Insurers Get Tax Credits for Backing Tennessee Venture Fund for Startups

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Newly signed legislation in Tennessee will provide venture money for new companies with high growth potential, such as those involved in biotechnology and other innovations.

The money will come from insurance companies that invest in the fund and then receive tax credits against their premium tax liabilities. According to The Daily News of Memphis, the program could generate as much as $120 million.

The state will select six “TN Investcos” from established venture funds that apply. Innova Memphis and MB Venture Partners are interested in being designated as one of six TN Investcos, the entities that will actually distribute the money.

Gwin Scott, president of Emerge Memphis, a business and technology-based incubator, said he hopes the program will identify small businesses and startups with the best growth potential. The program will be administered by the Tennessee Department of Economic and Community Development in conjunction with the Department of Revenue.

“This is a big opportunity,” Scott said. “It’s important for the state to get this and to do this so that we remain competitive. Those funds I’m sure will be weighted fairly evenly throughout the state just for balance and for political purposes. ”

The Nashville-based legal firm Waller Lansden issued an information bulletin about the new program, saying the model is patterned after one in Alabama.

The average wage of jobs created by the initial investment was $40,628, the bulletin states.

The two Tennessee agencies in charge of administering the program will work with the Tennessee Technology Development Corp. in choosing the TN Investcos that will receive $20 million credit allocations. The decisions will be made no later than Dec. 31, according to the bulletin.

Venture funds interested in being designated as TN Investcos must apply by Oct. 1.

To qualify for an investment from a TN Investco, a business must be headquartered in the state, 60 percent of its employees must be state residents and have no more than 100 employees.

“Our main charge will be to make sure that the people distributing these funds are aware that there are these companies out there looking for funding and, again, these guys need to be qualified and they need to be filtered so that the right companies are being presented and the right opportunities are being matched,” Scott said.