Program Offers $200 Million to Small Texas Firms

This article from The Chamber Report announced that $200 million will become available to small Texas businesses through the CAPCO program.  The Chamber’s Technology Business Council strongly believe it will increase business successes in Texas:

When the 78th Legislature passed legislation authorizing state-certified venture capital companies, a.k.a. CAPCOs, the Chamber’s Technology Business Council (TBC) applauded.

The TBC has supported funding for all stages of business development, particularly early investment funding for companies in North Texas. The council and the regional life sciences alliance, BioDFW, host a monthly breakfast series on technology issues. Stonehenge Capital Company LLC and Advantage Capital Partners discussed the Texas CAPCO Program at the BioDFW Breakfast Series in October. Both investment firms will be CAPCO investors in 2005.

CAPCOs are state-regulated, privately owned venture capital entities that invest funds in small and emerging businesses located in Texas. The program will make $200 million of venture capital available for small Texas businesses. The investors in a CAPCO receive economic development tax credits. CAPCO rules should go into effect this month, with the first investments beginning at that time.

To receive an investment from a CAPCO, a business:

  • Must be headquartered in Texas with its principal business operations located within the state;
  • Must employ fewer than 100 people with at least 80% located in state and must pay 80% of its payroll in state;
  • Must be primarily engaged in manufacturing, processing, assembling products; research and development and services; and
  • Must not be primarily engaged in retail sales, real estate development, insurance, banking or lending, or the professional services provided by accountants, physicians or attorneys.

Traditional venture capitalists usually make their investments in later-stage, lower-risk companies, leaving open the need for early-stage investments. Every CAPCO must put at least 50% of the capital it invests in the first five years in early-stage businesses, and 30% in the first five years in strategic investment businesses.

CAPCOs target investment in companies that are unable to receive traditional bank financing. The TBC’s capital formation committee believes that the early-stage funding needed on the development side of R&D has not been as easily accessible to entrepreneurs, and that programs like the Texas CAPCO Program will increase successes in North Texas.

To find out more about the Texas CAPCO Program, please contact the Chamber’s Technology Business Council at 214-712-1921 or techcouncil@dallaschamber.org; or visit www.texascapital.org or www.sos.state.tx.us/texreg/index.shtml.

 

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