O'Malley seeks to boost funding for Maryland start-ups
Monday, June 7, 2010
In their wildest dreams, Maryland officials would love to launch the biotech equivalent of Google.
Gov. Martin O'Malley (D) is seeking to spur Maryland's economy by spawning hundreds of innovative businesses that ideally would create tens of thousands of jobs. O'Malley wants to expand the state's venture fund, raising $100 million for start-up and early-stage companies.
Maryland ranks at the top in the amount of federal spending per capita for research and development, at entities such as Johns Hopkins and the National Institutes of Health, state officials said. But unlike California and Massachusetts, state officials said, Maryland hasn't been aggressive enough in finding ways to capitalize on its research.
"As good as we are [in research], we have not been good in translating that into commercial ventures," said Christian S. Johansson, secretary of the state's Department of Business and Economic Development. State officials point to national studies showing an overall decline in venture and capital funding for small businesses. They said venture funding has been especially tough for Maryland, which has a high proportion of research in high-risk fields such as biotech and medicine.
"We're hoping to create as many dynamic, innovative companies that could grow into regional, national and global firms," Johansson added.
O'Malley is proposing to pay for the program, called InvestMaryland, by inviting insurance companies to pay forward their taxes in exchange for getting a tax credit in the future. The insurance companies would bid on the credits through an auction process.
Under the proposal, $50 million would go into the Maryland Venture Fund and another $50 million would go to private venture-capital firms, which would distribute the money to start-ups.
At this point, the proposal is little more than an idea. It cannot even be introduced into the legislature until the next session in 2011. And that likely would only happen if O'Malley, who is running against his predecessor, Robert L. Ehrlich Jr. (R), is reelected in November.
Still, some local economic development officials say the prospect of seeing a new funding stream for fledgling businesses is appealing.
"People forget curing cancer is a business," said Steven A. Silverman, director of the Montgomery County Department of Economic Development, which runs five business incubators that house about 30 start-ups. "If you can't get capital for your scientists, you're never going to get a product to market."
The state over the past several years has invested $25 million in the Maryland Venture Fund, which Johansson said has helped 200 companies create 2,000 jobs and resulted in a $61 million return to the state. But the legislature decided to redirect those funds to other budget items during the downturn.
State officials said a portion of the money would be set aside for minority businesses. "This is an opportunity where everyone wins," said Michelle D. Jackson, federal facilities director at the Maryland economic development department's Division of Business and Enterprise Development.