One of the most vexing problems facing states, outside of a few well known success stories, is a persistent lack of attention from the venture capital industry. In 2006, almost 60 percent of venture capital investment was concentrated in California and Massachusetts. The other 48 states have had to devise their own strategies to compete with Silicon Valley, Route 128 and each other to gain the attention of potential investors. Mississippi, for example, attracted only two venture investment deals and only $8 million in VC investment last year, according to PricewaterhouseCoopers’ annual MoneyTree Survey. The lack of access to capital was stifling the state’s economy, especially its high-tech industries, Momentum Mississippi concluded in a study last year.
To help remedy Mississippi's situation, the state legislature recently approved a package authorizing five new state funds to support early-stage high-tech companies and to build an in-state market for private equity investment. The funds will be administered by the Mississippi Technology Alliance (MTA), a nonprofit organization that works closely with the state to provide services to investors and entrepreneurs. Gov. Haley Barbour’s budget request for fiscal year 2008 proposes a $4 million initial allocation for the funds, which will be disbursed to MTA by the Mississippi Development Authority, as needed.
The state will dedicate almost half of the funding to one of the funds to assist start-up, seed and early-stage Mississippi-based businesses. To be eligible, the companies must have a business plan, reach a collaborative agreement with a state institution of higher education or community college, and secure a match from an accredited investor. The fund will provide loans for up to $100,000 per year in qualified expenses, for a total of $200,000. Interest on loans will be forgiven if the funds are repaid within three years.
The four remaining programs are similar in design but address specific situations or needs, such as: early-stage businesses without outside investment; university technology spinoffs; and early- and late-stage high-tech firms in rural areas.
In addition to providing capital to small businesses and an incentive for outside investment, Gov. Barbour says the new programs will stimulate collaborative research between the state’s research institutions and businesses, accelerate the rate of new business formation, and encourage promising high-tech industries.
House Bill 1724 is available at: http://billstatus.ls.state.ms.us/documents/2007/html/HB/1700-1799/HB1724SG.htm