May 13–A Triad seed-stage investment fund is one step nearer to closing another round with a recent investment from the N.C. Biotechnology Center.
The center, based in Research Triangle Park, has pledged $15,000 to the Inception Micro Angel Fund LLC, which aims to help startup companies that need money to shore up a business plan or complete a management team before developing a product or a service.
The investment triggers the Qualified Business Venture Tax Credit, which allows individual investors to receive a tax credit of up to a 25 percent tax for investments in qualified small companies. The biotech center, MCNC and the Technology Development Authority are certified organizations and trigger the tax credit if they invest in funds or businesses.
“It’s very helpful in capital formation,” Barry Teeter, a spokesman for the biotech center, said. “There is a shortage of venture capital in the industry, and this leverages our money to help others raise money.”
The micro fund had its first closing on $100,000 in December and expects to close on a total of $250,000 later this month, said Tim Janke, a regional director with the Small Business and Technology Development Center and one of the fund’s founders.
Money is pooled from individuals, who must contribute $15,000, or from organizations, which must invest two units or $30,000. Participants must be considered “accredited investors,” with a minimum net worth of $1 million or an annual income of $200,000 for the past two years as well as in 2003.
The biotech center was granted an exception in investing one unit of $15,000, Janke said.
“$15,000 triggered the tax credit, and that’s what we wanted,” he said. “It was a strategic value for drawing more investments.”
After the May closing, Janke and others will begin reviewing business plans, he said. They plan to invest in companies in the medical and dental-device sector as well as target startups that were recently spun out of a university’s technology-commercialization program.
The investment process will look like this: the micro fund’s administrative committee will screen business plans and perform due diligence — examining the startup’s market potential, intellectual property and management team — before deciding whether the group should invest.
“It’s the membership that will decide whether there’s an investment to be made; the administrative committee just puts together the whole package,” Janke said.
The fund’s organizers are hoping that some of the early-stage companies become potential investments for the Piedmont Angel Network, or PAN, formed a year ago.
PAN invests in startups that have a business plan and at least a prototype of a product or service.
“It has to be a little more than an idea, they have to say at least the prototype works,” Lou Anne Flanders-Stec, the executive director for PAN, said.
PAN expects to make its fourth investment soon and is trying to close on a round of $4 million, Flanders-Stec said.
Some, but not many, in the Triad have invested in both funds, said Charles Calkins, an attorney with Kilpatrick Stockton LLP, which is giving the micro fund legal assistance.
“I don’t think this [fund] will tap the community dry,” Calkins said. “This fund has a reason to exist because there aren’t a lot of people in this community who have expressed interest to write $50,000 individual checks to be an angel investor, so this steps in and takes the place of that.”
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(c) 2003, Winston-Salem Journal. Distributed by Knight Ridder/Tribune Business News.
