Insurance tax credit auction nets $84M for venture fund
Posted: 7:21 pm Thu, March 15, 2012
Daily Record Business Writer
ANNAPOLIS — A highly touted state venture capital program raised $84 million in an online auction of insurance premium tax credits Thursday, setting the stage for its first round of investments this summer.
Invest Maryland, which allows the state to sell tax credits to insurance companies to fill a venture fund to be targeted at high-tech companies, stood to raise $70 million if bids were made at the state’s price floor of 70 cents on the dollar in the first-ever online auction to raise such funds.
The program was Gov. Martin O’Malley’s signature jobs legislation during the 2011 session of the General Assembly, and could create thousands of jobs in the life sciences, biotechnology, cyber security and green technology industries,
“For the first time in our nation’s history, a state has successfully held an online auction to raise funds for a venture capital program and as a result, Maryland will infuse $84 million in venture capital into our innovation economy to create jobs,” O’Malley said in a statement.
Ten insurance companies were awarded tax credits in the auction: Agency Insurance, Chubb, GEICO, Hartford Insurance, IWIF, Med Mutual, Met Life, New York Life, Selective and Traveler’s. The companies can claim the credits in 2015.
Altius Associates, a London-based firm contracted by the state, now must choose “three or four” private venture firms to invest the state’s share of the money, which is two-thirds of the funds.
Maryland’s general fund will be reimbursed 100 percent of the principal investment amount and 80 percent of the profits. The Maryland Venture Fund will invest the remaining one-third, with those returns being reinvested into the program.
“This program brings maximum benefit for taxpayers, helps create the jobs and companies of tomorrow and builds an economic climate where the most promising ideas and innovations have a chance to mature,” Department of Business and Economic Development Secretary Christian S. Johansson said in a statement.
DBED has previously estimated that investments would be made in 40 to 80 companies a year. State investments will be made in early-stage firms where there is more risk, while the private venture capitalists will target more mature growth-stage companies.
The auction is the latest step in a program that has been operating for nine months, since being enacted by the General Assembly. In August, O’Malley named the Venture Fund Authority, a nine-member panel that oversees the administration and operation of the program.