Will Price of Next Frontier Capital testified to the Senate Tax Committee in support of HB 187 to increase the pool of risk capital available in Montana

Yesterday, On behalf of Next Frontier Capital http://www.nextfrontiercapital.com/ I testified to the Senate Tax Committee in support of HB 187. Rep Jim Hamilton (D) of Bozeman is sponsoring the bill in an effort to increase the pool of risk capital available in Montana. He deserves our support and gratitude for his leadership and vision. If after reading the post below you feel inclined to support HB 187, please email Rep. Hamilton via [email protected]. Additionally, please reach out to Sen Leader Scott Sales [email protected] .

What is the bill?

HB 187: Establish An Angel Investor/Venture Capital Tax Credit

What does it hope to accomplish?

Simply put, the goal is to attract risk capital to MT above and beyond the organic rate of development. Why does this matter? Brookings Institute research finds that advanced industry jobs earnings have increased almost five times as fast as those in the overall economy, offer a significant wage premium at every level of education, offer powerful multiplier effects where every new advanced industry job supports more than two others, and enjoy average wages of $90,000. Moreover, advanced industry jobs require capital and talent, both of which are in relatively limited supply in Montana relative to neighboring states.

In brief, the bill provides income tax credits to investors in qualifying businesses, ie high-tech, advanced industry companies, and venture funds. The bill calls for investors to receive a 30% tax credit, $750,000 lifetime, and up to $75,000 per year. For example, a $1m investment in a qualifying fund or business would create a MT tax credit of $300,000 to the investor with the ability to take the deduction over ten years with a max credit in any one year of $75,000.

Who Testified?

In addition to NFC, SiteOne’s CEO, Stan Abel, the Chamber of Commerce, the MT Bankers Association, the MT Photonics Industry, Liz Marchi of Frontier Angels Fund, Dennis O’Brien of Linn Grove Capital, Pat LaPointe, Blackmore Sensors’ Alex Fichtler, and the Montana Small Business Alliance testified in support of the bill. Don Beeman, the former CEO of Ligocyte, and others wrote letters in support. Thank you to all.

Precedent?

Today, 26 states have enacted legislation to motivate equity investors to invest in high-risk, early-stage ventures in an attempt to stimulate state economies. Policy makers believe that there is a market failure in that many entrepreneurial companies are prevented from exploiting growth opportunities due to a lack of risk capital. This perceived failure in risk capital markets is addressed by either directly increasing the supply of risk capital or by increasing the expected returns to investors through decreasing taxation, improving exit markets, or reducing barriers to entrepreneurship. The most common formula is to offer tax relief on the amount invested in early stage ventures, which has an immediate effect on the annual income tax of the investor (IIJ Study: Seeding Venture Capital).

Expected Outcome?

The Bill passed the House and received broad support from both the House Tax and House Appropriations committees. The bi-partisan support for the Bill is encouraging to see and is explained by the recognition of both the current lack of equity capital in MT and the relationship between risk capital and high-wage job creation.

We applaud Rep Jim Hamilton for working closely with the high-tech and private capital sectors to work to create a bill that will make MT more competitive and capital more readily available.

Will Price is the founder of Next Frontier Capital.
"Our focus is to partner with mission-driven, talented entrepreneurs to build Montana technology companies of impact, utility, and value"

http://www.nextfrontiercapital.com/