January 7, 2013
SBA Licenses First Fund In Early Stage Capital Initiative
WASHINGTON – Hatteras Venture Partners of Durham, N.C. is the first licensee in the Early Stage Innovation Funds initiative, a part of the U.S. Small Business Administration’s (SBA) Small Business Investment Company (SBIC) capital investment program.
Hatteras Venture Partners (HVP) (www.hatterasvp.com), a venture capital firm based in Research Triangle Park, N.C., focuses on seed and early stage opportunities in biopharmaceuticals, medical devices, diagnostics, and related opportunities in human medicine. HVP was selected because it demonstrated that it has a strong team with a clear, focused strategy and a track record investing in an undercapitalized region.
“The New Year is the perfect time to celebrate new businesses and win-win opportunities like the Early Stage Initiative,” said SBA Administrator Karen Mills. “The Early Stage Innovation Funds initiative promotes American innovation and job creation by encouraging private sector investment in early stage small businesses. And by licensing funds like Hatteras Venture Partners IV, we can expand entrepreneurs’ access to capital at no cost to taxpayers.”
High-growth, early stage companies commonly experience a gap in the availability of funding between $1 million and $4 million levels. This gap is often referred to in the venture capital industry as the “Valley of Death.” Since January 2006, less than 10 percent of all U.S. venture capital dollars went to seed funds investing at those levels, and approximately 70 percent of those dollars went to just three states: California, Massachusetts, and New York.
The Early Stage Innovation Funds initiative targets this gap by licensing and guaranteeing leverage to funds focused on early/seed stage investments. SBA’s improved licensing times under its SBIC debenture program complement the Early Stage Innovation Funds initiative.
SBA has committed up to $1 billion in SBA-guaranteed leverage over a five-year period for selected Early Stage Innovation Funds using its current SBIC program authorization. Licensed Early Stage Innovation Funds can receive up to a maximum of $50 million in SBA-guaranteed funding to match their privately raised capital. Early Stage Innovation Funds must invest at least 50 percent of their investment dollars in early stage small businesses.
Recently, SBA called for applications from fund managers for year two of the five-year initiative. The deadline for filing the Management Application Questionnaires (MAQs) for year two of the Early Stage Innovation Fund program is March 1, 2013, 5:00 p.m. EST.
Application details are in the call notice published in the Federal Register: https://www.federalregister.gov/articles/2012/12/18/2012-30431/small-business-investment-companies-early-stage-sbics.
SBICs are privately-owned and managed investment firms that are licensed and regulated by SBA. SBICs use a combination of funds raised from private sources and money raised through the use of SBA guarantees to make equity and mezzanine capital investments in small businesses. There are nearly 300 SBICs with more than $18 billion in capital under management.
More information on the Early Stage Innovation Funds initiative and the regulations governing these SBICs may be found at www.sba.gov/inv/earlystage.
For more information about the SBA’s Investment Division, SBIC program, Impact Investment Initiative and Early Stage Innovation Funds, go to www.sba.gov/INV. The web site offers much useful information including segments for: SBIC Applicants, SBIC Licensees, Private Partners & LPs, and Entrepreneurs & Small Business Owners. The site also includes useful SBIC forms, up-to-date news and reports, and detailed information and descriptions of the Impact Investment Initiative and Early Stage Innovation Fund.
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