Cromwell Schmisseur LLC is the national leader in best practice venture capital initiatives that unleash the economic development potential of great American entrepreneurs in emerging regions. Our obsession is empowering entrepreneurs, especially in underserved geographies, by making regional capital markets more efficient, more resilient and more accountable.
Location Matters
When it comes to venture capital investment and where an entrepreneur can start and scale a high-growth potential company, location matters. Don’t be fooled by the “all good deals get funded” line that is too simplistic to describe the flow of risk capital.
The venture capital industry is geographically concentrated in a small number of urban areas, creating a situation where innovators are compelled to move to the source of capital rather than capital flowing to the innovators where they currently live and work. This distorts market activity and constrains the innovation and economic growth needs of individual states and the country as a whole.
Question - is your state a net importer or exporter of innovation capital (funds and talent)?
We believe venture capital is an important component of an economic development agenda and that there are exceptional entrepreneurs and great companies in every state. Emerging entrepreneurial ecosystems are too often underserved by venture capital, but there are smart policies and best practice programs state leaders can utilize to stimulate private investment in local markets. Importantly, these programs offer elected officials the opportunity to realize "comprehensive returns" in the form of both economic development outcomes and strong investment returns. It's time for states to stop giving money away in the name of economic development and focus on market-based strategies.
Cromwell Schmisseur has advised public and private sector leaders on the design, implementation or review of large-scale capital formation initiatives. From state supported private investment funds to co-investment funds to fund-of-funds, we've seen what works and what doesn't work in this niche policy arena.
More and more states are realizing the importance of nurturing high-growth potential firms to be the future anchors of regional economies. Business innovation is fueled by equity financing, so states are seeking new strategies to spur local investment in promising firms.
The small business investment programs supported by Cromwell Schmisseur have positively impacted thousands of companies in diverse regions across the country. These innovative businesses can diversify and strengthen state economies.
Innovation-based economic development strategies require a long-term commitment, for program outcomes are realized over 10-15 year investment cycles. However, state and local governments have served as laboratories for innovation with various capital formation experiments, and practitioners today can learn from recognized best practices and a principles-based approach to good policy-making. Examples of government-supported programs that align with private market principles include:
InvestMaryland is the largest venture capital initiative in the state's history, designed to plug a financing gap between seed-stage and growth-stage ventures in Maryland. The program raised $84 million from the sale of $100 million of deferred tax credits, with the capital proceeds split between a direct investment fund and fund-of-funds strategy.
Innovate in PA addresses the financing needs of technology-oriented businesses by increasing risk capital accessibility. The program was capitalized by the sale of $100 million of deferred tax credits to yield $85.5 million for investment. The capital is being deployed by the Ben Franklin Technology Partners, the Life Science Greenhouse and through a fund-of funds program.
The State Small Business Credit Initiative (SSBCI) was created by the Small Business Jobs Act of 2010 and administered by the U.S. Department of Treasury. SSBCI was originally funded with $1.5 billion to strengthen state small business financing programs. The American Rescue Plan Act of 2021 reauthorized and expanded SSBCI with $10 billion in funding support, of which $3B is allocated to equity investing.
Finding credible information on best practices for state venture capital initiatives is all too elusive, and state leaders don’t know where to turn for professional guidance. To help state leaders and ecosystem stakeholders start down the right path to an effective, efficient program, we offer the following executive summaries to begin collecting actionable information and asking the right questions:
