Capital

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Crowdfunding Grows Up

Ways to raise early stage capital has finally caught up to the innovation demonstrated by the companies that are trying to raise the money. In case you missed it, equity crowdfunding got the thumbs up from the SEC in the middle of last year. So if you’re looking for ways to bring in more investment dollars in the new year, equity fundraising may be the path for you.

Most of you have probably heard of the JOBS Act (Jumpstart Our Business Startups Act) that was signed into law by former President Barack Obama in 2012. The goal of the legislation was to help small businesses access capital quicker and easier. Part of that legislation was Title 3 that provides an exemption from registration certain crowdfunding transactions. In 2015, the new rules stated that eligible companies will be allowed to raise capital using Regulation Crowdfunding starting on May 16, 2015. In an interview with Entrepreneur, Ellen Grady, an attorney and corporate governance specialist at the law firm Cozen O’Connor said, “For the first time, anyone can become an investor in a business and be able to share in its profits and growth regardless of income, net worth, or level of financial sophistication, and this will open up a new source of potential financing for entrepreneurs, which could be a game changer.”

In general, equity crowdfunding works much like rewards-based crowdfunding where you choose a crowdfunding portal, create an online profile, and submit a funding campaign for approval. Rather than giving investors a preview sample of a new product in return for their investment, however, you are required to give people stock or pay them a percentage of sales for a certain amount of time. The process of raising funds this way means that you will have to find an equity crowdfunding site to facilitate these types of transactions. Some sites charge a subscription fee while others get a percentage of the total amount raised. As part of setting up a profile page, companies have to show how they plan to use the money along with other information like the minimum amount of investment that it will accept and the offering terms. Investment funds sit in escrow until the investment closes, and each investor pays a processing fee. After the investment period has closed, the company is required to routinely share information with their investors about how the business is doing. Popular equity crowdfunding sites include: bolstr, CircleUp, crowdfunder, EarlyShares, EquityNet, Fundable, localstake, onevest, and seedinvest.

If your company isn’t getting attention from VCs or angel investors, equity crowdfunding can be a quick way to raise funds provided that you have a viable product that people believe in and that you promote it effectively and to a wide audience. At the same time, the sheer speed and number of random investors, many of whom are inexperienced and looking to make their money back in multiples, can be a bit overwhelming. Though this type of fundraising is relatively new, the SEC has set up a framework and laid the ground rules, some of which are listed below, for investing which startups should understand.

  • A company issuing securities in reliance on Regulation Crowdfunding (an “issuer”) is permitted to raise a maximum aggregate amount of $1 million in a 12-month period.
  • Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period.
  • Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period.
  • Certain companies are not eligible to use the Regulation Crowdfunding exemption including, among others, non-U.S. companies and companies currently Exchange Act reporting companies.

Analysts predict that equity crowdfunding will pour billions of dollars into early-stage startups which is good news for both the companies and the people who invest in them. Early-stage investors will be able to have control over the companies that they invest with, which means they can buy a stake in products and services that have meaning to them. This may make it easier for startups to successfully promote their vision to investors on a more personal level. 

Sources:
Entrepreneur – bit.ly/2jJJUtW
Securities and Exchange Commission – bit.ly/2jier3o

Workforce Development

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How TechHire is Helping IT Employees and Employers

In March 2015, President Obama launched the TechHire initiative based on the idea of building a pipeline of tech talent to bring new jobs to local economies, facilitate business growth, and give local residents a pathway into the middle class. To build this pipeline, TechHire was established as a nationwide, community-based movement that helps underrepresented and overlooked job seekers start technology careers. Within this framework, TechHire addresses employers’ need for technology talent with emerging models for quickly training people with limited ingoing technology skills to be job-ready in months, not years. The initiative is powered by Opportunity@Work in partnership with the U.S. Department of Education.

Today, there are nearly 600,000 open IT jobs across all sectors—more than two-thirds of which are in fields outside the tech sector, such as manufacturing, financial services, and healthcare. These jobs pay one and a half times more than the average private-sector job, and training takes less than a year with emerging programs like “coding bootcamps,” free open data trainings, and online courses like the Department of Commerce’s Data Usability Project and massive open online courses (MOOCs) by the Federal government, academic institutions, non-profit organizations, and the private sector. Since its launch, TechHire communities across the country have piloted fast-track training programs designed to give people skills that are in high demand by employers. So far, over 4,000 people have been trained and connected to work opportunities with local employers, earning average salaries of well over median income.

The TechHire initiative began with 21 communities, and today it has grown to over 70 communities working with 1,500 employers on three key actions:

  • Opening recruiting and hiring pathways for people without traditional credentials who can demonstrate that they have the skills to succeed in a tech job regardless of where those skills were attained.
  • Recruiting, incubating, and expanding accelerated tech learning programs—such as high quality coding bootcamps and innovative online training—which enable interested, unexperienced students to rapidly gain tech skills.
  • Connecting people to jobs by investing in and working with organizations that can vouch for those who have the skills to do the job but who may lack the typical profile of education and experience.

Just last month two counties in Maryland joined the TechHire initiative including Carroll and Howard Counties. According to a White House press release:

Carroll County employers, training providers, and community organizations are uniting to train and employ more than 200 local tech workers by 2020. Led by Carroll Community College, the Carroll Technology Council, and the Mid-Atlantic Gigabit Innovation Collaboratory, Inc. (MAGIC), a broad group of partnering organizations will connect local participants in leading-edge tech training programs to a network of over 520 county employers.

Howard Community College and the Howard Tech Council will come together to train individuals for jobs in tech fields including computer science, information technology, cybersecurity, and computer forensics. Howard County’s TechHire initiative will leverage an apprenticeship model, whereby trainees can participate in on-the-job learning with the over 200 regional employers that participate in Howard Tech Council. By 2020, the Howard County TechHire initiative aims to train and place 800 individuals, with an emphasis on the long-term unemployed, minorities, and the military.

If you would like to learn more about the initiative and how you can find qualified talent in your area, visit www.techhire.org.

Sources:

https://www.whitehouse.gov/the-press-office/2016/03/09/fact-sheet-white-house-announces-doubling-techhire-communities-and-new

https://www.whitehouse.gov/the-press-office/2015/03/09/fact-sheet-president-obama-launches-new-techhire-initiative

Member Spotlight

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ComNet Communications

Maryland Tech Council (MTC) members work on all sides of technology, and this month we talked with Carl Lechner, Business Development Manager for ComNet Communications. ComNet has been a member of MTC for two years, and Carl serves as a lead member of the MTC Ambassador Committee.

Give us an overview of ComNet Communications.
We are a national contractor that focuses on the turnkey installation and integration of wired and wireless IT, Communications, Audio Visual and Security systems. When a company moves or expands, they will need to add phone and network capabilities, so we do the physical installation and integration of the various systems. We have an excellent reputation for working on complex projects with companies of all sizes.

ComNet is privately owned and has been in business for 32 years. Our Corporate headquarters is in Bethel, CT, not too far outside of New York City. Our Mid-Atlantic office is based in Frederick, MD and we have about 450 full time employees companywide. We also have offices in Dallas and Jacksonville, with teams of technicians in several other areas around the country.

What types of industries do you work with?

Our client base is very diverse. Some examples are new or renovated office buildings, schools, hospitals, retail, data centers, sports facilities, and life sciences companies. We’re comfortable in almost any space, both locally and nationally. Last year we performed a large project for Daytona Speedway, and we upgraded signage and other technologies for 750 McDonald’s locations. We’ve done work with MTC member, CRB. We installed their IT and communications wired and wireless systems. We work with the end-users directly and also through general contractors and systems integrators.

ComNet works with federal government agencies as well, correct?
We do. Typically, we work as a subcontractor partner to systems integrators that are more involved in the network gear (servers, etc.). We are the install component of the contract, or the feet on the ground if you will, and we serve in this capacity for large contractors.

What is ComNet’s differentiator in this market?
We have a trained staff of technicians ready to deploy across the country. In the remote areas where we don’t have permanent staff, we have vetted contractor partners that we use. This is a big advantage for us, and we want clients to call on us regardless of where their project is located. We have the ability to offer consistency in our installations across all geographies in the U.S.

Another differentiator is that we are vendor agnostic, and we can work that way because ComNet invests a lot of resources in training the technicians and engineers on a wide variety of products. Our IT staff has numerous certifications, which enables us to offer solutions that are right for the job. We have 16 engineers that are BISCI certified.

What is the best thing about your work?
We work with companies that are typically growing and expanding. Our goal is to build long-term relationships with companies and to help them to prosper and grow by being a trusted resource for the installation of their mission-critical wired and wireless technologies.

Are you seeing any trends in your industry?
There is a trend in downsizing office space because, for one reason, more people are telecommuting. Companies are also trending toward more open office spaces and fewer closed or walled offices. Collaboration spaces are also becoming very important in commercial buildings.

Wireless is also a big factor in technology implementations. Also, bandwidth and speed are increasing exponentially and thus fiber optics are becoming more in demand. Of course security and audio-visual systems are becoming more important and complex, so ComNet has invested heavily in developing these teams and service offerings as well. This isn’t just running wires and plugging them in, you need highly technical, experienced people to design, install, and integrate these systems.

Where can people get in touch with you?
They can email me at clechner@comnetcomm.com or call me at 202.748.1823.

Mentoring Services

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Venture Mentoring Services

Grow your Future with the Tech Council of Maryland Venture Mentoring Services Program (TCM VMS) 

The pathway to becoming an entrepreneur is often challenging. Through hands-on mentoring, TCM VMS’s mentee companies learn how to perfect their products and services, identify markets, build business organization and seek funding.

The ultimate goal of the TCM VMS program is to bring employment opportunities and capital to the area in the technology and life sciences fields by helping companies to grow faster.

The TCM VMS program is based on a team mentoring approach modeled after the highly-successful MIT Venture Mentoring Service, which has been implemented in more than 60 communities around the globe. 50 Mentors have gone through the TCM VMS training and are currently serving 14 Maryland-based startup companies.

The TCM VMS program is looking for startup companies in the technology and life sciences fields, led by an individual or individuals who work full-time on the business that are preparing to raise their first venture capital or institutional round of financing.

Potential Startup Companies whose applications are accepted will have the opportunity to present to potential mentors at a monthly meeting, after which the TCM VMS will facilitate matches with interested mentors. The TCM VMS will provide guidelines to support the startup of the relationship and assist in the ongoing management of the team mentoring meetings.

There is no fee to the startup company for the mentoring program.

Contact: The Tech Council of Maryland Venture Mentor Services is a program of the Tech Council of Maryland. For more information or to apply, contact Pam Lubel: plubel@techcouncilmd.com or apply online at http://www.techcouncilmd.com/tcm/pdf/application.pdf

Cost Savings

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Cost Savings Program

The Tech Council’s Cost Savings program delivers an excellent ROI, and we have the proof! 

TCM wants to remind you that your membership gives you the leverage of our entire industry’s financial clout to deliver to your company – as a FREE benefit – exclusive deep savings and premier services from leading suppliers! At no cost to you, sign up today and get a $25.00 gift card. 

Have you checked out the advantages of the cost savings program? Want to save money on office supplies or insurance? What about microscope systems or document sharing software? There is something for everyone. 

Nearly 3000 companies currently use the purchasing program and the discounted prices and value added features available to you are based on the total volume of the program. This program gives you the purchasing power of the largest companies in your industry. We have pooled the purchasing power of thousands of companies to benefit your company. Your exact savings will depend on which programs you use as well as other factors, such as product mix, frequency and volume of purchases, etc.

Each supplier knows the unique risks and challenges of our high-stakes industry. Each has been selected to give every company—your company—savings and services usually reserved for only the very largest enterprises.

Enrollment is quick and easy. For specifics on the savings and benefits available to you immediately, click here.

Workforce Development

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A Look at Employer Incentives from the State of Maryland

We’re still reveling in the holiday spirit, but tax season seems to sneak up quickly after the New Year. In an effort to retain employers, reduce the cost of doing business, and attract out-of-state companies, the State of Maryland offers various incentives for employers based on the types of employees they hire and where the business is located. Knowing that the State offers these  incentives may help with the beginning-of-the-year tax blues.

Disabled Access Tax Incentive
Small businesses are eligible for two tax incentives to help cover the cost of providing reasonable accommodations for employees or customers with disabilities, such as sign language interpreters, readers, materials in alternative format (such as Braille or large print), the purchase of adaptive equipment, the modification of existing equipment, or the removal of architectural barriers.

The tax credit is available to businesses that have either revenues of $1,000,000 or less or 30 or fewer full-time workers. The maximum amount of the credit is $5,000. The credit can be used to cover a variety of expenditures, including: The amount of the tax credit is equal to 50% of the eligible access expenditures in a year, up to a maximum of $5,000. There is no tax credit for the first $250 of expenditures.

Empowerment Zone Employment Credit
The Empowerment Zone Employment Credit is an incentive, for businesses located in an Empowerment Zone, to hire employees who live in the zone, earning a tax credit of up to $3,000 per eligible employee. Empowerment Zones are distressed urban and rural areas nationwide that are in need of revitalization. The Empowerment Zone Initiative brings communities together through public and private partnerships to create the investment necessary for economic development. The Federal government assists these targeted communities by providing tax incentives, grants, loans and technical assistance. To determine if your business is located in an EZ, visit the HUD website at http://arcg.is/2h6LoNs.

The Federal Bonding Program
The Federal Bonding Program is sponsored by the U.S. Department of Labor and serves as a tool to secure the job placement of ex-offenders and other high-risk applicants by issuing Fidelity bonds to businesses who offer jobs to workers in “at risk” groups. These bonds are business insurance policies that protect the employer in case of any loss of money or property due to employee dishonesty.

The bond is given to the employer free-of-charge, and serves as an incentive to the company to hire a job applicant who is an ex-offender or has some other risk factor in their personal background. The employer is then able to employ the worker without taking any risk of dishonesty on the job. It insures the employer for any type of stealing by theft, forgery, larceny, or embezzlement.

The initial Fidelity bond is issued for a six-month period. A total of $5,000 bond coverage is usually issued, with no deductible amount of liability for the employer. Larger bond amounts can possibly be issued if the certified agency issuing the bonds has acquired a special bond package and has determined that larger bond amounts are appropriate. A list of worker qualifications is available at http://bit.ly/2h3yYp4. 

Renewal Community Employment Credit
Similar to the Empowerment Zone Employment Credit, the Renewal Community Employment Credit allows companies located within a Renewal Community (RC) to earn a tax credit of up to $1,500 for each of their employees who lives in the community. Renewal Communities are distressed urban and rural areas nationwide that are in need of revitalization

The Renewal Community Employment Credit is an incentive to businesses that are located in a renewal community to hire and retain employees who also live in the RC. Businesses are eligible for a wage credit of up to $1,500 per eligible employee.

The credit is 15% of the qualified wages paid during a calendar year, up to $10,000 per employee. Both newly hired and current employees are eligible. The credit is renewable each year, and there is no limit to the number of employees a business can claim, as long as each employee lives in the RC. Both full-time and part-time employees may qualify. Learn more about Renewal Communities at http://bit.ly/2h71OrO.

Work Opportunity Tax Credit Program
The Work Opportunity Tax Credit (WOTC) is a federal income tax credit that can be claimed by employers who hire employees from one of nine targeted groups.

The WOTC can be as much as:

  • $2,400 for each new adult hire
  • $1,200 for each summer youth hire
  • $4,800 for each new disabled veteran hire
  • $9,000 for each new long-term Temporary Assistance for Needy Families (TANF) recipient hired over a 2-year period 

To learn more about incentives for Maryland-based employers, visit http://bit.ly/2gw2x6e

Source: http://bit.ly/2gw2x6e

Capital

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Finding Funding Locally

Sources of funding for businesses come in a variety of forms and from different government entities both locally and nationally. In our two previous articles we covered funding resources from the federal government (SBA) and from the State of Maryland. This month we’ll highlight programs on the local level that are offered by Montgomery County.

Montgomery County Economic Development Grant and Loan Program

Who is eligible? The County provides financial assistance to private employers who retain jobs or stimulate new job creation in Montgomery County. Priority is given to high tech companies, manufacturing companies, businesses located in urban revitalization areas, and private employers providing the greatest public benefits.

Amount: The typical amount ranges from $5,000 – $10,000 but higher amounts are possible for larger projects.

Priority: Priority is given to private employers who will create significant growth, significant capital investment in the County, will improve the County’s economic development strategies, and where it leverages existing state and private sector funding.

Montgomery County MOVE Program

Who is eligible? Businesses that are new to the County that lease up to 10,000 square feet of Class A or B office space. All industries, except retail and restaurants, and all leases up to 10,000 square feet are eligible.

Amount: $8/square feet

Requirement: Sign a minimum 3-year lease 

Montgomery County Small Business Revolving Loan Program

Who is eligible? Small businesses based in Montgomery County with gross revenues of less than $5,000,000 annually and fewer than 75 employees. Program funds must assist the expansion of the business or help retain and stabilize the business.

Amount: Ranges from $5,000 – $100,000 with maximum terms up to 5 years.

Criteria:
Program applicants will be rated on these elements:

  • Financial history (if applicable, including personal financial/credit history) and projections, including balance sheets, income statements, cash flow statements, and bank statements (if applicable)
  • Background, experience, and financial commitment of the company principal(s) and key management personnel
  • Statement of the amount, timing, and projected use of the County’s assistance and any co-venture capital
  • Projected employment growth, and/or other positive economic impacts that the County’s assistance will facilitate
  • Ability of the recipient business to generate sufficient income to service the requested loan

Priority will be given to:

  • Assistance that will materially improve the County’s economy and advance the County’s economic development objectives and strategies
  • Cases where the County’s assistance will function as a catalyst to the company’s subsequent capitalization
  • Cases where the business will create significant employment growth by creating new jobs within 3 to 5 years of funding
  • Businesses for whom private/bank financing is not available at the time of application

Commercial Lending

Montgomery County contributes funds into community banks that have agreed to focus on lending to small businesses in the County. Banks that participate with the County are listed below.

  • Capital Bank
  • Congressional Bank
  • Eagle Bank
  • Wells Fargo Woman/Diverse Business Owner Programs

In addition to funding resources, the County also offers business advice, licenses/permits, and a variety of services at the Montgomery County Business Portal at http://bit.ly/2gCTTP6.

Source: Montgomery County Business Portal – http://bit.ly/2gCTTP6

Government Relations

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Legislature Evaluates
Maryland Job Creation Tax Credit

Since 2012, Maryland has established 14 tax credits with eight of those primarily for businesses. Since then, each enacted tax credit is required to be formally evaluated by the Department of Legislative Services (DLS) and that evaluation is to be reviewed by a special legislative committee. This year, the Job Creation Tax Credit is the subject of this process. In 2018, the process is required to evaluate and review the Research and Development Tax Credit and the Biotechnology Tax Credit. The Cyber Security Investment Incentive will be the subject of the process in 2019.

Since its inception in 2002, the Job Creation Tax Credit has been claimed by 101 businesses who reported creating 17,692 jobs. The tax credits to those businesses totaled an estimated 21.8 million dollars.

To be eligible, a business must be involved in certain industries. Biotechnology, research, development and testing, and information technology are among those business sectors eligible for the credit.

The DLS evaluation found that the Job Creation Tax Credit provides a modest incentive to large businesses but it overlaps with other State employment tax credits. Small businesses are at a disadvantage in trying to use the credit because of its requirement to create at least 30 jobs within two years. Also, the requirement to have a certification from a CPA can be too costly.

The significant recommendation from the DLS evaluation is that the Maryland General Assembly consider consolidating the credit with other employment based credits and lower the job creation requirement to make the credit more broad based.

TCM anticipates legislation to change the eligibility of this tax credit and others during the upcoming 2017 legislative session. Any proposals in this area will be discussed by the Legislative Committee during their regular conference calls starting in January.

Member Spotlight

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Noble Life Sciences

The Tech Council recently visited with Srujana Cherukuri, Sr. Vice President and Chief Operations Officer, of Noble Life Sciences. The company was founded in Gaithersburg and currently operates the business at their location, which is nestled in a picturesque valley in Sykesville in Carroll County, Maryland.

What services does Noble Life Sciences offer?

We provide integrated GLP and non-GLP preclinical services designed to accelerate development of drugs, vaccines, and medical devices. Our core services are disease and animal models in a wide range of mammalian species, toxicology, analytical and lab services, polyclonal antibody production, and drug evaluation services with significant expertise in the development of new drugs to treat cancer and infectious diseases.

Noble offers real-time, live animal imaging services with the IVIS Lumina series imager. This imaging tool is well suited for preclinical studies of new drugs to treat cancer and infectious diseases as well as cell and gene therapies. Our imaging capabilities also include a C-arm imaging scanner intensifier, radiography, computed tomography (CT), magnetic resonance imaging (MRI), and ultrasound.

Tell us about this location.  

Spring Valley Laboratories, founded in 1980, was headquartered at this location, at first providing animal housing and antibody production services. Eventually, the company’s services expanded to include GLP-compliant services and large animal testing capabilities. Because Spring Valley’s services and capabilities were complementary to Noble’s small animal testing capabilities and in vitro drug discovery expertise, Noble acquired Spring Valley Laboratories in 2014. In 2015, we consolidated operations at this site. The facility consists of 24,000 square feet of animal housing, support, and lab space on a 25-acre campus. The support space includes two surgical suites with recovery room and intensive care area; labs for clinical pathology, specimen analysis, and necropsy; and areas for test article storage and secure-access controlled archives.

noble-aerial-2

How is Noble different from other companies in this arena?

The key for us is to offer flexibility and competitive pricing to our clients backed by strong scientific experience. In addition, Noble provides high quality and customized services to our clients allowing our clients to participate in their studies. For example, a medical device company may want to use our animals and technicians but have their surgeon conduct the testing of their device. We provide the resources, but they conduct the study. We offer our clients a full range of options including assistance with study design and program development based on our scientific expertise and extensive experience in drug development and medical devices.

What type of support do you offer to startups?

We offer quite a few resources to startups. As anyone in a startup can tell you, it’s not always possible to hire a lot of people and the staff doesn’t always have the scientific expertise that’s needed to plan and conduct a study. So we walk them through the process and help them in preclinical program development. We also help companies with grant applications. For example, we can help them prepare a budget, develop an animal-use protocol, and provide them with a support letter.

Do you see any trends in CROs?

Partnering is popular now because many CROs do not provide a full range of services. For example, a CRO may have most of the capabilities needed to meet their clients’ needs but not have large animal capabilities or a surgical suite. In such a case, the CRO might partner with Noble to offer a more complete package of services. This is a good model for clients who want to have their study managed by one CRO and receive a single report.

What’s in the future for Noble?

We want to grow our business by offering our clients high quality, cost effective preclinical services. We will be increasing our sales and marketing presence as well as continuing to expand our technology platform to add more value to our clients.

We’re also excited about a new externship program that we developed with Johns Hopkins University and the National Institutes of Health. Through this program we offer full-time Ph.D. candidates non-academic experience for 6-12 months. After they are trained in our sales process, they spend 10 hours a week helping us to increase our client base by using their scientific background and their sales training. The externs benefit because they gain business development experience and can explore alternate career paths which they may pursue in the future.

Have you utilized any of the Tech Council’s benefits?

Absolutely, we’ve taken advantage of the VWR member discount program for years and see that as a big benefit.

Who can Tech Council members contact for more information?

They can contact me at my business number 410.795.2222 or my cell 301.642.7826 or at scherukuri@noblelifesci.com.

TCM Featured Highlight

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TCM Moves Convergence Forward in Maryland with Panel Discussion

There have been a lot of discussions recently about the convergence of life science, technology, and healthcare and its future in the state of Maryland. As an ecosystem, the consensus is that we could be doing a better job of bringing together these industries for the purpose of driving precision medicine and the companies and organizations that support it. To that end, the Tech Council hosted a panel discussion on November 3rd at the Institute for Bioscience & Biotechnology in Rockville. Several key opinion leaders from life science, technology, and healthcare gathered to discuss the opportunities and challenges of precision medicine and how Maryland can become a “top three” in terms of the convergence. The panel delivered key takeaways about data management access, best practices, patient representation, and the development of an asset map for our area.

We expect to form an advisory committee from the participants to continue to move the topic and discussion forward. The Tech Council would like to thank all of the participants and our sponsors, J.P. Morgan Private Bank, Schiff Hardin, Selnova, and iExecuVision.