The governor’s economic development office hopes to receive about $4 million in federal money to invest in new businesses through the Silver State’s venture capital program.
Dubbed the Battle Born Venture, the state’s capital investment program relies on a slice of about $13 million given to the state by the federal government from a national pot of about $1.45 billion.
But before the Silver State can use a cent of that money, officials with the governor’s office have to meet Wednesday with the Legislature’s Interim Finance Committee to discuss a budget. Although Battle Born is authorized to ask for as much as $5 million, officials say they’re asking for less this year so they can accelerate their rate of investment in the future.
After the state received $5 million from the U.S. Treasury last year, the economic development office received more than 70 applications from companies interested in setting up shop in Nevada. Although that’s more than triple the number of previous applications, officials would not specifically comment on any of the interested businesses.
The point of the program? To feed and grow the state’s budding business landscape by investing in early stage businesses that fall within the following industries: aerospace and defense; agriculture; energy; health care; IT; logistics and operations; manufacturing; water; mining; and tourism and gaming.
The program is not as simple as handing out cash to budding companies. The program falls under the U.S. Treasury’s State Small Business Credit Initiative and seeks a return on its investment. All proceeds generated by Battle Born-funded businesses are funneled back into the program for reinvestment in the state.
The Small Business Jobs Act of 2010 created the State Small Business Credit Initiative, hoping to build financial infrastructure across the U.S. with the aim of enhancing local capital infrastructures. Following its launch, the U.S. Treasury approved 47 state-run venture capital programs in 30 states.
Nevada’s program launched in 2011 with just two offerings, including a program that pledges cash collateral to lenders to help qualified Nevada companies and a “microlending” program that lends up to $35,000 at market rates to Nevadan companies.
As the state’s venture capital arm, Battle Born usually makes investments $100,000 to $200,000. But these programs also rely on private funding to get businesses off the ground. On the national level, for every federal dollar, such programs receive more than eight private funding dollars nationwide, said Karsten Heise, economic development office’s technology commercialization director and the person in charge of Battle Born.
“This sends a clear message,” Heise said. The State Small Business Credit Initiative “is attracting substantial private funding into the market place.”
The jump in venture capital applications in Nevada represents a greater trend: Nationwide, venture capital investments have been booming. In the past year, more than $13 billion of venture capital funds landed in the United States by way of 1,100 deals, according to the National Venture Capital Association.
But compared with states such as California, New York and Massachusetts, Nevada does not have the strongest investment numbers.
So far in 2014, California has seen almost $8 billion in venture capital dollars enter the state by way of more than 460 deals. In Utah, 18 deals were landed to the tune of more than $350 million. Meanwhile in Nevada, about $20 million was landed through four deals, according to the National Venture Capital Association.
The disparity has everything to do with the size and quality of a region’s infrastructure. And to Bobby Franklin, the association’s president and CEO, venture capital can’t transform a city’s infrastructure overnight.
“It takes an entire ecosystem to make all this happen,” Franklin said. “It takes great entrepreneurs. It takes more human capital and engineers. You have to have great universities, where great ideas are created.”
When venture capital investors decide to put their money in the game, Franklin said, there are no guarantees. But any activity is good activity when it comes to building an investment infrastructure.
“They understand they’re going to invest in many different companies, and they know some of those are going to fail,” said Franklin. “It’s risky, and your money’s going to be tied up for a very long time.”
Contact reporter Ed Komenda at email@example.com or 702-383-0270. Follow him on Twitter @ejkomenda.