State Of New Yorks Proven CAPCO Program Gets $60 Million Boost For Small Businesses

The CAPCO program in New York received additional funds:

Reaffirming the strong economic performance of New Yorks Certified Capital Company (CAPCO) program, state lawmakers recently authorized an additional $60 million in tax credits to provide investment stimulus to small businesses across the state.

The renewal of the CAPCO program, the fourth authorization by the New York State Legislature, brings to $340 million the amount of funds authorized by the State of New York.

“When I first proposed the CAPCO program in 1997, it was done to provide badly needed venture capital in our state,” said New York Assembly Speaker Sheldon Silver. “With this latest round of CAPCO investments, we hope to attract a greater interest in early stage venture capital involvement. The CAPCO program is critical not only to developing the highly sought-after, next generation of high tech companies and the employment opportunities they would bring to New York, but also to ensuring the success of our home-grown small businesses and to building a strong and healthy state economy.”

Those insights are shared by New York Senate Majority Leader Joseph L. Bruno.

“Its imperative that we make a significant investment in our economy to create jobs, especially in the fast developing fields such as high-tech and biotechnology,” Bruno said in a news release. “Legislative initiatives and job creation programs such as CAPCO are major highlights of the new budget.”

The legislative action comes on the heels of a recent report by the Growth Capital Alliance that shows prior CAPCO stimulus programs have created more than 1,100 new jobs in the State of New York and have generated more than $500 million in direct and indirect investment. The GCA reported in May that CAPCOs in New York have directly invested $150 million in 117 companies located in 21 counties across the state. An additional $350 million of investment has been attracted by those investments—a ratio of $2.50 in outside, private investment for every $1 in CAPCO investment.

“The positive reinforcement of the CAPCO program in New York is a national signal that this form of venture capital financing has proven itself successful time and again,” said Paul Zemitzsch, a spokesman for the Growth Capital Alliance, a nationwide information resource of venture capital investment. “Leaders in New York know the CAPCO program is essential for economic growth and they continue to show their confidence in the benefits for small business.

New Yorks CAPCO program began seven years ago, using a tax credit incentive to increase investment in New York States venture capital markets. Insurance companies operating in the state can earn tax credits by making investments in small companies that frequently have difficulty accessing traditional funding sources. CAPCO funds are targeted specifically at economic development zones, called Empire Zones, and underserved areas of the state where there is less venture capital available.

Companies receiving investment from New Yorks five CAPCO firms reflect a variety of industries, with technology companies accounting for nearly half. Services and manufacturing firms were the next most common entities, followed by financial and life sciences companies.

Zemitzsch noted that the 2004 CAPCO program contains a number of enhancements to ensure the state is getting a good return on its investment.

The new program requires that half of all early stage investments be made in start-up companies, and an “overlay” that requires half of all investment be in emerging technology companies, that operate in high-tech or the life sciences. Those targeted emerging technology companies must spend at least six percent of their revenue on research and development to attract CAPCO funding.

“CAPCO investments are intended to help those companies that need it most and show promise for the state economy,” said Scott Murphy of Advantage Capital Partners, one of the participating CAPCOs in New York.

Among the CAPCO firms operating in the State of New York are: Advantage Capital Partners, Enhanced Capital Partners, the New York Small Business Venture Fund, Stonehenge Capital and Wilshire Advisors.

In aggregate over the past 15 years, more than $3.5 billion has been invested through CAPCO programs nationwide in more than 300 small businesses that have created more than 13,000 direct and indirect jobs.

The GCA was formed to specifically help small businesses address the issues of capital formation and governmental regulation that may affect their ability to raise funds. It works with legislative, executive and regulatory branches of government to provide accurate and up-to-date information about these topics. The GCA is supported by venture capital firms that participate in the CAPCO program and the SBIC program.

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