SAN ANTONIO (AP) – Technology Fund has filed for bankruptcy, folding after the state cut off money that was tied to hitting milestones not in the original contract, the president of the startup said Thursday.

The bankruptcy filing raises the amount of failed investments by the state’s venture capital-like fund to $2.5 million. Although that’s a sliver of the tech fund’s total $192 million portfolio, this latest bankruptcy brought fresh criticism to a fund shadowed by questions over accountability and transparency.

NanoTailor Inc. President Ramon Perales said his Austin-based startup had been making progress. But he told The Associated Press that after NanoTailor received its first $250,000 award in 2010, the state took another $1 million in potential funding off the table when the company couldn’t hit new benchmarks the state now required to receive the full investment.

Perry spokeswoman Lucy Nashed said the state cut off an underperforming NanoTailor to protect taxpayers, adding that the company would have been required to sign off on any contract revisions.

“We were concerned about continuing to offer any further taxpayer dollars,” she said.

Perales would not elaborate on the new milestones he said the state set or how realistic they were, saying: “The fact of the matter is they added them for whatever reason.”

The company filed for Chapter 7 bankruptcy in May. The AP was the first to locate the filing while researching the fund’s recipients.

Perry’s office oversees the Emerging Technology Fund, which was created in 2005 to help launch tech start-ups in Texas by investing early-seed funding. The awards are not grants, because the state takes equity positions in each company, but the stakes are not made public. Nashed said there is still $60 million available for new projects

The high tech fund has drawn scrutiny from the right and left. Republican state Rep. David Simpson, who rode the tea party wave into the Legislature in 2010, said Thursday that $250,000 has now been wasted because the government went into the business of “picking winners and losers.”

The watchdog group Texans for Public Justice, which has been critical of Perry’s pot of dollars for businesses, said NanoTailor’s bankruptcy doesn’t help the fund’s track record.

“It is the nature of an emerging technology fund that there is going to be a certain amount of failure,” said Andrew Wheat, the group’s research director. “That is another question that could be better sorted out by our state officials: How much risk is too much risk?”

Perales said NanoTailor used licensed technology from NASA to make carbon nanotubes for industries ranging from aerospace to pharmaceuticals. He said the company had six employees and about 20 investors, but Nashed said filings with the state indicate the startup lagged in attracting outside dollars.

NanoTailor requested their next round of funding four months after being given the $250,000, Nashed said. The state told NanoTailor in January 2011 that the company had not made enough progress to receive more funding but that they were welcome to address those concerns and re-apply. NanoTailor never did, Nashed said.

NanoTailor stands out as among the smallest investments of the fund, which has given $192 million early-seed funding to more than 130 companies. Estimates put the fund’s worth at $4 million more than what the state has invested, Nashed said.

“There are protections in place to make sure that we are making the best use of these taxpayer dollars,” Nashed said.

The other two bankruptcies in the fund portfolio happened in 2010. Thrombovision Inc. was awarded $1.5 million, and StarVision Technologies received $750,000. A state auditor’s report in 2011 found that neither company had submitted required annual reports for three years, and that the fund managers didn’t even know that Thrombovision had filed for bankruptcy until it was reported in the press.

The auditor’s report went on to fault the fund for having a decision-making process that is “not open to the public” and for not keeping up with how awardees are performing and spending their money.

   (Copyright 2012 by The Associated Press.  All Rights Reserved.)