capital

The Minnesota Department of Deployment and Economic Development (DEED) has launched a new loan program for entrepreneurs with high-tech products or services. The loans are similar in size to microfinance options increasingly available to new bricks-and-mortar establishments, but flexible payment options and innovation-focused criteria are intended to make Minnesota Innovation Loans for Entrepreneurs (MILE) uniquely appropriate for tech-based economic development.

Part 1 of this series on SAFEs (simple agreements for future equity) focused on the investment vehicle and its pros and cons, and can be found here.

In this second article in a series on SAFEs, we examine how the investment contracts may be used by venture development organizations (VDOs), entrepreneurial support organizations, and other investment-focused economic development entities. These public/nonprofit capital providers may increasingly face exposure to SAFEs from the changing private market as their region’s private accelerators, super angels, and other private investors shift from convertible notes to SAFEs during the early-stage investment process.

Six years after the passage of the Jumpstart Our Business Startups Act of 2012 (JOBS Act), SSTI continues to examine the impact that the legislation has had on startup capital. In previous weeks, SSTI has looked at Regulation A+ offerings and equity crowdfunding (also known as regulation crowdfunding or Reg CF). This week, we look at SAFEs (simple agreements for future equity), an early stage, equity agreement that has gained  popularity due, in part, to the JOBS Act streamlining companies’ ability to raise capital privately. A future story will focus on their use for TBED organizations.

A Securities Exchange Commission (SEC) report contains over 20 recommendations for the SEC to consider that would improve small business capital formation. The report, released in April, stems from the 36th annual Government-Business Forum on Small Business Capital Formation – a daylong event held late last year. Its recommendations include issues related to the definition of accredited investors; rules changes that would increase the number of Regulation A+ and Regulation Crowdfunding offerings; and, a revised regulatory regime (based upon the European regulatory regime) to improve peer-to-peer lending.

In a previous Digest, SSTI discussed the positive impact that community banks have had on small business lending activity and economic growth in communities across the country since the Great Recession. In this article, SSTI shares two studies on the existing roadblocks and pessimism faced by minority small business and entrepreneurs as they seek financing through banks.

As the U.S. Senate works toward a vote on a bipartisan bill targeted at lifting regulations for some banks, several studies published within the last year have looked at the impact community banks have had on serving small- to mid-sized businesses (SMBs) across the country. Historically, community banks have been the loan originator for nearly 60 percent of business loans made to SMBs and have served as drivers of economic growth and opportunity in rural and underserved communities. The reports highlight the impact of these community banks on small business lending pre and post Great Recession; the resiliency of SMB lending activities by these banks during the Great Recession; and policy recommendations to support community banking.

This week, we conclude our series of stories on how TBED organizations can help communities ensure a vibrant investment system. This final installment will cover developing a fund that matches your region.

One of the themes highlighted during the 2017 conference was the need to match your fund with the strengths of your region. This is achieved through two basic recommendations:

• First, know your regions strengths and weaknesses; and,
• Second, don’t chase the newest, hottest industry just because it’s the hot new industry.

One of the hottest topics at SSTI’s 2017 Annual Conference centered on helping communities build the investment system necessary for local entrepreneurs and startups to thrive. Led by several panels of experts, the conversations led to sharing many great ideas, thoughtful solutions, and tough realities. This week we continue our series of stories on how TBED organizations can help communities ensure a vibrant investment system. This second installment focuses on effective strategies and ideas for building your organization’s investment team. In our first installment, we discussed the necessity of creating a strong deal flow to stimulate the growth and success of the system. In the next installment of this series, SSTI will cover topics such as the hard necessity of saying no and developing a fund that matches your region.

One of the hottest topics at SSTI’s 2017 Annual Conference centered on helping communities build the investment system necessary for local entrepreneurs and startups to thrive.  Led by several panels of experts, the conversations around this topic led to many great ideas, thoughtful solutions, and tough realities. This week we begin a series of stories on how tech-based economic development organizations can help communities ensure a vibrant investment system. This first installment focuses on the necessity of creating a strong deal flow to stimulate the growth and success of the system. In future installments of this series, SSTI will cover topics such as why it is necessary to say no to a deal and building an investment team.

The Federal Reserve Bank of New York reported that startup firms (small businesses that were five-years-old or younger and had full- or part-time employees in 2016) were twice as likely to be adding jobs and growing revenues but more likely to be higher credit risk than mature firms. The 2016 Small Business Credit Survey: Report on Startup Firms provides an in-depth look at the financing and credit experiences of the startups. The report notes that startups account for 34 percent of all small employer firms and “play an outsized role in U.S. innovation and productivity.” Despite their role in innovation and job creation, the rate of startup creation has been decreasing for years and the rate of failure for those that do launch is high, the report states. Noting that access to capital is critical for startups, the report offers a detailed look at startups financing needs and challenges.