States Ramping Up Investment in Start-Ups

The DC CAPCO Program continues to be successful in creating more jobs in the district:

Officials in Maryland and Virginia are increasingly taking on the role of a financial investor in their economic development efforts, deploying millions in taxpayer dollars to up-and-coming companies that they hope will create jobs.

It’s a strategy that is both full of potential and fraught with risk.

The District has also taken steps to help foster its start-up community, though it has been less aggressive than its neighbors in providing investment capital.

Their efforts address a perennial need in the start-up community for capital that can propel business ideas into viable companies. That’s particularly true of firms in industries that often require a lot of cash to get off the ground, such as technology and life sciences.

For investors, however, there’s always a gamble. The return on investment could be big if the company finds success. But many new ventures fail to achieve their full potential or fold altogether, which in turn results in a loss.

The District

The District has made its own efforts to spur growth in its budding tech sector as young entrepreneurs look to establish companies in the city. But current regulations limit economic developers’ ability to make direct investments.

“There does not appear to be any law that enables us to invest directly into VCs or even companies,” said Jenifer Boss, a senior business development representative in the office of the deputy mayor for planning and economic development.

The city’s main investment vehicle to date has been the Certified Capital Company Program, known as CAPCO. The program was created in 2003 and is run through the department of insurance, securities and banking.

The program raised $50 million through the sale of tax credits to insurance companies, then divided the money among three venture capital firms to invest in District-based companies by 2013.

Read the full article from the Washington Post.