State Venture Capital Incentives Drive Success for Missouri Entrepreneurs

St. Louis Commerce Magazine reports that Advantage Capital Partners is contributing to the success of Missouri entrepreneurs through the CAPCO programs:

Among the valuable results of the annual InvestMidwest Venture Capital Forum is a wide range of partnerships, projects, exchange of ideas, information and opportunities among entrepreneurs, funding entities and public-sector economic development leaders.

Advantage Capital Partners, an InvestMidwest sponsor since the Forum’s inception, believes the current difficult state of the economy underscores the importance of public/private partnerships for states and communities that want to achieve aggressive economic development goals.

“Our firm’s success results from making investments that are sensible not only from a financial perspective, but also because they create jobs, spur growth and inspire entrepreneurial community spirit,” says Scott Zajac, a managing director of Advantage Capital Partners. The firm is headquartered in St. Louis and invests in entrepreneurial companies in communities across the United States through affiliated funds.

Over the past six years, Advantage Capital has used one of Missouri’s most innovative and effective economic development tools, the Certified Capital Company (CAPCO) tax credit program, to grow development-stage companies and create jobs in Missouri. The CAPCO program provides tax credits to encourage private sector investment in regulated venture capital firms, which in turn must invest the capital in qualified companies located in the state.

“Although returns for the CAPCO managers have suffered in the stock market collapse, Missouri is realizing tremendous benefits from the program,” Zajac says.

Companies funded by Advantage Capital through CAPCO dollars include:

* Stereotaxis, a medical device company that has developed an FDA-approved magnetic guidance system for medical instruments to precisely target sites in the human body. Stereotaxis has received more than $90 million of funding from Advantage Capital and its co-investors and recently closed an additional round of venture funding led by Ascension Health Ventures of approximately $16 million to fund a roll-out of its system to hospital sites worldwide.

* Birch Telecom, a competitive local exchange carrier (CLEC) in Kansas City, Mo., provides voice and data service to small- and mid-sized businesses in 10 states. When Advantage Capital made its initial investment in Birch, the company had 13 employees, zero customers and zero revenue. Now, pending its merger with Ionex Telecom, Birch has 1,100 employees, will serve more than 500,000 telephone lines and generate $350 million in annual revenues. Birch represents one of the greatest economic development success stories in the CAPCO program.

* SAVVIS provides virtual private network (VPN) and other Internet services to mid-sized/ Global 2000 companies via a data network spanning 110 cities in 45 countries. SAVVIS initially was funded by Gateway Associates (a CAPCO manager) and a group of local investors, then purchased by Bridge Information Systems and taken public through an IPO in 2000 at a market capitalization of more than $2 billion. In 2001, SAVVIS was recognized by Deloitte & Touche as one of the 10 fastest-growing technology companies in North America. SAVVIS currently has an annual revenue run-rate of more than $200 million and employs more than 700 people.

“Growing companies like these provides enormous economic development benefits through job creation and tax base expansion. Innovative government programs, such as CAPCO, encourage private sector investment without placing tax dollars at risk,” says Mark Lewis, partner, Gateway Associates. “The economic impact is huge,” Zajac adds. “A study by Dr. Donald Phares, a professor of economics at the University of Missouri-St. Louis, concludes Birch Telecom already has generated more than $27 million in new Missouri state and local tax revenues during its first four years of operations.”

 

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