State Small Business Credit Initiative (SSBCI) Community Development Venture Capital Association March 13, 2014

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1 State Small Business Credit Initiative (SSBCI) Community Development Venture Capital Association March 13,

2 SSBCI Overview Created by Small Business Jobs Act of Treasury awarded almost $1.5 B to state agencies as credit support for small business loans or investments. States design their own SSBCI programs to respond to local conditions. Private sector leverage requirement of 1:1 per program, with a reasonable expectation to achieve 10:1. SSBCI funds remain with state after recycling as an evergreen resource. 2

3 SSBCI Funds Allocated by Program Type (As of December 31, 2013) Loan Participation Venture Capital $441m $464m Loan Guarantee Collateral Support $221m $218m CAP $113m $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 Millions Funds awarded to 47 states, D.C., 5 territories and 4 municipal consortia in AK, WY, ND. Of the $1.5 B in awarded funds, approximately $441MM or 31 percent allocated for state VC programs in 33 states or municipalities. 3

4 Percentage of Funds Expended, Obligated or Transferred by Program Type 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% (Cumulative through December 31, 2013) Recycled Funds EOT Original Allocation EOT Loan Participation Venture Capital Collateral Support Loan Guarantee CAP States may draw down the SSBCI funds through Status check in June

5 Percentage of VC Funds Expended, Obligated or Transferred by State 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% (As of December 31, 2013) NH NJ NC WA IA KS WV NY MO AR TN IN TX IL UT LA OK HI WI AZ FL ME RI PA MD AK ND-C NE OH MI MN NV PR WY Millions $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 NH NJ NC WA IA KS WV NY Venture Capital Allocation Amount by State (As of December 31, 2013) MO AR TN IN TX IL UT LA OK HI WI AZ FL ME RI PA MD AK ND-C NE OH MI MN NV PR WY 5

6 Funds Allocated by Stage of Investment Pre-Seed $10.0 $- Any $10.0 $- Growth $20.0 $10.0 $- Mezz/Debt $20.0 $10.0 $- Seed/Early $50.0 $40.0 $30.0 $20.0 $10.0 $- Total $50.0 $40.0 $30.0 $20.0 $10.0 $- Anchorage, AK Arizona Arkansas Florida Hawaii Illinois Indiana Iowa Kansas Louisiana Maine Maryland Michigan Minnnesota Missouri Nebraska Nevada New New Jersey New York North Carolina Ohio Oklahoma Pennsylvania Puerto Rico Rhode Island Tennessee Texas Utah Virginia Washington West Virginia Wisconsin 6

7 Funds Allocated SSBCI by Overview Stage of Investment Pre-Seed 2% Any 3% Growth 12% Seed / Early Stage 67% Mezz / Debt 16% Total VC Allocation = $441m 7

8 Funds SSBCI Allocated Overview by Structure Co-Investment 14% Direct Investment 39% 3d Party Managed 12% Fund-of-Funds 35% Total VC Allocation = $441m 8

9 Example: SSBCI Direct Overview Investment Model Missouri IDEA Fund TechLaunch Research Commercialization Fund Seed Capital Co-Investment Fund High-Tech Industrial Expansion Fund Venture Capital Co-Investment Fund $23.6 million allocated to Venture Capital 74% deployed through December 2013 Notable Features and Outcomes Early advocate for Venture Capital option Comparatively rapid implementation and capital deployment Momentum used to substantially increase state funding for MTC operations 9

10 Example: SSBCI Co-Investment Overview Model WV Seed Capital Co-Investment Fund West Virginia Jobs Investment Trust serves as program administrator $6.7 million allocated to Venture Capital 94% deployed through December 2013 Notable Features and Outcomes Partnered with 8 regional or statewide organizations to originate investments Originating Investors source deals for coinvestment by SSBCI capital SSBCI serving as a catalyst for policy considerations by state leaders about statesupported capital formation 10

11 Example: SSBCI 3rd Party Overview Managed Model Washington W Fund Managed by University of Washington s Office of Commercialization $5 million allocated to Venture Capital 100% obligated, with SSBCI capital immediately leveraged by private investors in target $20 million W Fund Notable Features and Outcomes Immediate co-investment in fund, with additional leverage from investments Innovative investment committee structure to manage conflicts 11

12 Example: SSBCI Overview Fund-of-Funds North Carolina Fund of Funds NC Department of Commerce is the program lead with initial setup managed by the NC Rural Development Center $10.3 million allocated to Venture Capital Estimated that half of the SSBCI funds will be invested in small businesses by mid-2014 Notable Features and Outcomes 4 investment managers awarded funds Designed to offer a diverse investment approach across financing lifecycle One funding commitment supports six earlystage seed/angel funds across the state 12

13 More SSBCI Information Overview SSBCI program website: 1. State SSBCI contacts 2. Summaries of States Quarterly and Annual Reports 3. Reports by industry consultants Cliff Kellogg 13