Hundreds Support Bill to Fuel $100 Million Investment in Maryland's Innovation Economy

Venture capital expert lauds proposed InvestMD program as national model

Feb 17, 2011, 16:55 ET from Maryland Department of Business and Economic Development

ANNAPOLIS, Md., Feb. 17, 2011 /PRNewswire/ -- More than 400 entrepreneurs joined renowned educators and business leaders in Maryland's state capitol of Annapolis yesterday to show support for a bold initiative to infuse $100 million in the State's Innovation Economy. Heralded by experts as a national model, InvestMaryland - SB 180/HB173 - seeks to create a public-private partnership to fuel investment in Maryland's start-up and early stage companies, effectively quadrupling the State government's previous investment and spurring a culture of organic growth in the State. Among its benefits, the program has the potential to create thousands of jobs in Innovation Economy sectors – life sciences and biotechnology, cyber security/IT and clean/green tech and attract billions of follow on capital, all with no immediate cost to taxpayers. It mirrors many aspects of a federal program to accelerate high-growth entrepreneurship nationwide, The Startup America Partnership, which President Barack Obama launched last month.

In a strong show of support, Maryland Governor Martin O'Malley testified before Maryland Senate and House committees, calling on legislators to pass InvestMaryland, which "might just be the difference between helping grow the next MedImmune or Human Genome Sciences here in Maryland, or watching it happen in another state or country."

Joining Governor O'Malley at the witness table were a number of international business and education leaders and industry experts, including Johns Hopkins University President Ron Daniels, University System of Maryland Chancellor William Kirwan; Greater Baltimore Committee CEO Don Fry, Maryland Department of Business and Economic Development Secretary Christian S. Johansson and Dr. Julia Sass Rubin, a Rutgers professor and national expert on state-sponsored venture capital programs.

Johns Hopkins President Daniels testified that University researchers were awarded 44 patents, 35 invention disclosures and executed 104 license and option agreements in FY 2010, with the majority in the biotechnology and medical device fields.

"Maryland is recognized as one of the nation's leaders in science and technology research," President Daniels testified. "At the same time, Maryland's existing technology companies continually experience significant difficulties accessing venture capital and needed cash flow for their research enterprise. It would be extremely helpful to support fledgling companies in their early years in order to encourage the formation of startups in the state."

"Two aspects of InvestMaryland make it particularly strong and a great model for other states to emulate," said Dr. Sass Rubin, a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "First, the program requires private venture funds that receive investments through this program to return all of the State's principal investment and 80 percent of the profits, as they would do for any private-sector investors.  Second, the program uses an auction to monetize the tax credits, which increases competition and efficiency.  Both of these provisions ensure that Maryland's taxpayers are getting the most for their investment."

InvestMaryland is a premium tax credit program designed to fuel $100 million in venture capital investment in Maryland businesses by auctioning premium tax credits to insurance companies that would bid between $.70 and $1.00 on each credit. The funds would be split, with $50 million deposited into the State's 15-year-old Maryland Venture Fund (MVF). Over its life, the MVF has invested $25 million into hundreds of start up and early stage technology and life sciences companies, generating a $61 million return. The remaining $50 million would be placed with three to four private venture capital firms that will be selected by an independent third-party, which will return 100 percent of the principal investment to the State and 80 percent of the profits. Insurance companies will be able to claim tax credits beginning in 2015.

"The structure of InvestMaryland is unique in that it seeks the maximum benefit for taxpayers, while investing in our Innovation Economy, fueling the jobs and companies of tomorrow and creating in an economic climate where entrepreneurs can thrive," said Secretary  Johansson. "Our goal is to invest in the most promising companies, so that we can create an evergreen fund that will ensure a continuous supply of capital for future investments."

To galvanize support, an advocacy effort - InvestMaryland Day - was held before the hearings and drew hundreds of legislators, entrepreneurs, venture capitalists and business leaders. The advocacy event featured a panel discussion moderated by CNN commentator and Digital Lifestyle Expert Mario Armstrong and included entrepreneurs like Dr. Joseph Amprey, Chief Business Officer of Gaitherburg-based biotherapeutics company Zyngenia who formerly ran MedImmune's venture fund. Keynote remarks were given by Steve Dubin, CEO of Martek Biosciences Corp., one of Maryland's home-grown companies and a product of the University of Maryland System. The company recently announced its sale for more than $1 billion to Royal DSM N.V., the global life sciences and materials sciences company headquartered in the Netherlands.

"The InvestMaryland program excites me not only because we will be helping to fund many promising start-up companies, but because of the impact that the State can have by leading deals and encouraging other investors to co-invest with and within the State," said Dubin, who is also Co-Chair of the Maryland Economic Development Commission. "InvestMaryland will attract venture funding to Maryland as well as companies that will want to locate in a State where early-stage money is more readily available."

Maryland has an outstanding infrastructure to support an Innovation Economy. Last month, the Milken Institute again ranked Maryland #2 in the nation for technology and science assets. According to study results, while Maryland received high rankings in human capital investment, research and development inputs, technology and science workforce, and technology concentration and dynamism, it lagged behind other states in risk capital and entrepreneurial infrastructure, demonstrating the need for InvestMaryland. The Index provides measurements of the technology and science assets for states, ranking them on their ability to foster and sustain a technology sector, which research has shown is a crucial factor in determining a region's future economic success. The previous study was conducted in 2008.

SOURCE Maryland Department of Business and Economic Development