The state is giving $20 million in tax credits to six venture capital firms to invest in small startup businesses. The goal is to help new companies get going here, despite the short supply of starting capital. Whatever profits the investors make, Tennessee gets half.
State Revenue Commissioner Reagan Farr says that $120 million handed out in tax credits will ultimately help create jobs and grow Tennessee’s economy. Plus, he says the state will share in any profits made by the venture capital firms.
“As they invest in a seed or early-stage concept, and either take it to where it’s acquired by an ongoing enterprise or they take it public. Any profits from that the state gets 50% of.”
Over the program’s 10-year life, Farr says the state expects to fully recoup the amount it’s giving up in tax credits. Beyond that, he says profits will benefit a fund that gives cheap loans to small rural businesses.
State legislators unanimously created the TNInvestco tax credit program last year.
Lawmakers will monitor the project through regular updates, but financial details of startup companies’ won’t be made public. Officials say doing so would give valuable information to competitors.
The six venture capital firms receiving tax credits are:
Tennessee Community Venture Fund LLC (TNCV)
Based in Nashville, and “has more than 60 years of experience founding, identifying, investing in and raising follow-on capital for high-growth companies.”
XMi High Growth Development Fund, LLC
Has operations in Nashville (XMi Holdings) and Chattanooga (Lupton Company). “Our team of experienced and successful operators, investors and mentors coupled with XMi’s back-office support for entrepreneurs will create above-market returns for the State.”
Limestone Fund
Based in Nashville and will focus across the state in “early-stage life sciences and technology companies targeting patients and consumers.”
Tri-Star Technology Ventures
Another venture firm from Nashville, concentrating on founding and investing in “companies from America’s top research institutions.” Includes work in biotechnology, pharmaceuticals and healthcare IT.
Innova Fund II, LP
Looks to invest early-on in bioscience, technology, and ag-bio.
Council & Enhanced Tennessee Fund, LLC focuses on “building seed and early-stage, transformational businesses in Tennessee.”
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