Measuring Angel’s impact

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MHTA – Economic development leaders say Minnesota is catching up to its neighbors when it comes to attracting investments in emerging businesses. The news arrives as state legislators consider increasing the amount of tax credits available to angel investors.

In its annual report, the Minnesota Department of Employment and Economic Development (DEED) announced the angel tax credit program helped 113 startup firms raise more than $63 million. Those investments have helped create 102 new jobs. 2011 was the first full year for the program.

The Angel Tax Credit Program gives investors a 25 precent tax credit for money they pump into small technology firms. Last year, those investors received about $16 million in tax credit returns. The program actually ran out of money in November which has spurred supporters to push for additional funding beyond the $12 million allocated for 2012.

Both the Minnesota House and Senate have boosted program investment as they formulate their tax and jobs legislation. A Senate amendment also requires 40 percent of the tax credits be spent for investments in greater Minnesota companies. DEED officials say they have worked to increase awareness in greater Minnesota and the additional amount of investment jumped seven fold last year to 11 companies receiving more than $12 million in investments.

When economic development leaders first launched the Angel Tax Credit Program, they said it should help Minnesota compete with neigbhoring staets.

“What we were finding is that small emerging businesses in Minnesota, in order to attract investment, often had to move to Wisconsin,Iowa or North Dakota,” Jeff Nelson with DEED told Minnesota Public Radio.

Now there are more signs the neighbors have noticed. Tom Still, president of the Wisconsin Technology Council, wrote recently that Minnesota and Nebraska took his state’s tax credit law a step further by allowing out-of-state investors to collect credits.

“Venture capital is vital to a startup economy because angel groups and individual investors can only take most companies so far,” Still wrote in Milwaukee Business News. “Venture capital is often required to accelerate company growth – and to create more jobs. Unless angels can pass the baton to venture capitalists or find other exits for their investments, companies can stall out or move to other states in search of additional capital.”

Both Minnesota and Wisconsin leaders say angel investor programs are long-term job creation tools. That means it will likley take several more years before companies move from creating hundreds of new jobs to thousands.

MHTA will continue to monitor developments with this program and other initiatives as the Minnesota legislature nears the end of its regular session.

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