A group of charitable organizations led by the Abell Foundation hopes to raise up to $15 million for a new fund to invest in startups within Baltimore's city limits, tripling the size of a well-received program started in 2012.
That program, known as Propel Baltimore, invests up to $250,000 in young companies willing to move to Baltimore or already based here. Its initial $5.5 million coffer has funded nine fledgling businesses that now employ about 250 people combined, 100 more than before, and helped those firms lock down millions of dollars in other investments.
The foundations now aim to more than double down on their investment, inviting wealthy individuals and other financiers to join in an effort to attract and multiply high-paying, high-tech jobs to the city. The effort comes as many of Baltimore's wealthiest trusts and charities look beyond grant-making to further their missions, risking some of their millions in investments on ventures to promote the local economy and society, and even earn a few dollars back.
Propel Baltimore's goal is to enrich the city at large, helping to lure educated professionals to broaden its tax base. But the investors and business advocates also hope for strong returns by funding young companies at the make-or-break point when they require more money than they can get from family or friends but don't have the track record to nail down more traditional financing.
"We went to other foundations and pointed out that Baltimore's major problem was jobs," Robert C. Embry, the Abell Foundation's president, said of Propel Baltimore's genesis. "We weren't going to attract large companies to move here; it would be a very difficult case to make. We did have an opportunity with startups, with entrepreneurship."
Several investors in the initial Propel fund have committed to participating again, led by Abell and including the Robert W. Deutsch Foundation and Clayton Baker Trust. Organizers want to broaden participation, drawing in new institutional investors and individuals. The Maryland Technology Development Corp., or TEDCO, also supports the fund and manages its investments.
Since the first fund launched, it has become a welcome resource for startups, along with other TEDCO technology investment funds and angel investing groups. Robert Rosenbaum, executive director of TEDCO, said the fund is among the tools the state organization uses as a seal of approval that can help young companies convince other investors to support them.
The first Propel Baltimore fund has invested in companies including ZeroFOX, a social media cybersecurity company; RedOwl Analytics, a cybersecurity firm focused on "insider" threats; Bambeco, a retailer of sustainable furniture and housewares; and WellDoc, developer of a mobile application to help patients manage diabetes.
At least two companies in the Propel Baltimore portfolio relocated from outside the region, in part because of the opportunity to receive investment here.
"Our company wouldn't be where it is without the network here," said Saad Alam, CEO of Citelighter, an education technology company that moved from New York in the fall of 2013, lured by a TEDCO investment and veterans of education companies Sylvan Learning and Laureate Education. "They have given us amazing feedback we could not have gotten anywhere else."
Citelighter, which is developing a software system that helps K-12 students learn how to improve their writing, received $250,000 from Propel in a $2 million funding round it closed this year. The company has grown from a single desk at Federal Hill's Betamore incubator to 35 desks, plus 15 remote employees, and is searching for permanent space of its own, Alam said.
Another so-called ed tech company, ThreeRing, also moved from New York in part because of the chance for Propel funding, and other investment and mentorship opportunities. The company's software application allows teachers and students to share work across mobile devices and is now used in school districts across the state.
Steve Silvius, ThreeRing's chief education officer, welcomed the prospect of another Propel fund, saying he hopes the infusion of money allows organizers to take on different investment strategies and gets Baltimore more attention from larger venture capital investors.
"I think they'll put it to good use," Silvius said of the second fund. "They're not afraid to take some risk in putting capital to work, which is a good thing for that kind of fund."
There's no money left in the first fund for new investments, though officials retained some money to make follow-up investments in its portfolio.
The program's investments are all so new that it has yet to show a return for the investors. While its success isn't proven yet, investors said it is promising enough to win their support.
"This is still a leap of faith. It's a belief that it's important," said John B. Powell Jr., executive director of the Clayton Baker Trust, a charitable foundation. "I don't think the results are clear yet. Certainly there's been some good results in terms of employment."
Such investments also further the foundations' mission, better than others that simply promise a decent return, some say.
Tax law requires foundations to give away 5 percent of their endowments in grants or other awards each year or face penalties. But foundation leaders said opportunities like Propel Baltimore and other direct investments in business ventures or social programs allow them to go beyond grant making to better their communities.
"We're living at a time of such huge need that you increasingly want to get the most value possible out of both your grant making and your investing," said Jane Brown, executive director of the Deutsch Foundation. "You've got to invest these assets anyway."
For Deutsch, other such investments include a $10 million "maker space" for artists and manufacturers in Station North known as Open Works. The Abell Foundation, which is also an investor in Open Works, channels 15 percent of its investment dollars to community projects and startup companies, Embry said.
And the Goldseker Foundation, which supported the first Propel Baltimore fund, has backed Healthy Neighborhoods, a program offering mortgage guarantees in distressed Baltimore neighborhoods, said CEO Matthew Gallagher. He said it also is considering participating in a program to offer what are known as social impact bonds, which invest money to improve a specific social outcome and are repaid by the associated savings in government spending.
With all such investments, the aim is to both make money and to benefit the city, the foundation executives said. Business advocates said there is opportunity for both with Propel Baltimore.
"You're creating new companies, but you're also doing workforce development, you're building opportunities for all these employees' families," said Jennifer Meyer, president of Betamore, the technology incubator. "It's a pretty significant impact."
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