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State Aid: Should You Give a Hoot? (2.4)

Published on Nov 19, 2015

Find out the benefits and consequences of seeking aid from your state for your startup. Just how do states help entrepreneurs? Are there cons? Trust the Experts in venture capital.

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1.

One of The Biggest Lies?

"I'm from the government and I'm here to help"
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2.

Jokes aside, in VC, that isn't true!

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The states are trying a number of devices to incubate technologically oriented industry.

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4.

How?

  • "Hard" Inducements
  • "Soft" Inducements
  • "Backdoor" Financing 
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5.

Hard: Loans/Investments
Soft: Facilities/Services
Backdoor: Deductions

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6.

The Process:

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1. State agency puts up modest cash for grants, equity, and investment.

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2. The pot is sweetened with government procurement set-asides, technical assistance, state tax credits, and "incubator" space.

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3. Startups (supposedly) flourish and grow with aid in designated incubators/research facilities.

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Cons:

  • Financial impact = minor
  • Special contingent conditions
  • Restrictions in loan agreements
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Pros:

  • Loss ratios aren't a factor
  • Full repayment not necessary 
  • Less risk of "plug pulling"
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