10. How do I apply to the Maryland Venture Fund?

1. Who and what is the Maryland Venture Fund?
Maryland Venture Fund is the venture capital arm of the State of Maryland that invests in seed and early-stage technology companies.  We make direct investments in advanced technology and life science companies that currently, or are prepared to have their primary offices in the State of Maryland.

The Fund typically invests from $50,000 to $500,000, investing money from one of two investment vehicles (Challenge or Enterprise; see # 4 for more detail) in a given company over one or more rounds of financing.

2. What is the structure and size of your fund?

The Maryland Venture Fund is an evergreen fund which, by definition means we receive a funding allocation each year.  Hence, we invest on an ongoing basis. While the specific amount varies annually to a degree, our fund for FY2006 (commencing July 1, 2005) is $7 million.

Since the Fund’s inception, we have invested $35 million in over 175 information technology and healthcare companies, returning $55 million to the State of Maryland. Additionally, the fair market value of existing portfolio companies is in excess of $xx million, and we have a pipeline of companies that are well positioned for initial public offering or acquisition.

3. We are headquartered in California, but are looking to open a sales office in Maryland.  Would we qualify for funding?
The primary offices must be in Maryland.  Although you may apply, any funding would be contingent on relocation.

4. What are the differences between your Challenge and Enterprise investment vehicles?
Typically, we make seed investments of $50,000 to $150,000 at the Challenge level, and early stage investments of $150,000 to $500,000 at an institutional round of financing, through the Enterprise Fund.  There is a minimum 1:1 matching requirement for Challenge investments, which may include friends and family monies.  For Enterprise investments, a minimum 3:1 match is required, which may only come from a venture capital firm or investor of similar sophistication.

Challenge investments are structured as convertible debt with specific royalty repayment criteria, whereas Enterprise funds are usually pure equity investments where we obtain an ownership position in your firm.

5. What is or what is not acceptable for the matching funds requirement?
The Challenge program requires that any friends, family, and angel investors provide direct cash investment into the company.  We have asked for documents that show evidence of co-investment (e.g., bank receipts/statements, checks from investors).  In-kind matching, or sweat equity is not considered an acceptable match for Challenge or Enterprise funding. Generally, grants from federal, state, or county jurisdictions are not counted as matching funds.

As for the Enterprise program, we qualify the venture capital firm or other party as a suitable co-investor. We generally do not accept corporate investment or angel investment as matching funds but reserve the right to reconsider based on any number of factors.

6. What do you consider to be an advanced technology company, and what are you looking for?
We invest in a broad swath of technology companies comprising various software and hardware platforms.  Firms that appeal to us have a deep, proprietary technological foundation that drives the business. We seek innovators, not “me too” companies merely offering another approach to solving a well-parsed problem.

We typically invest in product, rather than service-driven companies with a large, nascent market opportunity, the unique potential to exploit it with high competitive barriers, the ability of management to execute, and the ability to work with the Maryland Venture Fund to execute the business plan.  

7. How competitive is the application process?
The application process is competitive. We review over 250 business plans each year, and given our annual investment budget and our tendency to set aside a portion of these monies to follow-on investments in our existing portfolio companies, we can only invest in a small number of companies that apply for initial funding from Maryland Venture Fund.  In 2005, we invested in over 15 new companies and placed additional investments in over 10 existing portfolio companies.

8. What ancillary services does Maryland Venture Fund provide its portfolio companies?
The support we provide stretches far beyond financing and should not be understated.  First, we can help raise your company’s profile and provide introductions on your behalf.  Our scope of relationships exposes our portfolio companies to a vast network of public and private sector constituents—including numerous reputed venture capital firms throughout the region with which we co-invest, as well as attorneys, bankers, consultants, and industry executives.

Second, we provide ongoing mentoring and operational assistance to help nurture your firm through its launch and growth stages.

9. What is the turnaround time and process once I submit my business plan?
We strive to initiate contact within two weeks of receipt of your plan.  As circumstances may vary, it may occasionally take longer and we appreciate your patience. Following the initial review, we may request a teleconference or office meeting to get more information to help with due diligence on your venture. 

Once due diligence is conducted, and our investment team has met with the company and thoroughly analyzed the technology, market and competition, an investment decision is made.