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A group of early-stage Indiana companies is set to receive promised investment funding that has been in limbo since April amid an ongoing Elevate Ventures funding freeze.
On April 24, Gov. Mike Braun announced a funding freeze for Elevate Ventures, an Indianapolis-based organization that invests federal and state money into Indiana companies on behalf of the Indiana Economic Development Corp. Braun cited concerns about transparency as a reason for the freeze.
The freeze includes a round of federal funding from the State Small Business Credit Initiative, a U.S. Treasury Department initiative to invest in local small businesses. Elevate officials have said about 80% of the money it invests in early-stage startups comes from SSBCI funding. Those deals are approved by the IEDC before any companies receive money.
At the Indiana Economic Development Corp’s quarterly board meeting Wednesday—held just two days after Braun removed all the IEDC’s former board members and replaced them with eight of his own picks—the board’s entrepreneurship committee approved the release of $5.34 million in SSBCI funding. That money will be used for investments that had already been approved by both the IEDC and Elevate Ventures but had not yet closed when the funding freeze took effect April 24.
The IEDC said the $5.34 million will support a “small set of investments,” but it did not say how many companies will receive investment funding and it did not identify the companies.
But the IEDC specified that the funding freeze for Elevate Ventures is still in place, and that no other investments will be eligible for funding.
Also, at Wednesday’s meeting, the IEDC board’s entrepreneurship committee updated the investment policy for the Indiana Angel Network Fund III LLC—the investment fund managed by Elevate Ventures through which the SSBCI money flows.
The updated policy still names Elevate Ventures as the manager of the fund, but the updates tighten the eligibility requirements for young companies receiving investments from that fund.
Under the previous version of the investment policy, companies based outside of Indiana were eligible to receive investments from the fund if they committed to, or were in the process of, establishing a significant presence in the Hoosier state. A “significant presence” was defined as having at least one physical office and one full-time employee in Indiana. The previous version of the policy also allowed out-of-state companies to receive an investment and then use that money to establish their significant presence in Indiana.
Under the new policy approved Wednesday, companies must be based in Indiana in order to receive an investment—having an office or a couple of employees won’t be enough. The new policy specifies that Elevate Ventures must determine, and the state must approve, that a company does indeed have its headquarters here.
“We want the ‘significant presence’ to be the domicile being here,” Indiana Secretary of Commerce David Adams told IBJ after the committee meeting. “If they have offices in other locations, great—but we want the headquarters.”
It’s unclear how the investment policy changes will affect a high-dollar annual pitch contest that Elevate Ventures created two years ago as part of its Rally innovation conference.
The Rally pitch contest offers startups an investment of up to $1 million to each of five winning startups. That $1 million includes up to $500,000 in co-investment from Elevate Ventures, which must be matched by other investment secured by the winner.
Of the 10 companies that have won the pitch contest to date, only two were Indiana-based. The other eight were all based elsewhere, though most of them have since established a “significant presence” in Indiana as defined by the former investment policy.
Elevate Ventures CEO Christopher Day did not respond to an IBJ email and text message seeking comment on the investment policy changes.
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