Startups getting financial help

by John Callegari Published: May 25, 2012 Local investors and state legislators are at work on a pair of programs that would boost investment in Long Island startups needing a financial leg up. Which, of course, is most of them. The initiatives come as venture capital investment in New York state waned in the first three months of the year, posting a 40 percent dollar drop over the fourth quarter of 2011, despite an increased number of deals. While New York state edged out Massachusetts to become the countrys No. 2 tech capital during that period after, and well behind, Silicon Valley most of that growth has stemmed from New York City. One initiative, by the Long Island Angel Network, seeks to raise $1 million from the groups 17member board, which includes CA Technologies founder Russ Artzt, Steve Winick of TopSpin Partners and Jove Equity Partners CEO David Calone. That money would be leveraged with funds from other investors to aid as many as 20 local startups. The group expects to have the fund up and running by September, according to Michael Faltischek, the groups chairman. Thats good timing: The Angel Network fielded pitches from almost a dozen startups at its most recent meeting, including a company with organic hair care products and a software firm that hopes to help travelers negotiate foreign cuisines. A proposal in Albany seeks to bolster investment by offering tax incentives to those who opt to invest their money in New York ventures. The bill, backed by Assemblyman Micah Kellner, D-Manhattan, and Sen. Joseph Robach, RRochester, would provide a tax credit worth 25 percent of investments between $25,000 and $1 million. Eligible investments must be made in a startup company with revenue of less than $1 million and no more than 25 employees 60 percent of whom work in-state. The startup also must be in New York for fewer than seven years. If the amount to be written off exceeds the total taxable income in any given year, the remainder can be spread across three subsequent years. Under the legislation, the tax credit would apply to tax years beginning Jan. 1, 2013. The credits would serve as a cushion against risk for investors like Calone of Jove Equity, who said he would increase funding for New York state and Long Island-based startups if the bill makes its way into law.

The bills timing, however, puts it at a disadvantage. Recently introduced and sent to committee for review, it would have to make it to the floor of both chambers before the end of the legislative session on June 21. And holding the bill until the Legislatures January restart would push the proposals launch back by a full year. On its face, it looks like a good bill, but it was just introduced, so it still needs to be vetted, said Anthony Figliola, vice president of Empire Government Strategies, a Uniondale-based lobbying firm. If it can get more sponsors and receive a push from the investor communities, it can get through this year, but that would require Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos to be on the same page. But Kellner said he was optimistic about getting some movement on the bill before the summer recess, noting that he has bipartisan support in both the Assembly and Senate. He said most of his colleagues understand the need for the job creation the tax credit would support. The assemblyman crafted the legislation to mirror a program in Connecticut. Similar tax credits have also been implemented with success in Wisconsin, where angel investing increased from $30 million to $180 million within five years of the credits implementation. Faltischek lauded the bill, saying the angel network plans to publicly support it. Things like that really get people to undertake a risk, Faltischek said.