Members of the Maryland tech community filled four-seat panels three times over at a state Senate committee room in Annapolis on Wednesday afternoon. They spoke up in favor of a proposal that would create an angel investor tax credit in the state.
Pushed by the Greater Baltimore Committee and sponsored by Baltimore-based state Sen. Catherine Pugh, SB 584 would create a fund of “at least $5 million.” Under the legislation, the early-stage investors could be eligible for credits of up to 50 percent of investments, or $50,000 for individuals and $100,000 for couples. That figure squares with the fact that angel investors usually put up dollar amounts in the thousands to help lean companies get up and running.
"Who actually winds up benefitting are the entrepreneurs who see more angels come out of the woodwork to invest."
Investors have to be recognized by the SEC to be eligible. In turn, companies who receive the investment must be based in Maryland, be younger than five years old and have fewer than 35 employees, the legislation states.
Members of the Baltimore Angels, the Tech Council of Maryland, local entrepreneurs and representatives from state-backed agencies, including TEDCO President Rob Rosenbaum, came out in support of the bill. No one spoke in formal opposition.
While there are already tax credits for cybersecurity and biotech, the angel investor tax credit offers incentives to people who give money to “innovation companies.”
Though an amendment is currently being worked up to define those companies in legalese, Pugh said the looser definition offers flexibility for investors who move among the many categories that make up the startup community.
“Risk capital is the lifeblood of startups,” said Tony Stanco of the National Council of Entrepreneurial Tech Transfer. “Without it, the best technologies in the world will whither and die, and sometimes that happens here.”
Providing state money to already-wealthy investors?
The proponents faced questions from members of the Senate Budget & Taxation Committee about whether the state would benefit from a program that provides money to already-wealthy investors. But speakers stuck to the message that the incentive will ultimately create more capital for entrepreneurs.
“I don’t see it as getting money back from the state,” said Baltimore Angels co-chairman Ed Chalfin. “I see it that I can invest more, and then have the state be part of that.”
Chalfin also pointed out that angel investors are already familiar with the tech community, so the tax credit is essentially entrusting state money to the most knowledgable people about the industry.
They’re hoping the legislation will help bring more angel investors to Maryland, and “sideline angels” who aren’t currently willing to take the risk on early-stage companies.
“Who actually winds up benefitting are the entrepreneurs who see more angels come out of the woodwork to invest,” said Kelly Keenan Trumpbour. A founder of See Jane Invest and a member of Baltimore Angels, Keenan Trumpbour praised the fact that the bill calls for at least 10 percent of the money to be set aside for women and minority angel investors.
From the entrepreneur side, Citelighter founder Saad Alam talked about the help he received from angel investors when he relocated the edtech startup to Baltimore from Brooklyn. Equally, he pointed out the importance of angel investors in attracting more companies that would grow Baltimore’s edtech reputation.
“You can’t bring more companies unless you make sure the capital’s built,” Alam said.
The committee didn’t immediately vote on the bill. If it passes, the bill will have to go before the full Senate, as well as the Assembly.