A year after the launch of a $50 million venture capital fund program dedicated to investing in Washington-based startup companies, $10 million has been invested in 10 D.C. companies — a pace well ahead of the program’s goal of investing 20 percent by May 2007.
But investment in District firms is still far behind that in Northern Virginia and Maryland, say experts. According to data from PricewaterhouseCoopers, more than 200 area companies received venture funds between the first quarter of 2005 and 2006 but only 14 of those firms were in the District.
The Washington region sees several hundred million dollars in venture investments each year, but “it really comes down to Northern Virginia and Maryland,” said Nick Manetto, a spokesman for the D.C. Coalition for Capital. “It hasn’t spilled over into the District. To really continue to move the District forward we need to infuse venture financing into the city.”
The city’s Certified Capital Co., or CAPCO, program comprises three independent funds with combined assets of about $50 million.
The CAPCO program — which exists in numerous states as a means of stimulating economic development — secures funding from local insurance companies in exchange for tax breaks.
Though government-sponsored, investment decisions are left up to private sector professionals running the firms based on the assumption they are better equipped to spot promising companies.
CAPCO is accomplishing what it set out to do — help startups move to the next level, create new jobs and draw residents into the city — but the program will only make a dent in D.C.’s economic development, said Doug Beekman, senior vice president for Advantage Capital Partners.
“It’s a $50 million fund and in aggregate that’s not very large,” he said. “There are many, many [venture] firms just in Northern Virginia that are much bigger than that.”
Advantage has invested in two companies so far, including one that moved from Bethesda to the District in order to qualify.
“I think we can find high-quality deals in the District,” Beekman said. “But we’re certainly not going to have the same volume. … We’re trying to have the most impact with the dollars that have been given to us.”
The District’s CAPCO program’s three venture funds have invested about $10 million, or 20 percent, of the $50 million fund since last May. The three funds, listed below, must invest $20 million by November 2008.
Enhanced Capital Partners
Total Fund: $26.5 million
Investments:
» Create Hope (software company): $2 million
» JLC New Hope Partners (real estate development): $750,000
» Session Title Services (title processing company): $120,000
» AV Smoot (construction outsourcing company): $50,000
» The fund also plans to announce three additional investments totaling about $3.5 million in the next month.
Advantage Capital Partners
Total fund: $11.2 million
Investments:
» GridPoint (energy management and alternative power company): $600,000.
The company relocated from Bethesda to D.C. in order to qualify for CAPCO and brought about 40 employees with them.
» AV Smoot: $200,000
Wilshire DC Partners
Total fund: $13. 4 million
Investments:
» Community Financial Services: $1.9 million
» Small Business Solutions/Newtek Insurance Agency: $1.9 million
» ICM Productions/Mumin Productions: $1.9 million
» Rumba Tivoli (restaurant): $450,000
Source: Risk Finance Bureau, D.C. Dept. of Insurance, Securities and Banking
