Donald J. Rainey, a partner in the Reston office of North Carolina-based venture firm Intersouth Partners, said he's skeptical that such a plan would have an impact on venture funds, but he has seen how much it can influence angel investors. North Carolina created a similar incentive in the mid-1990s when Rainey was an entrepreneur there. He said he found it much easier to persuade people to part with their money when they were guaranteed to get some back.
Ehrlich's plan targets only angel investors but is broader than Feldman's in that funding could go to any technology start-up, not just biotech firms. Anyone with a net worth over $1 million could apply for a 45 percent tax credit on investments over $50,000. The legislation would not allow any investor to recoup more than $200,000 in one year and would cap the program at $8 million per year.
"We're trying to institute a cultural change in the technology community here in Maryland," said Christopher C. Foster, the state's chief technology officer. "We're trying to make it more entrepreneurial, and we're trying to tell people it's okay to take risks."
Bolstering technology entrepreneurship is not a new endeavor in Maryland. The state sponsors 19 incubators that nurture tech start-ups, and its Department of Business and Economic Development is often the most active venture investor in the region.
A study last July found that 19 states have established tax credit programs to spur investments in start-ups.
Ohio has had a tax incentive program for angel investors in place since 1996. Tax credits totaling $11 million have been issued to 1,470 investors who pumped more than $45 million into 131 companies. But there are no statistics on how many jobs that money helped create or how the start-ups fared.
Still, John May, co-founder of the Dinner Club, a Washington organization of angel investors, describes such programs as an "interesting experiment." They may not make conservative investors dump their municipal bonds for the newest incubator company on the block, he said, but they could push some wealthy people to take a gamble on a promising start-up.
"I'm a big believer that all of these tools are useful," May said, "and I'm a mild advocate of them."
A bill moving through committees in Virginia's legislature would essentially remove risk by guaranteeing a 10 percent rate of return to pension funds, endowments and other institutions investing in venture capital funds that promise to pump money into tech firms in Virginia. The sponsor, Del. Harry R. Purkey (R-Virginia Beach) said he's hoping the appropriations committee will allot $250,000 for a pilot year of the program.
Back in Maryland, Feldman and aides to Ehrlich said they are optimistic that with similar bills coming from both sides of the aisle, some version will be passed this year.
Cohen of 20/20 GeneSystems is cheering them on. His company put a product on the market that screens suspicious powders for bioterrorism substances. But the diagnostics test for lupus is still several years out. With a bit of extra funding, he said, "I think we could cut the time in half."
Ellen McCarthy writes about the local tech scene every other Thursday. Her e-mail address is mccarthye@washpost.com.
