CAPCO Programs

Companies that took advantage of the Capital Tax Credit Program agree that the Louisiana CAPCO Program should be re-instated:

When business leaders gathered Monday to announce the creation of a venture capital fund to help entrepreneurs at the very earliest stages of business development, they took a small step toward filling a funding gap that has persisted in New Orleans and Louisiana for decades.

‘We’ve gone from being like Estonia to people saying maybe this is the next major hot spot,’ said Matthew Wisdom, who founded the technology company TurboSquid in 2000.

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Dennis Murphree of Murphree Venture Partners in Texas participated in the state’s CAPCO Program in 2002:

Venture capitalist Dennis Murphree has joined a small band of fund managers in the country who participate in a little-known but rapidly expanding program called CAPCO.

A handful of states have passed legislation to create programs called CAPCO, an acronym for certified capital companies. These programs spawn investment funds, some as large as $175 million, that are designed to spur economic development.

The program itself is complicated, but it wasn’t difficult for Murphree and his partners to decide they wanted to be involved.

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The CAPCO program, which has been proven successful in several states, was awaiting to be enacted in Colorado back in 2001:

CAPCO program, which awaits governor’s signature, has spurred significant economic growth in several states and could bring same prosperity to Colorado.

The Certified Capital Company (CAPCO) program, a highly successful economic development initiative aimed at creating jobs and fueling entrepreneurial activity in Colorado, could bring at least $50 million of venture capital funding to the state’s rural and agricultural communities if signed by Gov. Owens. The program was adopted by the state legislature (HB 1097) last week.

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The Park and Love, owned by Marc Barnes, received financing from Enhanced Capital Partners back in July, 2009:

Enhanced Capital, a national private investment firm participating in the District’s CAPCO program, has provided $300,000 in financing to two of the District’s premier establishments. The Park, a trendy four story restaurant and lounge, and Love, a sophisticated nightclub which opened in 2001, are both owned by DC visionary and entrepreneur Marc Barnes.

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In 1998, Wisconsin established its own Certified Capital Companies (CAPCO) program:

On April 28, 1998, Wisconsin added a new tool to its economic development program when it enacted legislation authorizing tax incentives for investments in Certified Capital Companies (CAPCOs). CAPCOs, organizations whose primary business activity is investing in “qualified businesses,” have been used in a handful of other states as a method of promoting venture capital investment within the state. With the enactment of 1997 Wisconsin Act 215 (the Act), Wisconsin joined Louisiana, Missouri, and New York in offering premium tax credits to insurance companies that make a certified capital investment in a CAPCO. Florida joined the group shortly after Wisconsin by passing its own CAPCO legislation on May 28, 1998, and CAPCO legislation has been introduced in both houses of the Illinois Legislature.

This article reviews the development and operation of these CAPCO programs and the enabling legislation in Wisconsin, exploring the roles of the CAPCO investment vehicles, the qualified businesses that will receive the venture capital funds, and the insurance company investors. The article also focuses on how attorneys can help their clients in any of these three categories take advantage of Wisconsin’s new CAPCO program.

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SOMS Technologies received funding from Advantage Capital Partners through the New York CAPCO Program:

Advantage Capital Partners, a leading venture capital and small business finance firm, has made an investment in SOMS Technologies LLC, the manufacturer of the microGreen(tm) vehicle engine oil filter. The microGreen filter is a “green” product that utilizes a patented filter technology designed to keep engine oil cleaner, extending the oil life up to 30,000 miles. The funding will be used to support the company’s continued growth.

“This financing comes at a crucial time, as we prepare to expand our marketing and sales efforts,” said Miles Flamenbaum, CEO of SOMS Technologies. “Advantage Capital’s investment will enable our company to continue to grow, helping more customers save time and money on their oil changes. Our microGreen oil filter helps customers protect the environment by reducing oil consumption and the generation of hazardous waste.”

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Back in 2002, Representative Reilly introduced the Rhode Island Certified Capital Company Act:

Rhode Island, said Rep. Donald O. Reilly Jr. (D-Dist. 67) of Cumberland, currently ranks 36th in the nation in the amount of venture capital it receives for small businesses.

“Increased venture capital investments made in small businesses located in Rhode Island will lead to job creation and increased tax revenue for the state. That’s not wishful thinking. It is happening in other states all around the country and it’s time it happens in Rhode Island,” said Representative Reilly.

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Small businesses can turn to their local CAPCO programs for funding:

Fostering new businesses in your county (with their new tax revenue potential) is obviously a much better way to deal with state budget cutbacks and dwindling local revenues than increasing taxes or cutting services or both. And it doesn’t necessarily take a new automobile assembly plant in your community to turn the revenue slide.

For most counties, small businesses are the economic engines for their communities. The National Association of Small Business Owners reports that small businesses employ 51 percent of private sector workers; provide two-thirds to three-quarters of the new jobs; and represent 96 percent of all exporters of goods.

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Through the CAPCO program in Louisiana, Advantage Capital Partners and Enhanced Capital Partners invest $1 million in Portico Learning Solutions:

BATON ROUGE, La., March 18, 2008 (GLOBE NEWSWIRE) — Advantage Capital Partners, Enhanced Capital Partners, Louisiana Fund I and the Louisiana Technology Fund today announced participation in a $1 million funding round for Baton Rouge-based Portico Learning Solutions, a premier provider of custom e-Learning solutions. The company will use the funds to fulfill its working capital needs.

“The e-Learning market is a growing industry and we’re confident that Portico will continue to gain more traction in the marketplace with this latest round of funding,” said Lee Pryor, CEO of Portico Learning Solutions.

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The Louisiana Coalition for Capital makes its case for public-private collaboration through the CAPCO program to help the economy:

We have all heard the bad news.

The National Venture Capital Association reports that venture investing in early stage businesses is down 71% over the last 12 months. Most venture funds are reserving their capital for existing portfolio companies. Small business lines of credit are not being renewed by banks seeking to preserve liquidity. As credit is cut further, companies are forced to consider layoffs to stay in business. The result will be a sharp decline in 2009 in the number of companies funded, and very little of the federal stimulus package is expected to make its way to small business.

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