Providence Wants to be “Startup Incubator”
Monday, November 21, 2011
The city of Providence will partner with local angel and venture investors Betaspring, Slater Technology Fund and Cherrystone Angel Group to create one-of-a-kind public investment initiative it believes can put the city on the map as a “startup incubator.”
The Innovation Investment Program (IIP) will be managed by the city and funded under the US Department of Housing and Urban Development (HUD). Believed to be the first equity investment program under HUD nationwide, the IIP fund uses federal dollars to provide capital to innovation-based, knowledge-driven companies to stimulate growth and job creation.
It enables the city to assume an equity position in growing companies, and is also designed to help companies attract matching investments from angel investors and other sources.
“Providence has a great pool of entrepreneurs, and their talents and ambitions will help to power our city’s economy. The IIP fund gives emerging entrepreneurs with ventures that have significant growth potential a good reason to stay and develop their businesses here in the capital city,” said Mayor Taveras.
Companies Will Get $50k for Staying in City
An advisory team made up of representatives from the local life science and technology sectors has been created to guide the city in the selection of appropriate high-growth companies. Members of the ad hoc group include Max Winograd (chair), Jason Harry, Charlie Kroll, Steve Lane and Pamela O'Hara.
The advisory team determined that the most effective, timely way to deploy these funds was to engage three investor partners from the local community, with proven expertise in new-venture creation and seed-stage investment.
The committee selected Betaspring, Cherrystone Angel Group, and the Slater Technology Fund to fill this role. Companies that receive an investment from one of these three investment partners and are willing to locate in Providence for at least one year will be automatically eligible for a $50,000 IIP investment. The first candidates eligible for this program are those that completed the summer 2011 Betaspring program.
“It is very exciting to be able to offer one-of-a-kind financing to creative start-ups,” said James S. Bennett, Director of Economic Development for the City of Providence. “This is tomorrow’s economy and we want to encourage these businesses and jobs right here, in Providence. Having this business tool allows us to attract and keep the high-growth, high-skilled jobs that could easily be attracted elsewhere and that will make Providence a magnet for this development.”
Investments will be made as a $50,000 convertible note – a common early stage financing tool. This investment vehicle gives the city an equity stake in the company, and the city receives a return on investment when the company repurchases shares, is acquired, or completes an initial public offering (IPO).
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