Start-ups and growth-stage businesses in Maryland could gain access to millions in investment capital next year, now that the General Assembly has passed a scaled back version of Gov. Martin O’Malley’s InvestMaryland proposal.

The money will not be as plentiful as the Democratic governor and many in the business community had hoped. Still, private sector advocates said the measure stands to bring new funds to small, fledgling firms that venture capitalists have shied away from in favor of later stage, less-risky investments.

Assuming O’Malley signs the bill, the state plans to generate at least $70 million to invest in Maryland companies by auctioning off $100 million worth of tax credits to insurance companies at a reduced rate. That money would then be divided into two pools: One-third would be invested by the state and two-thirds would be funneled to select venture capital firms.

Those provisions are different from the proposal initially put forth by the O’Malley administration, which sought to raise $100 million for investments and split that amount fifty-fifty between the state and investment firms.

A mandate that venture firms have a physical office in Maryland was stricken from the bill; instead a nine-member panel must approve them based on their investment record and other factors.

The amendments to InvestMaryland were met with mixed reactions from advocates of the legislation, many of whom had traveled to Annapolis to testify before committees and meet with individual legislators.

Jonathan Cohen, chief executive of 20/20 Gene Systems, said the state should seek to invest the money in companies that only need a small infusion of cash to see results. His Rockville biotech, for example, could bring a blood test for lung cancer to market with $1 million or $2 million, he said.

“I think it’s just very important with both selecting the venture capitalists and the direct investments, [that Maryland] looks to fill voids in the financing environment and not just jump on the latest Wall Street bandwagon,” Cohen said.

Christian Johansson, the state’s secretary for the Department of Business and Economic Development, said the state would focus its portion of the investment on companies that require seed or smaller-sized investments.

The venture capitalists, however, have more autonomy. They must demonstrate a commitment to growing Maryland’s economy, but there aren’t stringent requirements on the size or nature of their investments.

Lisa Fadden, a lobbyist for the Montgomery County Chamber of Commerce, advocated for looser restrictions because she said that will make more firms willing to compete for funds. She reasons that the best investors, who may have access to other capital, will be deterred by too much oversight.

“You’re going to pull in investors who have probably never looked at Maryland before,” Fadden said. “The job growth will happen on the private side of this program because of the phase where the private sector invests.”

What’s the deal?

Scoutmob, a daily deal purveyor based in Atlanta, expanded to the District and nine other cities last week on the heels of a $1.5 million investment from Reston-based venture capital firm New Atlantic Ventures.

The reach of the company and the size of its funding round pale in comparison to those of competitors like Groupon and LivingSocial, both of which have raised hundreds of millions of dollars on multibillion-dollar valuations.

But co-founder and chief operating officer Michael Tavani said Scoutmob brings an alternate business model to the daily deals concept. Consumers activate the coupon on a mobile phone while inside the establishment and merchants pay a flat fee per customer.

“The first iteration of this space has been won hands down by Groupon and LivingSocial,” Tavani said. “But if you look at the history of the Internet, you’ll see a lot of the winners of the first space don’t become a winner in the long run.

New Atlantic Ventures Managing Partner Thanasis Delistathis said the firm would not have invested in a discount dealer with the same business model that the big players are following. He expects the differences at Scoutmob will help it thrive in a crowded marketplace.

“I happen to think that that model [of Groupon and LivingSocial] is not sustainable in the long term with those economics, so they will have to innovate and find different ways to serve the market,” he said.

GWU names business plan winners

George Washington University wrapped up its annual business plan competition on Friday after whittling down a record 112 teams composed of students, faculty or alumni that signed up to compete for $50,000 in prize money.

Four finalists took home awards: Lead Driver, a software company that creates customizable pamphlets for car dealers, claimed the $25,000 check. Bookstore Genie, a textbook rental service, won $10,000 for finishing second, as well as $10,000 for the best undergraduate venture.

Leafworks, a biodegradable plate distributor, took home $4,000 for finishing third and Ascend Air, a shuttle service based on blimps, finished fourth with $1,000 in winnings. A panel that included business executives, investors and Florida first lady Ann Scott judged the submissions.