Charleston Regional Development Alliance

Berkeley, Charleston & Dorchester Counties

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Venture capital program may lure new companies

Dec. 13, 2007
Charleston Regional Business Journal
By Molly Parker
Several new knowledge-based companies could be on their way to South Carolina as a direct result of a state-backed investor capital fund the Legislature created three years ago.

Almost $50 million, supported by state tax credits, has been divided between four venture capital firms that will in turn invest money to help companies doing business in South Carolina.

Those firms are close to signing deals with three or four companies that could relocate to the state, said Harry Huntley, executive director of InvestSC, the tax-exempt entity that acts as the middleman between the state and private investment firms.

“I can’t give any names out because we don’t have signed deals,” Huntley said this week. “These are companies that are already up and going and active businesses that would move here. You’re talking about companies already generating revenues of several million dollars a year.

“I know one fund is looking at bringing a company from Europe and three or four companies are looking at moving to South Carolina from other states,” he said. “These are not hourly wage people. These are highly technical, highly skilled people who come with salaries commensurate to that.”

In 2004, the General Assembly passed the Venture Capital Investment Act, which called for creation of the seven-member Venture Capital Authority as an arm of the S.C. Department of Commerce.

Last year, the authority picked four diverse firms that specialize in investments at all levels on the business timeline. The Legislature tweaked the act this past session in order to close the loan transactions, the S.C. Department of Commerce said.

Because state law prevents direct investments in private business, InvestSC was created to act as the borrowing agent for the state, Huntley said. The private firms, in their normal role, choose their investments without input from the state.

Program mandates require the company to have an active presence in the state and decree that no single state-backed investment may exceed $5 million or 15% of a company’s committed capital, whichever is less.

Already offered in varying forms in numerous states across the nation, the venture capital program is meant to charge South Carolina’s economy by encouraging industry growth that teams with the state’s existing resources and available work force, Huntley said.

It is aimed at companies that have already gained a foothold in the market but need an extra push to grow to the next level, a period during which it is typically more difficult for a business to secure capital, Huntley said.

“You get a lot of things ready to go but then the companies need to get to that next point and it takes money and expertise in order to do it,” he said. “These venture capital firms can fulfill some of that need. The end goal of all of this is to create economic development opportunities in this state. That’s the bottom line. There’s a real good chance this will be done without costing the state any money.”

The ultimate goal is that the investments will generate enough cash flow to pay down the bank loan within 15 years, Huntley said, and also create enough revenue to establish a self-sustaining program in which past investments will pay for future ones. 		related information