CAPCO Programs

The DC CAPCO program has exceeded expectations and Advantage Capital Partners, Enhanced Capital Partners and Wilshire DC Partners continue to invest in start-up companies:

The District’s CAPCO program, a $50 million venture fund dedicated to Washington-based startup companies, has invested nearly $14 million in 11 companies since the program’s launch 18 months ago. While the program has far exceeded its initial goal of investing 20 percent by May 2007, it has only added one new company to the CAPCO portfolio in the last six months.

The city’s Certified Capital Co., or CAPCO, was started in May 2005 to bring a much-needed infusion of funding to D.C. companies, which often lose out in the race for capital to start-ups in Northern Virginia and Maryland. The CAPCO program — a program that exists in numerous states as a means of stimulating economic development — is funded through local insurance companies that provide the cash in exchange for tax breaks.

Most recently, CAPCO invested about $2 million in InsideHigherEd.com, a Web site that features free news and job postings for the higher education community, and ARC Solutions, an association-management software company. The rest of the more than $7 million that’s been invested in the last six months went to companies that had previously been funded through the program.

“About 80 percent of the deals that a venture fund does, they always reinvest along the way,” said Tom Davidson, director of Enhanced Capital Partners, one of three venture funds that is overseeing the program. “[Venture capitalists] usually reinvest along the entire life cycle.”

However, the program rules stipulate that none of the three venture firms, which also include Advantage Capital Partners and Wilshire D.C. Partners, can invest more than 15 percent of their share into any one company.

Davidson said he expects to invest in about five companies in 2007.

“This is definitely a different kind of program,” said Nick Manetto, a spokesman for the D.C. Coalition for Capital. “It’s not a grant program where you show up and fill out a form. This is a relationship-building program.”

The point of CAPCO was not to invest in a myriad of companies, those overseeing the program said. Instead, investors were charged with finding companies with the most potential to contribute to D.C.’s overall financial health.

“There are funds that exist right across the river that are 40 times the size of this entire program, so it is a very small amount of money in the greater scheme of the venture market,” said Davidson, who has reviewed hundreds of companies since the program started. “Our hope is that we can find the next generation of great companies in D.C.; that we can find them early enough in their life so that they stay in D.C. and grow in D.C.”

Venture Funds

The District’s CAPCO program’s three venture funds have invested nearly $14 million, or about 28 percent, since May 2005. The fund’s next goal is $20 million by November 2008.

» Enhanced Capital Partners

Total fund: $26.5 million

Investments:

InsideHigherEd Inc. (Web site for teaching community): $500,000
Create Hope (software company): $3.1 million
ARC Solutions Inc. (association management software company): $750,000
JLC New Hope Partners (real estate development): $750,000
Session Title Services (title processing company): $120,000
AV Smoot (construction outsourcing company): $50,000

» Advantage Capital Partners

Total fund: $11.2 million

Investments:

InsideHigherEd Inc.: $250,000
CreateHope Inc.: $1.15 million
AV Smoot: $200,000
GridPoint (energy management and alternative power company) : $600,000
ARC Solutions: $250,000

» Wilshire DC Partners

Total fund: $13.4 million

Investments:

Community Financial Services: $1.9 million
Newtek Insurance Agency: $1.9 million
ICM Productions/Mumin Productions (theater productions): $1.9 million
Rumba Tivoli (restaurant): $450,000

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