Innovative Venture Capital Program to Bring Millions of Dollars to Rural Missouri; CAPCO Program

The Certified Capital Company (CAPCO) Program helps bring prosperity to the agricultural business in rural Missouri:

The Certified Capital Company (CAPCO) program, a highly successful economic development initiative aimed at creating jobs and fueling entrepreneurial activity in Missouri, could bring $25 million in venture capital funding to the state’s rural and agricultural communities. The program was first adopted in 1997 and is up for renewal in the state legislature.

Senator Joe Maxwell, (D – Mexico), joined by Senator Franc Flotron (R-St. Louis), Representative Catherine Hanaway (R-St. Louis) and Representative May Scheve (D-Affton), has introduced legislation this year to expand the CAPCO program for an additional $10 million dollars a year for ten years. As part of the deal, $25 million of the bill’s total $100 million would be designated for Missouri rural, agricultural businesses.

“The agriculture industry is looking for ways to jump-start activity,” said Sen. Maxwell. “The CAPCO program has a proven track record and will be a great help to the farmers and agriculture-related businesses of the state.”

The CAPCO program allows the state to offer tax credits to insurance companies that invest in local venture capital firms. These venture firms (CAPCOs), accordingly, must invest in early-stage businesses headquartered within the state. These businesses often represent the highest growth opportunities.

A research report from the IC2 Institute of the University of Texas recently concluded that Missouri’s CAPCO program has created more than 1,600 jobs across the state and attracted $540 million dollars of investment for early-stage companies. Dr. James Jarrett, senior research scientist at the IC2 institute says the CAPCO program is benefiting Missouri’s economy now and shows every indication of proving even more beneficial in the future.

Rep. Scheve, a co-sponsor of the 1996 CAPCO legislation, has watched the program benefit companies for the past three years. “Missouri business owners are starting to get the help they desperately need,” she said. “Our state is positioned to become a focal point for entrepreneurial activity and the CAPCO program is providing the critical resource of capital necessary for high growth companies.”

The CAPCO program has raised $100 million dollars since 1997, with an additional $40 million specifically targeted to “distressed” communities. Rep. Scheve says the capital invested is not only going to directly support the entrepreneurs, but it has attracted more than ten times the initial amount in follow-on capital, often from outside of the state.

“Birch telecom, a competitive local exchange carrier, secured a $2 million dollar CAPCO investment in November of 1997 and has since attracted commitments of more than $260 million in follow-on investment,” Scheve said. “They have gone from 13, employees less than three years to over 950 today. This is a company that likely would have failed but for the availability of CAPCO funds.”

The Rural Entrepreneurship Initiative, an effort of the Partners for Rural America, Inc. (PRA) and the National Rural Development Partnership (NRDP) is also in favor of the CAPCO program. The Initiative is funded through a grant from the Ewing Marion Kauffman Foundation to the PRA and strives to build stronger rural development strategies that support entrepreneurship opportunities.

“The CAPCO program is a critical piece of legislation that will help create jobs and drive entrepreneurship in rural parts of Missouri,” said Cheryl Zimny of Marshall, Mo., Community Service Development Coordinator for the Missouri Valley Human Resource Community Action Agency and representative of the Missouri Rural Entrepreneurship Initiative. “Given the success that this program has already had, we are confident that its renewal could significantly benefit additional individuals and businesses throughout Missouri, especially in the agricultural sector. For true economic development to occur, we must have a consistent state policy that is dedicated to targeting resources for the support of entrepreneurship in these areas.”

David Bergmann, co-founder of Advantage Capital and participant in the CAPCO program, has seen the business climate change around the state of Missouri.

“The entrepreneurs of Missouri have extraordinary business ideas and the talent to make them happen. Layoffs and downsizing at some of Missouri’s traditionally largest employers have injected talented and motivated people into the entrepreneurial community. The last piece necessary to keep them in Missouri and make them successful is the availability of capital.”

The CAPCO program (SB 867&552) has passed the Missouri Senate and will be heard in the House Commerce Committee this week.

 

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