Mary­land an­nounced

The Washington Post - - FRONT PAGE - BY AARON GREGG aaron.gregg@wash­post.com

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.”

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