Maryland Governor Proposes $100 Million for Startup Companies

Maryland Governor Martin O'Malley recently announced a new effort to direct $100 million to public and private venture capital investors. The InvestMaryland program would offer insurance companies tax credits to generate the funds, which would either be invested directly in startup companies or in private venture firms. Governor O'Malley's current proposal would provide $50 million to the Maryland Venture Fund and the other $50 million to venture capital firms. The state's Department of Business and Economic Development plans to work with legislators, businesses and universities to draft a bill for next year's legislative session.

Maryland, like much of the country, has experienced a significant decline in venture capital (VC) investment since the beginning of the current recession. Venture firms across the country invested $17.8 billion last year, 41.5 percent less than in 2007, according to the PricewaterhouseCoopers Moneytree Survey. Maryland, experienced a larger relative decline than the country as a whole, sliding from $602 million to $284 million, a 52.8 percent decrease. In his announcement, Gov. O'Malley noted that venture investment is particularly important in the life sciences, in which research and commercialization can take years, requiring reliable sources of sustained capital. The InvestMaryland program would be of particular benefit to the life sciences sector, which continues to struggle with capital availability, according to the governor.

The Maryland Venture Fund was created in 1997 and has invested $51 million in more than 200 companies. Under the funds guidelines, companies with no more than 25 employees and less than $1 million in revenues may receive initial investments of up to $100,000. Approximately 60 percent of the fund is invested in software, communications, and IT security companies, and the other 40 percent is invested in life sciences companies in the areas of therapeutics, medical devices, and diagnostics. In recent years, however, the fund has been depleted as the recession has hit both the state budget and its portfolio companies. The $50 million boost included for the program in the governor's proposal would help the fund continue investing in seed- and early-stage high-tech startups.

The remaining $50 million would be available in invest through private venture capital firms. Though the details have not yet been set, the governor said the funding would be invested in Maryland-based VC firms to provide capital for Maryland-based tech businesses.

The proposal would be introduced when the state legislature meets in 2011. Governor O'Malley is currently running for reelection against former governor Robert Ehrlich. Implementation of InvestMaryland would likely depend on the governor's reelection in November.

Read the press release at: http://www.governor.maryland.gov/pressreleases/100601.asp