UPDATE: Lawmakers in the Iowa House on Tuesday passed a the bill. It is now before the Senate.
By Pat Shaver
Lawmakers are expected to consider a bill this week that would give incentives to start up companies throughout the state.
The bill, also known as the Iowa Angel Investment Tax Credit Program, would help leverage $10 million per year in new seed capital investments in Iowa-based small emerging businesses with high-growth potential.
Iowa had similar benefits a few years ago, though state officials decided to invest that money elsewhere.
The bill would allow the Iowa Department of Economic Development to award $2 million annually in angel investment tax credits for investments made in Iowa businesses that have a net worth of $5 million or less. The tax credit would be 20 percent.
“One of the No. 1 challenges in starting new business is the ability to raise capital necessary to allow them to start,” said Curt Nelson, president and CEO of the Entrepreneurial Development Center in Cedar Rapids. “Any of the things that the state can do help with the amount of money that individual angels are able to put into Iowa to start up business surely is going to help.”
“If we’re going to get better, we’ve got to get better at the whole capital creation,” Mr. Nelson said. “From the EDC’s perspective, it’s an essential component.”
The bill, House File 688, was put on the Ways and Means committee calendar, which means that it’s ready for the lawmakers to caucus in the house. Officials expect the bill will be considered this week.
John Slump, co-Founder and chief financial officer of Corvida Medical (formerly J&J Solutions) in Coralville, said an incentive like the Iowa Angel Tax Credit would have been a huge help while he was starting his company. Corvida Medical manufactures medical devices.
After graduating from the University of Iowa in May 2008, Mr. Stump spent part of 2008 and all of 2009 fundraising to start his business. They were able to get the investments, though other startup businesses may not be as persistent.
Mr. Slump said it was particularly difficult as a beginning entrepreneur to raise money in Iowa.
“It’s particularly important to me. I feel that looking back at my tumultuous 2009, I just know it would have come sooner, it would have come quicker, had we had a program like this,” Mr. Slump said.
Mr. Slump has been contacting state lawmakers over the last few weeks urging them to consider passing the bill.
“This is just another stepping stone to make our state more competitive,” Mr. Slump said. States like Illinois, Minnesota, Kansas and Wisconsin all have angel investment programs, which could be a reason why a business would start there rather than Iowa.”
The bill would offer incentives on capital formation at the beginning of a company’s development, which is often the most challenging time to get capital. It would also focus on non-institutional investors like friends and family or individual angels.
“This is just another component that we need to implement to make sure we attract and retain our high growth tech companies,” he said.
That, he added, would translate into more quality jobs and tax revenues in Iowa.