State of Maryland Creates Gap Investment Fund
Managing the financing of a company in its growth stages can be challenging, especially in that gap period between when it receives seed funding and when it’s large enough to attract venture capital. Fortunately, the state of Maryland announced $1 million in new economic development funds that will provide technology companies with investment capital specifically for that gap between seed funding and venture capital investments. The fund aims to spur economic development and it encourages companies to remain in the state. The Gap Investment Fund program is part of Governor Hogan’s Fiscal Year 2018 budget and is being developed and administered by TEDCO. The fund will be available on July 1 of this year.
According to TEDCO’s press release, the state’s current Seed Investment programs support approximately 50 companies per year – creating a funnel of companies that serve as a source of deal flow for the new Gap Investment Fund initiative. A Seed Investment of $100,000 can support a project that advances a technology toward commercialization. TEDCO’s later-stage fund, the Maryland Venture Fund, and other venture capital funds support companies further along in their development – often with significant revenues and complete management teams – that are raising investment rounds of more than $2 million. This established structure leaves a significant funding gap between the state’s seed investments and the investments made by institutional investors, such as venture capitalists.
In outlining the goals for the Fund, Newt Fowler, TEDCO Board Chair and business transactions partner of Womble Carlyle, LLP said in the TEDCO press release, “To help ensure that companies started in Maryland stay in Maryland, resources were needed to address the financing needs of growing companies, especially those that had already received investment through one of the State’s seed investment programs but are still vulnerable to leaving the State to receive their next round of funding. The Governor has provided a critical tool for building one of the nation’s leading technology clusters and TEDCO, which sees many of these companies at the seed investment stage, is well-equipped to administer the funding.”
TEDCO is seeking innovative, technology-based, and highly-scalable companies that are likely to be ready for a venture investment 12-18 months following a Gap Investment. Competition for the limited Gap Investment Funds is anticipated to be strong, so the selection process will be very competitive. TEDCO anticipates making two investments in its first 12 months, but hopes to have the ability to make up to 10 investments in subsequent years.
Source
http://tedco.md/press/tedco-announces-new-gap-funding-for-startup-companies/