a new investment fund for technology start-ups, meant to keep them from leaving for cities with better funding.
Maryland’s technology industry has never been short on talent or ideas, thanks partly to the federal government’s local presence. National Institutes of Health installations bolster a sizable biotechnology industry in Montgomery County, and the National Security Agency’s headquarters in Fort Meade supports a thriving cybersecurity sector in the D.C.-Baltimore corridor.
But most of that work is closely related to serving the federal government. Some regional economic experts would rather see a local technology industry linked to commercial markets, possibly enabling wealth creation of the kind seen in places such as Silicon Valley. Efforts to create a broader commercial industry have been piecemeal, with some of the region’s most promising firms leaving for other cities in search of funding.
“This is a big problem that’s going to require a lot of money and a lot of concerted effort,” said Jonathan Aberman, a Virginiabased technology investor.
Maryland has tried to solve that problem by handing out small taxpayer-funded investments each year to promising start-ups in the earliest stages of development. Maryland’s Technology Development Corp. (TEDCO) hands out $100,000 investments in state-appropriated money to start-ups deemed to show potential.
But officials have found that the small investments, typically given to companies with only a few employees, aren’t enough for some firms.
On Tuesday, the state announced a program called the GAP Investment Fund. The fund is designed to make investments of $200,000 to $500,000. The plan is to cater to start-ups that have grown past the initial phases of developing their technology but aren’t big enough to cut deals with private venture capital firms.
“Instead of piecing together a hundred thousand here or a hundred thousand there, we’re trying to scale up the amount of money we’re investing,” said John Wasilisin, president of TEDCO.
The problem is that the legislature set aside $1 million for the fund’s first year of investments, which will begin in June. That means the fund will probably be able to make only two or three investments in its first year.
The strategy and the name of the fund closely mirror CIT GAP Funds, a program set up in Virginia. That program provided the initial financial basis for the state’s Mach37 cybersecurity incubator, which hands out small investments in exchange for a promise to set up an office in Northern Virginia.
Maryland’s new program “sounds a lot like Virginia’s GAP, though they’re not as well funded as Virginia’s program,” said Rick Gordon, director of Mach37. “But it’s awesome that they’re doing it. We don’t have nearly enough investment dollars in the region to support the number of companies that deserve it.”
A cash infusion of that size could make a big difference for a tech start-up in its early stage and just trying to pay the bills while it scopes out customers. But state officials acknowledge that the extra $1 million provided for seed funding will be just a drop in the pool at first.
Wasilisin plans to ask for more money from the legislature next year and slowly expand the program.
“I’m certain we’re going to prove over the first year that the demand for the fund is going to far exceed the amount of money we have,” he said. “Ideally, you’d like to have a larger amount to start off with, but we’re excited about an opportunity to get it started.”