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.

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.

In an attempt to support their respective  innovation economies, several countries have announced new national investment strategies and other entrepreneurial support efforts that help startups access the capital necessary to move their business from an idea to a sustainable businesses. Efforts include a fintech focused-fund in Ireland, expansion of existing programs in two Oceanian countries, and a partnership between two of Asia’s largest economies.

New Zealand

Montreal Mayor Denis Coderre launched Capital Intelligent Mtl – a 100 million CD (77.3 million USD) investment fund aimed at smart city startups and established businesses offering solutions to urban challenges that also will spur job creation in Montreal. The new public-private partnership will backed by 23 founding organizations including venture capital firms, financial institutions and corporations that have pledged over 100 million CD in private capital to establish the fund.

Venture development organizations are reaching into new territory for funding partners and finding success in innovative models. Two new funds, the San Diego Tech & Life Science Investor Syndicate and Rev1 Fund I in Columbus, OH, have recently opened with less traditional funding sources, testing the waters of crowdfunding and heavy corporate backing, respectively. The San Diego fund, launched by CONNECT, allows anyone wanting to invest $1,000 the opportunity to participate alongside more experienced lead investors.

The U.S. Department of Agriculture (USDA) announced the launch of the McLarty Capital Partners’ Rural Business Investment Company (RBIC) – a new private investment fund with the potential to inject $100 million into growth-oriented, small businesses across rural America. As the fifth RBIC to launch since 2014, McLarty Capital Partners’ RBIC is part of the Made in Rural America initiative, an ongoing effort by the Obama administration to attract private sector capital to investment opportunities in rural America and drive more economic growth in rural communities.

The U.S. Department of Commerce announced this week that 35 organizations will receive nearly $15 million in funding to create and expand cluster-focused, proof-of-concept and commercialization programs, and early stage seed capital funds through the Economic Development Administration’s (EDA) Regional Innovation Strategies (RIS) program.

While equity crowdfunding has received widespread attention since the 2012 JOBS Act, another SEC rule change (named Regulation A+) that allowed companies to offer “mini-IPOs” has flown largely under the radar. However, it has shown early promise as a new method for startup financing since it was passed in 2015. In this feature, SSTI addresses three important questions related to Regulation A+ (Reg A+) including:

What is Reg A+?
What are the benefits and drawbacks of the offering?
What impact has it made so far?

A portfolio company of JumpStart Inc., an Ohio venture development organization, is to be purchased for $1.1 billion. The proposed acquisition of Ohio startup CoverMyMeds by McKesson Corp. marks Ohio’s first tech startup unicorn. JumpStart Evergreen, the non-profit fund that invested in CoverMyMeds, was funded in part by Ohio Third Frontier. CoverMyMeds was started in Ohio in 2008 and is now headquartered in Columbus.

While many universities maintain startup investment funds targeted at growing university-affiliated startups, several universities are looking beyond their walls for investment opportunities that will create a return on investment (ROI), but also support economic prosperity. Through these investment funds, universities are able to make strategic investment in startups that will contribute to the future growth of their community, region and state. Massachusetts provides a recent example where MIT will invest $25 million in local startups.

On May 16 of last year, the Securities and Exchange Commission (SEC) finally allowed both accredited and non-accredited investors to engage in regulation crowdfunding. Under the new SEC rules, startups and other private companies could offer equity in return for capital to help support business growth. As of May 2017, total contributions under the regulation crowdfunding into startups and small businesses are over the $40 million mark with an average investment of $833 per investor.

This week, leaders in Illinois and New Mexico announced new investments to help seed and early stage technology startups access equity capital. The Illinois Treasurer will launch the Illinois Growth and Innovation Fund, which would invest $220 million over the next three years in 15-20 funds across the state. No more than 15 percent of the money will be placed with any particular fund. The state’s investment will target emerging tech companies, beginning later this quarter.

Technology companies raised $225 million globally on rewards-based crowdfunding sites in 2015, according to a new report from the UK-based Crowdfunding Centre. In State of the Crowdfunding Nation, the Crowdfunding Centre reported that reward-based crowdfunding sites helped raise over $1.5 billion worldwide between the calendar years of 2014 and 2015. Global rewards-based crowdfunding campaigns raised $823.5 in 2015 million (a 20 percent increase over 2014) from nearly 10.2 million backers.

As the potential nexus of tech-based economic development and community development, cities play an important role in not only making their cities attractive to startups that help drive economic prosperity, but also in bringing together community members to take collective action and generate solutions to common problems. In an attempt to address both of these important issues, several metros have announced new city-backed investment funds that support both startup growth and impact the lives of city residents.

Indiana Gov. Mike Pence announced plans to invest $1 billion over the next 10 years to advance innovation and entrepreneurship in the state, and to ensure the Hoosier State plays a leading role in solving 21st century challenges, while supporting Indiana’s long-term economic growth, job creation and talent attraction.