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CAPCO Programs' Goals:


Over the last two decades the term “economic development” has been redefined. Historically, economic development focused on attracting large-scale manufacturing projects. While government efforts continue to include traditional business attraction and retention strategies, economic development today often focuses on building a diverse, sustainable economy based on high-growth service and technology-based industries. Traditionally, small businesses have not experienced the beneficial impacts of large-scale public incentives, as states have targeted these resources toward retaining and attracting larger companies. Therefore, these smaller businesses have struggled to grow and compete due to the lack of resources and assistance available to them. In response to this, a series of programs were launched to help accomplish the task of supporting and growing businesses in this sector.  One such initiative is the Certified Capital Company (CAPCO) program, a state economic development tool designed to encourage the flow of investment capital into promising small businesses.

The goal of the CAPCO program is to foster the development of an in-state venture capital infrastructure to help provide the necessary funding for innovative local companies that are without the means of obtaining financing from traditional sources of capital.

CAPCO programs allow states to access large pools of capital otherwise unavailable to them by offering state premium tax credits to insurance companies. These companies in turn provide a unique and previously underutilized source of funding for venture capital investing through certified investment companies, who prudently invest those funds into small businesses with growth potential.  More than sixty of the nation’s top insurance companies have participated in similar programs as investors.  Typically the funds are raised and invested at the beginning of the program, while the tax credits are allocated over seven to 10 years.

According to the U.S. Small Business Administration (SBA), 99 percent of all independent enterprises in the United States employ fewer than 500 people, and these enterprises account for more than 50 percent of all U.S. workers.  Furthermore, the SBA credits small businesses with the creation of 60 to 80 percent of the net new jobs in the U.S. over the past dozen years. Since small business is such a critical component of the economy, states have created certified capital company programs to address the unique challenges in raising venture capital to support this sector. CAPCO programs utilize state premium tax credits to incentivize private parties, including insurance companies and investors, to provide capital to smaller, local companies and to projects associated with state economic development directives. These programs create a venture capital climate within the state complete with a pool of funding sources and investors, which in turn impacts the state economy by creating jobs and increasing state and local tax revenue without requiring a large state investment. By providing increased access to capital, CAPCO programs promote entrepreneurship and boost small business growth.

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