IEDA steering $53M in federal funds to Iowa startups
Now is a good time to have a business idea in Iowa.
The U.S. Department of Treasury announced it will give the state $96 million to support small businesses, with programs for startups receiving the bulk of the money.
The Iowa Economic Development Authority will steer $31 million of that money into a new venture capital fund. The IEDA will use another $22 million to bolster existing public programs that give Iowa startups loans and grants.
“Phone calls are already coming in,” BioConnect Iowa Executive Director Steve Brody said Thursday morning, two days after the federal government’s Tuesday announcement.
Brody’s organization, a nonprofit that already receives IEDA money to help businesses apply for federal research grants, will manage the new venture capital fund. The group’s board will evaluate proposals for startups seeking money.
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Brody, whose firm contracts with the state, said IEDA officials wanted to create the new fund to pitch in some extra money for Iowa startups beyond what the state’s two main venture capital firms, Des Moines-based Next Level Ventures and Cedar Rapids-based ISA Ventures, provide.
Brody said his organization’s fund will be managed by a new limited liability company, Iowa Venture Capital Fund. He said the group will chip in on private funders’ efforts, with the goal of providing no more than 25% of a startup’s funding round.
Like other venture capital funds, Brody said the new fund will receive equity in startups. If a company later buys the startup, profits from the investment will go back into the fund.
Next Level Ventures Managing Partner Craig Ibsen said he believes his group and ISA Ventures already provide plenty of investment for startups in the state. But he said the added funds will give those businesses better chances to grow. The companies can use extra money to buy better technology or more office space.
“It means more runway,” said Ibsen, who has already recommended six companies to BioConnect Iowa. “It means (the companies) hire more people. It means the funding lasts longer.”
The other $22 million for startups will go toward existing programs for entrepreneurs, which include low-interest loans, forgivable loans and grants. For the two most recent fiscal years, the state has only allocated $2.9 million a year for those programs, said IEDA spokesperson Kanan Kappelman.
The state may not use all $22 million for those existing programs. According to an IEDA news release, the authority may use some of that money to “address gaps in startup development phases.”
Fund will inject money away from the coasts; buy robots
The federal money for these programs come from the American Rescue Plan Act, which Congress passed in March 2021. During a news conference about money allocated to various states on Tuesday, U.S. Sen. Amy Klobuchar, D-Minnesota, said members of Congress wanted to encourage startups away from the coasts where more investors inject funds.
“They keep going back to Silicon Valley,” she said. “They keep going back to New York City. And our nation is much stronger when we spread that out because not all entrepreneurs with great ideas live in one place.”
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In addition to money for startups, IEDA plans to use the federal allocation for:
- $28 million to buy parts of loans for manufacturers borrowing money for robots;
- $15 million for small business that don’t have enough collateral to secure a loan.
To qualify for help acquiring robots, manufacturers must employ no more than 750 workers. To qualify for loan support, small businesses have to qualify as underrepresented, meaning that at least 51% of the business’ owners are women, people from diverse backgrounds, veterans, people with disabilities and long-term rural residents.
Small businesses that the IEDA believes contribute to art and culture also qualify for loan support.
Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.
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