reduced the number of mergers and acquisitions.
"Those are the normal exit strategies that growing venture capital companies use," Warner said. "These strategies are not as widely available as they were 10 or 15 years ago, and that's had a big impact."
The original idea was for profits generated by the state's investments to be reinvested in other ventures so the state would have a perpetual venture capital fund.
The money the Enterprise Advancement Corp. received from the Investment Management Board was in the form of a loan with a 3 percent interest rate. However, there is no requirement that money invested in deals that go bad must be repaid.
According to the auditor's report, the program has a current value of $7 million, down from $8.6 million a year ago.
The audit report does not list the venture capital funds that received state money.
However, it was previously reported that the funds include Anthem Capital Limited Partnership of Baltimore; Toucan Capital Fund II Limited Partnership of Bethesda, Md.; Adena Ventures Limited Partnership of Athens, Ohio; Mountaineer Capital Limited Partnership of Charleston; Novitas Limited Partnership of Wayne, Pa.; Walker Investment Fund Limited Partnership of Glenwood, Md.; and Innova of Fairmont, an affiliate of the West Virginia High Technology Consortium.
The funds in turn invested in portfolios of high-risk start-up companies. The audit report does not list those companies.
The audit report said, "Due to the absence of readily ascertainable market values and the inherent uncertainty of valuation of venture capital investments," the current reported $7 million value of the program's assets "may differ significantly from the value that would have been used had a ready market for the investment existed, and the difference could be material."
Contact writer George Hohmann at busin...@dailymail.com or 304-348-4836.