January 17, 2013
Venture
Capital Growth Fund Strengthens Support for Emerging
Technology Businesses
Emerging
technology and life sciences
companies that have attracted
capital through strategic
investments will now be eligible for
assistance through the Edison
Innovation Venture Capital Growth
Fund.
Administered by
the New Jersey Economic Development
Authority (EDA), the program was
created in 2011 to benefit early
stage, emerging technology and life
sciences companies by providing
growth capital to directly fund uses
such as hiring key staff, product
marketing and sales. The
program, which provides a
subordinated convertible note of up
to $1 million for eligible
companies, previously included a 1:1
matching requirement only satisfied
by venture capital funds. The
program now allows strategic
investments, which can be made by a
variety of sources, including
commercial or institutional
entities, nonprofit organizations or
universities, to also be eligible.
“The EDA’s goal is
to ensure our programs are meeting
the needs defined by the
marketplace, and this enhancement
supports the fact that strategic
investors have become more and more
attractive to emerging companies,”
said EDA Chief Executive Officer
Michele Brown. “The Christie
Administration has placed a high
importance on nurturing the growth
of our technology and life sciences
companies, and this program now
recognizes the unique advantages
strategic investors offer New
Jersey’s early stage businesses.”
At the EDA’s Board
recent meeting, EDA President and
Chief Operating Officer Tim Lizura
outlined the benefits of
nontraditional investors. This
includes a more diverse investment
strategy beyond solely financial
return and a greater potential for
follow-on funding. Lizura
noted that strategic investors have
increasingly become more attractive
to emerging companies as they often
bring industry expertise in addition
to liquidity, access to a more
robust customer base, validation to
the technology or product and
opportunities for operating
partnerships. Assistance through the
Edison Innovation Venture Capital
Growth Fund was approved at today’s
EDA Board Meeting. All Board actions
will take effect at the expiration
of the statutory period for the
Governor’s review and consideration
of the meeting minutes.
Consistent with
the current process, due diligence
interviews will be completed with
strategic investors. This entails
the collection of important
information including the size of
the fund, percentage of the total
fund committed to date, potential
for follow-on funding, and a
background review of the company’s
management. Strategic
investors will be required to be
unrelated, arms length investors,
without any common ownership.
To be eligible for
the program, New Jersey-based
companies must have minimum trailing
12 month commercial revenues of
$500,000, derived from core business
activities, such as the sale of
technology products. Companies also
must be the developer or owner of
protected proprietary technology.
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