CAPCO Programs

Advantage Capital Partners has selected Ironwood Capital to identify potential companies for investments:

Connecticut has chosen a Missouri-based equity and venture capital firm to manage a $72 million investment pool aimed at growing small businesses.

The new funds come out of a provision in the recently passed jobs bill, which revised the state’s Insurance Reinvestment Tax Credit program to allow money managers to invest in any Connecticut-based business, not only insurance-related ones.

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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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Back in 2000, Missouri Governor Mel Carnahan vetoed an extension of the CAPCO program despite the state’s need for funding for start-up companies:

There is a sense that senatorial politics cast a shadow over the extension of Capco funding in Missouri.

Missouri Gov. Mel Carnahan, who supported the original legislation which created the Capco program in 1997, vetoed an extension this year because he was concerned with cutting $13 million in expenses on an estimated $7.5 billion revenue projection.

Some observers speculate the governor wanted a squeaky clean fiduciary bill of health because of his political battle with incumbent Sen. John Ashcroft. Mr. Ashcroft takes special pride in his own budgeting abilities during his gubernatorial tenure.

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The Midwest Technology Journal published an article discussing the benefits of the Missouri Certified Capital Companies (CAPCO) program:

Given the tremendous importance of small business to the Missouri economy – 95 percent of all companies and 35 percent of all jobs – it is remarkable that so few of the state-sponsored programs designed to stimulate economic growth are directed at assisting smaller firms. In Missouri, for example, only four of the 21 tax incentive programs designed to encourage investment and job growth are directed primarily at small business. This lack of support is even more inexplicable given the dynamic potential of small emerging businesses and the special problems that are unique to these firms – in particular, a lack of specialized managerial expertise and access to external sources of funding.

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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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CAPCO Programs make the Midwest an attractive location for entrepreneurial endeavors:

In just three years, the InvestMidwest Venture Capital Forum has established itself as the Midwest’s premier annual venture capital forum, to date generating more than $100 million in equity investment for innovative entrepreneurial growth companies. From the Forum’s early focus on companies located primarily in the St. Louis/Kansas City regions, InvestMidwest is now poised to expand its reach to encompass the country’s entire central corridor, thereby attracting a larger audience of regional and national venture capitalists.

InvestMidwest is presented by the RCGA, Missouri Venture Forum, Greater Kansas City Chamber of Commerce, KCCatalyst, Kansas Technology Enterprise Corporation and Technology Gateway Alliance. The Forum is sponsored by the Danforth Foundation, the Ewing Marion Kauffman Foundation and a diverse group of public and private organizations.

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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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Missouri’s rural and agricultural communities could be receiving millions of dollars through the state’s CAPCO Program:

The Certified Capital Company (CAPCO) program, a highly successful economic development initiative aimed at creating jobs and fueling entrepreneurial activity in Missouri, could bring $25 million in venture capital funding to the state’s rural and agricultural communities. The program was first adopted in 1997 and is up for renewal in the state legislature.

Senator Joe Maxwell, (D – Mexico), joined by Senator Franc Flotron (R-St. Louis), Representative Catherine Hanaway (R-St. Louis) and Representative May Scheve (D-Affton), has introduced legislation this year to expand the CAPCO program for an additional $10 million dollars a year for ten years. As part of the deal, $25 million of the bill’s total $100 million would be designated for Missouri rural, agricultural businesses.

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