The state Public Employees’ Retirement Association has established a venture fund that plans to pump up to $50 million into a dozen or so Colorado businesses over the next five years.

But startups, apparently regardless of how promising, shouldn’t get their hopes up. PERA’s mostly interested in companies that have already shown a profit.

“Over time, the amount of money available for … emerging entrepreneurs and management teams has diminished in Colorado, and PERA saw the mutual benefit providing much-needed capital for Colorado’s business community,” said Tim Moore, PERA’s director of Alternative Investments.

The new fund has drawn criticism from some who believe PERA should take more risk by investing in startups.

“The reason why I’m frustrated with it is it’s not (addressing) the big funding gap we have in Colorado,” said Tim Reeser, a partner in VC firm Aravaipa Ventures in Boulder. “Most companies who are profitable aren’t at risk of immediately going out of business.”

“They aren’t in a spot where it’s make-or-break,” added Reeser, who is also president and co-founder of Lightning Hybrids Inc. in Loveland.

Reeser welcomes any new money that could potentially fund Northern Colorado businesses, but he would like to see PERA take more risk to help solve the state’s venture-capital shortage.

“I don’t think they should get a great PR hit for not really taking any risk,” he said of PERA.

Venture capital in Colorado has dwindled in the past decade or so. The industry pumped $4.1 billion into Colorado companies in 2000; VC investments in the state amounted to just $610.6 million last year, according to PricewaterhouseCoopers, which tracks these sort of investments.

James Linfield, an attorney at the Broomfield office of Cooley who represents clients in venture financings, pointed out that Colorado is not alone in its venture-capital struggles: the industry has suffered nationwide. Even so, the state still lacks the sort of large-scale institutional investors found in California, Massachusetts and New York that invest in fledgling companies.

Colorado companies have seen success attracting venture capital from outside the state, but additional local support would help, said Linfield, who is chair of the governor’s venture-capital advisory committee.

“It would be nice to have other sources of early-stage capital” in Colorado, he said. “It doesn’t appear, at least at the moment, that’s a place where PERA wants to go.”

PERA responded by reiterating its commitment to funding established companies that are ready for the next phase of growth.

“PERA believes the best opportunity for success for this effort is in the growth-capital area with a financial sponsor investing alongside our capital,” PERA spokeswoman Katie Kaufmanis said.

Such a “sponsor” could be another venture fund or private equity firm.

PERA will not play favorites when it comes to industry – any company headquartered or doing business here will have a chance to qualify, she said.

In any case, $50 million isn’t really that much considering PERA is the 21st largest public pension plan in the nation with more than $40 billion in assets.

Aside from its new fund, PERA already invests about 9 percent, or $3.5 billion, into private companies that are viewed as growing.

Those investments pose a greater risk than the majority of PERA’s investments, but they also have reaped a higher return over the years, Kaufmanis said.

Between 1982 and 2011, these kinds of investments have yielded a more than 10-percent return, she said.

It will be difficult, however, to know which companies PERA ends up investing in via its new fund.

PERA will use its annual report to share how much it invested in any given year as well as any returns earned. But it won’t name the private companies in which it invests.

It will invest an average of about $4 million in each of the companies.

PERA has hired Credit Suisse Asset Management to manage its new fund.

PERA offers retirement and other benefits to nearly 500,000 current and former employees of more than 500 government and public entities in Colorado.