Tech rules

Entrepreneur, Nov, 1998 by Cynthia Griffin

When they consider economic development, state governments know high-tech is king - and they're putting up hard-earned taxpayer dollars to grow these industries. Indeed, according to Robert Heard, president of the National Association of State Venture Funds, about $784 million in state funds has been committed nationwide to encourage high-tech development.

Entrepreneurs seeking capital from a state-rim venture fund are finding that while these programs operate like private funding organizations, subtle differences can work in their favor. "State venture funds are not going to be quite as driven to obtain a return on investment," says Dan Berglund, executive director of the State Science and Technology Institute (SSTI) in Columbus, Ohio, a national clearinghouse of state technology programs.

The following sample programs are helping high-tech entrepreneurs. To find a state-run or state-supported venture fund in your state, contact your state economic development agency.

MASSACHUSETTS

Massachusetts Technology Development Corp. seeks start-up and early-stage firms that create innovative technology products or services. Early-stage funding up to $500,000 is available to firms unable to obtain sufficient capital from conventional sources. Investments are made as debt, equity or a combination of the two. For more information, contact the Massachusetts Technology Development Corp. at (617) 723-4920.

CONNECTICUT

Connecticut Innovations, a private organization whose funding guidelines are governed by the state, teams small companies that have a product, process or innovative application with a university to apply for up to $200,000 in funding. The small business must be in one of several specified fields, such as biotechnology, computer applications or telecommunications. For more information, call (860) 563-5851.

NORTH DAKOTA

Technology Transfer Inc. (TTI) gives entrepreneurs an average investment of up to $100,000 to underwrite pre-production activities, including patent protection, prototype development and feasibility studies for technologically innovative products. If the project succeeds, entrepreneurs must pay 2 to 3 percent of sales quarterly to TTI until a previously agreed-upon amount is reached. Repayment of the investment is not required if the product does not succeed. For more details, call (701) 328-5326.

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Wasilla, Alaska, entrepreneur Marlene Cameron found out just how supportive state tech funds can be when she applied for and was awarded an $85,000 industry research grant in 1991 from the Alaska Science and Technology Foundation (ASTF). She needed the money to help expand the state's birch syrup industry. In 1995, she was awarded an additional $8,500.

"The [first] proposal was to help get [the birch syrup industry] off the ground; says Cameron, whose firm manufactures a line of birch syrup products that includes candy, sauces, and flavored syrups.

Although Cameron Birch Syrups and Confections is not a high-tech company, it received the ASTF grant to help bring birch syrup equipment to the state, says Cameron. She also used some of the money to start an association for syrup makers.

ASTF provides seed grants of $50,000 to $200,000 to help develop a concept or prototype, or begin commercialization of a technologically innovative product. In Cameron's case, ASTF was also trying to stimulate growth of an entire industry in Alaska.

If commercialization of a product is successful, the company repays 5 percent of gross revenues up to 1.5 times the amount of the grant. If the project does not fly, the investment need not be repaid.