Capture venture capital to boost high-tech startups

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General Business

New sources of capital for high-tech companies bode well for NJ’s innovation economy.

Business innovation groups and state government entities trying to improve New Jersey’s attractiveness to high-tech startups have several new sources of investment capital to discuss when touting the benefits of the state for high-tech companies and workers.

“This is an exciting time for New Jersey’s innovation ecosystem as the state continues to gain momentum from actions taken over the past year,” said Tim Sullivan, CEO of the New Jersey Economic Development Authority (NJEDA).

NJEDA announced in March that New Jersey had fallen from 12th to 9th place in the nation based on venture capital dollars invested by state. New Jersey innovation-focused companies secured $5.5 billion in 219 venture capital deals in 2021, up from $1.7 billion in 154 deals in 2020, according to PitchBook. New Jersey’s share of the Northeast market also increased by 1.4 percentage points in 2021 to 5.5%.

“Supporting start-up entrepreneurs and innovation-based entrepreneurial businesses is key to achieving a strong, diverse and inclusive innovation economy,” says the Commission’s Executive Director for Science, Innovation and technology, Judith Sheft.

In April, the NJEDA Board of Directors approved the creation of the New Jersey Innovation Evergreen Fund (NJIEF), which will raise public and private capital to invest in New Jersey-based companies. The NJIEF will make the state an equity investor in startups deploying up to $600 million in companies with professional venture capital groups. Sullivan says the new fund is a way to ensure more businesses start, grow and stay in New Jersey by providing strategic support from aligned corporate partners. NJEDA designed the Evergreen Fund, created by the NJ Economic Recovery Act of 2020, to incentivize investment in emerging businesses, Sullivan says, while creating opportunities for mentorship, networking and education to help them succeed.

NJEDA also made improvements to the state’s Angel Investor Tax Credit program last summer. In addition to increasing the tax credits available each year under the program from $25 million to $35 million, the agency doubled the amount of tax credits available per qualifying investment to 20%, adding a 5% bonus credit for investments in minority or women-owned technology. business and technology businesses located in an Opportunity Zone or New Market Tax Credit Census Zone. Last year, NJEDA approved a record 559 angel investor tax credit program applications, an increase of nearly 400% from 2020, representing an injection of more than $100 million. dollars at 39 New Jersey companies, a more than triple year-over-year increase in investment and tax credit totals.

Sullivan says Governor Murphy’s goal of taking over New Jersey’s role as an innovation leader received a boost in September when NJEDA announced plans for a new entity, HAX LLC in Newark. NJEDA is partnering with Princeton-based SOSV in this endeavor. SOSV is a global venture capital firm specializing in early-stage startup development programs. It focuses on technology that promises good for humanity and the planet, and on cross-border markets, especially in Asia, that are ripe for explosive growth. The establishment of HAX’s headquarters in Newark provides New Jersey with one of the most active angel and early-stage venture capitalists in the world. To date, the HAX companies have collectively raised a total of $1.8 billion, of which $105 million has been invested by SOSV.

NJEDA intends to invest $25 million in HAX LLC. SOSV plans to take 100 companies through the HAX program over five years and invest $25 million in startups. With an initial investment of $250,000 from SOSV, a company would have the potential to access up to $50 million in follow-on funding to support its growth. SOSV will also provide college and university mentoring, local manufacturing sourcing, engage in workforce development, and establish local advisory boards.

The Commission on Science, Innovation and Technology also works with universities across the state to share information about available funding and other resources with researchers. “The commission also continues to roll out new grant and technical assistance programs to foster innovation and support New Jersey entrepreneurs,” Sheft said. “Over the past year, the commission has launched several programs that offer up to $150,000 in grants to help companies in the technology, life sciences and clean energy sectors move towards marketing. The response from New Jersey’s entrepreneurial community to all of these programs has been enthusiastic, especially given the strong statewide demand for seed funding from members of New Jersey’s innovation community. .

Keeping talent out of the state and keeping venture capital flowing in are closely related challenges. The New Jersey Research and Development Council (R&D Council) is trying to leverage the state’s history of government, industry and academia working together to retain and grow high-tech companies and to ensure that the talent pool does not drain from the state. “Through this history, this collaboration and these talents, New Jersey has become an ideal incubator for the development of startups and high-tech companies, helping the state to remain a world leader in innovation,” said Anthony. S. Cicatiello, President and CEO of the R&D Council. “The R&D Council is proud to cultivate and honor this talent through our programming that supports current and future innovators across the state.”

Cicatiello cites the Governor’s STEM Scholars program, which supports high-achieving STEM students in New Jersey high schools and colleges. “By connecting students with STEM representatives from the research and innovation communities and highlighting STEM opportunities in the state, we are setting them on the path to becoming the next generation of New Jersey STEM professionals” , says Cicatiello. The R&D Council’s goal is for the New Jersey STEM Pathways Network, a strategic public-private alliance created in 2014 by the Secretary of State for Higher Education, to be “the connective tissue for high-quality, kindergarten to college. By bringing together a network of more than 500 cross-sector STEM leaders, across six regional STEM ecosystems, we support STEM passion for in-school and out-of-school students through high-quality programming.

TechUnited, formerly the New Jersey Tech Council, will add investment capital to tech startups this year with $1 million in federal funding it recently received to launch its startup studio, BetterFutureLabs. President and CEO Aaron Price said TechUnited is committed to giving New Jersey startups “an unfair advantage.” This startup studio will accelerate TechUnited’s BetterX programming by providing financial support, mentorship, and valuable corporate connections. Price credits Rep. Bonnie Watson Coleman, D-12th District, and U.S. Senator Robert Menendez, D-NJ, for helping secure the funding.

Price notes that TechUnited announced three startup challenges this year to address issues in New Jersey communities:

BetterConnected Newark Challenge is powered by Audible and focuses on accelerating tech startups with solutions for Newark-based Main Street businesses.

BetterPlanet Challenge is powered by PSEG and has launched its third annual challenge around decarbonization.

Wellness Challenge is powered by RWJBarnabas and Labcorp to develop startups that build the modern patient experience.

“Now is the time to build great businesses in New Jersey, keep our incredibly diverse and well-trained talent in the state, and raise our investing and startup profile nationally,” says Price. .

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