InvestMaryland, Winning by Fueling Innovation + Creating Jobs

The State of Maryland is creating a $70 million investment fund to deploy into venture capital funds to stimulate innovation, spur economic growth, and create jobs.

This initiative is called “InvestMaryland,” and I am proud to have been appointed by Governor Martin O’Malley as a Member of the Maryland Venture Fund Authority, which will provide guidance to and oversight of the program.

This is a groundbreaking effort by the State of Maryland, and I applaud all of the various business and political constituencies who made this happen.

The State plans to raise at least $70 million by auctioning off tax credits to insurance companies.  About 2/3 of these proceeds will be invested into private venture capital funds, and 1/3 will be given to the Maryland Venture Fund, which will in turn invest in emerging companies in industried such as information technology, clean energy, and life sciences, among others.

Maryland is not the first state to employ this idea.  Eleven other states already have programs similar to InvestMaryland.  The expected benefit from InvestMaryland, according to some, is the creation of 2000+ new jobs while supporting at least 200 businesses.

Here is the the link to Gazette.net’s article in February, 2011 which covers the announcement of the program.

I am encouraged by these kinds of initiatives and would love to see more states embrace these kinds of public-private efforts to stimulate capital formation, and help create jobs and nurture new technologies and emerging companies.

Thank you for reading.  Let me know your thoughts about the InvestMaryland program or other ways in which technologies and small businesses can be supported.  And please sign up for my Blog!

Featured image courtesy of sidewalk flying licensed via creative commons.

About these ads

8 thoughts on “InvestMaryland, Winning by Fueling Innovation + Creating Jobs

  1. Hi Tien,
    Congrats on being selected as one of the 9 members of Maryland Venture Fund Authority. ‘InvestMaryland’ is really a bold initiative especially in this tough economy. Not only this initiative will boost the venture capital industry but it will also motivate many start-ups who don’t see the day of the light due to lack of funding. Congrats again !

  2. Let’s do a little math: $70M for 2,000 startup jobs means approx. $35k per job. With the MD tax rate of 4.75%, the taxable compensation for each job would have to be $737k for the state to just break even, and that does not even take time value of money into account. With an average salary of $88k in a venture-backed company (per Indeed.com), it would take 8.4 years if all of that salary was taxable (and it is not thanks to all sorts of exemptions and deductions). Yes, each of these jobs may create others through a multiplier effect (unless the 2,000 estimate already accounts for that, as is usual in political statements), but how many of these startups will actually survive for the state to benefit? If one additional job is created per one funded, but half of the startups go belly up after a few years, it’s a wash. Presumably, the state will realize some financial benefit through an investment as Limited Partner in the VC funds, though. But what were the net VC returns in our region in the last decade?

    • HI Marek, good analysis. This program is about more than jobs. The State plans on getting a return of capital and a return on capital in order to make this an “evergreen” fund where capital can be recycled. In addition, this kind of financial stimulus could support key core industries in Maryland, and will hopefully lead to the development and creation of some anchor companies who will eventually employ a lot more than 2000 people. Thanks for the Comment.

  3. Marek brings up some great points that need discussion, but I think we need to have a more liberal attitude about these kinds of public-private partnerships. I think the evidence today points policymakers toward more public-private experiments in the startup development domain, not less. As most know, one of the key reasons Silicon Valley is so active is because of reinvestment of profits into the next generation of people and their ideas, with enough mentoring and guidance to ensure some learning from mistakes… which in turn offers an improved day to day oversight of these investments. Money and mentoring and learning from mistakes thru the iteration of experiments is a major part of what leads to organic growth and broader social good.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s