Oregon Business Plan - Capital Issues Benchmarking States Finance Tools

March 2010John Wahrgren

Finance Tools Summary

Earlier-Stage

• Pre-seed Grants & Loans (royalty- forgivable)

• Direct Equity Seed/Venture Capital

• Fund-of-Funds Venture

• Tax Credit Incentives (R&D/Angel Investor)

• Metrics

Later-Stage• Revolving Loans• Loan Credit-

enhancements• Industrial

Development Revenue Bonds

• Tax Credit Incentives (Income/Property)

• Metrics

Note: Most states used public-private organizations as a means to deliver both earlier & later stage finance tools.

State Finance Tools Lifecycle-Stage Continuum

TIME

Phase 0 Fund/Proof of Concept grants/Partner Connections

Grants /Loans - royalty payback

Angel Tax Incentive

Commercialization Competitions

State Venture Funds & Guarantees/Recruitment Incentives

State Loan & Loan Enhancement Funds

Angel/Grants Venture CapitalFriends/Family/Founders/Corporate Investors Equity Markets/Banks

Potential profitability

Business not fully

established

“Comparable State” Selection Process

• 30* of 50 states are identified for comparable, best-practice /leadership potential.

• “State” includes finance tools provided by a public and/or public-private organization.

*Smaller Pop.: AZ/CO/CT/IN/IA/KS/KY/LA/MD/MA/MN/OK/OR/ SC/TN/UT/VA/WA/WI.

Larger Pop.: CA/FL/GA/IL/MI/NJ/NY/NC/OH/PA/TX.

Other: ME/NM.

Early-Stage Tools Summary

• All 30 states offer some type of early-stage funds (grants, loans and/or equity).

• A few states provide direct equity, although more offer fund-of-funds venture.

• R&D tax credits (93% of states).

• Many offer Angel tax credits (63% of states).

Later-Stage Tools Summary

• Most states offer tax incentives, and most provide revolving loans.

• All states offer IDBs, and all offer Brownfield reuse funds (tax credits- 37%).

• State (non-federal) funded NMTCs growing (20%).

• Loan credit enhancement (60%).

• Microenterprise loans (50%).

• Capital Access Program (30%).

State Finance Tools Lifecycle-Stage Continuum

TIME

Phase 0 Fund/Proof of Concept grants/Partner Connections

Grants /Loans - royalty payback

Angel Tax Incentive

Commercialization Competitions

State Venture Funds & Guarantees/Recruitment Incentives

State Loan & Loan Enhancement Funds

Angel/Grants Venture CapitalFriends/Family/Founders/Corporate Investors Equity Markets/Banks

Potential profitability

Business not fully

established

Policy Considerations: Early-Stage

• Increase outreach/marketing and state match amounts of SBIR/STTR grants.

• Encourage pre-seed/start-up gap funding: foundation grants, loans with royalty payback, corporate partners, and increase early-stage Angel investor incentives.

• Encourage networking – Angel/Venture.

Policy Considerations: Early-Stage (continued)

• Expand Fund-of-Funds venture with state guarantee.

• Dedicate innovation funds.

• Provide direct equity investment.

Program Delivery Methods:• Quasi-public

organizational structure.• Communicate early-

stage policies & metrics.

Policy Considerations: Later-Stage

Existing tools:• Retain tax credit incentives (e.g.

BETC, SIP, Enterprise Zones).• Recapitalize current tools (e.g.

OBDF).• Reinforce bond policy (e.g. IDB).New Tools:• State New Markets Tax Credit.• New credit enhancement tools

(e.g. Deposit Loan Program).• Brownfield-reuse tools (e.g.

Credits).

Questions?

Next Steps:• Develop priority

actions and funding strategy.

• Design & implement metrics for all finance tools.

• Evaluate public-private structure and potential implementation barriers.

You Are Invited! Portland Hilton - May 11-13,

2010