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Iowa budget bill would reduce fund for startup loans (update)

ByMatthew Patane

January 30, 2017

A state fund that provides money to Iowa startups is slated to lose about $2 million.

The Iowa Senate approved a bill last week intended to make up for a $118 million gap in the state’s budget for the current fiscal year, The Des Moines Register reported. The deal includes cuts to higher education and a variety of transfers.

Those transfers include taking about $2 million out of Iowa’s Innovation and Commercialization Fund. The Iowa Economic Development Authority uses the fund to provide financial awards to startups.

(Update: Iowa Gov. Terry Branstad signed this budget bill Wednesday, Feb. 1.)

The authority does not believe the transfer will result in fewer awards to startups this year, a spokeswoman said.

“We don’t anticipate it to be a cutback. We are planning for what we think the demand is,” IEDA spokeswoman Tina Hoffman said.

The innovation fund began fiscal 2017 (July 1, 2016) with $11.8 million, Hoffman said. By the end of December, the fund had about $9.8 million, according to the Legislative Services Agency.

Gov. Terry Branstad’s budget proposals call for providing IEDA with $7.7 million for the innovation fund in fiscal years 2018 and 2019.

Hoffman said the department does not consider this a budget cut. Instead, it’s viewed as a baseline amount for the innovation fund since IEDA could have carryover money from prior years.

Another IEDA fund, the Grow Iowa Values Fund, would also lose about $12 million, under the budget bill. Hoffman said money in that fund is not used to support entrepreneurs.

The legislation also moves about $6.1 million in Iowa’s cultural trust fund, used for the arts, to the general fund, the Register reported.

The Iowa House passed the bill Monday.

This story was originally published Monday, Jan. 30 and updated Wednesday, Feb. 1.

Matthew Patane is the managing editor and co-founder of Clay & Milk. Send him an email at mpatane@clayandmilk.com.

Iowa budget bill would reduce fund for startup loans (update) | Clay & Milk

A central Iowa ag-tech accelerator has secured more backers and finally has a name. The Greater Des Moines Partnership first announced the accelerator last year, naming four initial investors. On Monday, the Partnership said the program will be called the "Iowa AgriTech Accelerator" and named three new investors. The new investors include Grinnell Mutual, Kent Corp. and Sukup Manufacturing, all Iowa companies. They join investors Deere & Co., Peoples Co., Farmers Mutual Hail Insurance Co. and DuPont Pioneer. Each investor has agreed to put up $100,000 for the first year of the accelerator. Startups entering the program will receive $40,000 in seed funding in exchange for 6 percent equity. Tej Dhawan, an angel investor and local startup mentor, is serving as interim director until the AgriTech Accelerator names a permanent leader. Dhawan held a similar role with the GIA before Brian Hemesath was named as managing director. As interim director, Dhawan said his main job includes hiring the accelerator's executive director, establishing a business structure and initial recruiting for the first cohort. The accelerator will place few filters, such as location and product, on the applicant pool, Dhawan said. "When you’re seeking innovation, innovation can come from every corner of the world so why restrict ourselves," he said. One area the the AgriTech Accelerator won't recruit from is biotech. For its first cohort, the AgriTech Accelerator will work out of the GIA's space in Des Moines' East Village, Dhawan said. A future, permanent home is still to be decided. The accelerator's program will host startups from mid-July through mid-October, ending with an event connected to the annual World Food Prize. The GIA, which the AgriTech Accelerator is based on, also ends with presentations at an industry event. The accelerator has also started lining up a mentor pool. The Iowa Corn Growers Association, Iowa Soybean Association and the Iowa Pork Producers Association have agreed to provide mentors, as has Iowa State University. While the AgriTech Accelerator is loosely based off of the GIA, it will differ in its business structure, Dhawan said. The GIA runs through a for-profit model for both operations and its investment fund. The AgriTech Accelerator will have a nonprofit model for its operations and a for-profit setup for its fund. Dhawan said the nonprofit model is being used so the accelerator can better work with other nonprofit partners, such as trade associations. "These are all organizations that are nonprofits and can be amazing stakeholders without ever having to be investors in the accelerator," he said. "It becomes easier to work with trade associations in their nonprofit role when we are also a nonprofit." When it's up and running, the AgriTech Accelerator would be one of a handful of ag-focused startup development programs in Iowa. Others include the Ag Startup Engine out of Iowa State University and the Rural Ventures Alliance from Iowa MicroLoan. Matthew Patane is the managing editor and co-founder of Clay & Milk. Send him an email at mpatane@clayandmilk.com.

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