It takes money to make money, or so the saying goes. Access to sufficient capital is one of the major considerations why some businesses fail and others don’t. One of the great things about working with small business is I occasionally witness them become big business. There are programs in Nebraska that can help small businesses get the capital they need to succeed.
In 2011, with the goal of spurring private investment in fledgling high-growth and technology companies, the Nebraska legislature passed LB 389, “The Angel Investment Tax Credit Act.” The Act provides a refundable state income tax credit up to 40 percent for individuals and certain entities that make equity investments in eligible companies based in Nebraska. This program requires a minimum investment of $25,000 for individuals and $50,000 for investment funds and the eligible small businesses must have fewer than 25 employees.
Along with the Angel Investment Tax Credit Act, a Lincoln-based non-profit organization provides operational assistance to small businesses and additional access to growth capital. Invest Nebraska is a venture development organization focused on helping entrepreneurs and investing in high-growth companies in Nebraska. The organization is partially funded by the Nebraska Department of Economic Development through the Talent and Innovation Initiative, which is aimed at encouraging small businesses, innovation and entrepreneurship in Nebraska.
While Invest Nebraska’s primary mission is focused on assisting businesses, the organization also makes strategic investments from two programs: the Angel Sidecar Fund Program and the Seed/Commercialization Fund Program.
Invest Nebraska’s Angel Sidecar Fund Program matches the investment (1:1) of Nebraska-based angel investor funds or individual Nebraska angel investors up to $500,000. These investments are equity investments made into the qualifying small business.
The Seed/Commercialization Fund Program also makes matching investments in small businesses up to $500,000. These investments can be either convertible debt or equity. But the matching capital can be from any source including venture capital and bank financing. A small business loan would qualify participants for matching funds under this program. This is a great way to leverage a small business loan with equity financing in an amount up to $500,000.
To qualify for either Program, eligible businesses must have: 1) a committed leadership team with significant experience related to the technology being commercialized or committed collaborators/mentors with such experience; (2) a disruptive technology or “secret sauce” that has the potential to create high-paying jobs; (3) a viable plan for securing venture capital financing to successfully grow the start-up company within a reasonable time period after the seed capital co-investment; and (4) a market-based, third-party investment commitment equal to at least 100 percent of the total requested seed capital funding. Other restrictions as to the uses may apply.
For additional information on Invest Nebraska Corporation and its venture capital assistance programs, look to http://www.investnebraska.com/. If you think you may be ready to pursue venture capital, feel free to contact the Berry Law Firm with all your small business needs.