The New Markets Growth Fund, a venture capital fund based at the University of Maryland’s Robert H. Smith School of Business, has raised $20 million to invest in small businesses in low-income neighborhoods in the District, Prince George’s County and parts of Baltimore.
Founding partner Mark Grovic said the fund is potentially a significant source of capital for the area, especially in light of the overall drop in venture capital investment since 2000.
“People with promising ideas in low-income areas . . . have a very difficult time getting capital,” Grovic said. “If someone has got really incredible potential, we’re going to make an investment, and our reward is based on how successful the company becomes.”
Grovic raised $10 million from regional banks, individual investors and groups including the National Capital Revitalization Corp., the city’s investment arm; the Baltimore Development Corp.; the State of Maryland; several angel investors; and the University of Maryland business school. (Angel investors are often willing to accept more risk for a higher return, are involved in the businesses in which they invest and provide a financial bridge to venture capital funds.)
The fund’s other $10 million came from the U.S. Small Business Administration through its New Markets Venture Capital program.
Grovic, who is deputy director of the Dingman Center for Entrepreneurship at the University of Maryland and previously was a portfolio manager for the Calvert Group, a mutual fund based in Bethesda, said the New Markets Growth Fund has been vetting hundreds of companies for investment.
The fund will consider investing in businesses in almost all sections of Northeast and Southeast, as well as parts of Southwest. In Northwest, qualifying areas are primarily around Union Station, some areas north of Massachusetts Ave., and along Georgia Ave.
Grovic and his staff, which includes University of Maryland MBA students, are considering investing in an as-yet-unnamed start-up telecom venture that would be located in a low-income neighborhood near Union Station.
The fund hopes to make three or four investments of $2 million each in small local companies with the potential for high growth by the end of the year. The fund will also consider investing in companies that move into the designated low-income areas.
“It all has to do with whether a small business is able to have a really strong advantage,” Grovic said. “A lot of times that lends itself to technology. [Patenting a technology] is a really good way a small business can have a competitive advantage over bigger players.”
D.C. businessmen who are on the fund’s advisory board include Albert Hopkins, president and CEO of the Anacostia Economic Development Corp.; Clifton Kellogg, president of inner city lender City First Bank of DC; Robert Moore, president and CEO of the Development Corporation of Columbia Heights; and Malcolm Barnes, former director of the Howard University Small Business Development Center.
Reported By TechNews.com, http://www.TechNews.com
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