A Baltimore charitable foundation is joining Maryland's main technology development agency to create a $3.3 million investment fund to pump money into new tech startups in the city, officials plan to announce Tuesday.
The Abell Foundation is investing $3 million into the newly created Propel Baltimore Fund, with another $300,000 coming from the Maryland Technology Development Corp., a quasi-state agency.
The fund will make small, otherwise known as "angel," investments, typically ranging from $50,000 to $100,000, but up to a maximum of $220,000 per company.
"It's hard to attract existing corporations to Baltimore," said Robert C. Embry Jr., president of the foundation, which has a $350 million endowment. "What we need is to foster startups and innovation in our own city."
The Propel Baltimore Fund is Abell's latest effort to focus on growing technology startups as a source for local innovation and jobs in the Baltimore area. In January, the Abell Foundation gave $100,000 to the city's Emerging Technology Center incubator to jump start a new business accelerator program that would support new tech companies in their earliest stages.
Also in January, Abell funded a $75,000 survey of Baltimore's technology community by a new group, the Innovation Alliance.
It's never been easier to launch a company, especially on the Internet, but a lack of capital inhibits many startups from becoming much more than an idea. Many of the region's tech entrepreneurs are eager to launch new ventures but need the high-risk capital that typically only angel investors are willing to provide.
The Abell/TEDCO effort comes as state interest is rising in funding such companies. Later this year, the Maryland Department of Business and Economic Development is expected to launch InvestMaryland, a $70 million fund to invest in technology companies through the sale of tax credits to insurance companies.
"This [Abell/TEDCO initiative] should ultimately make everyone more successful," said David Troy, co-founder of tech startup 410Labs, which raised $750,000 in capital last year from East and West Coast investors. "For seed stage funding, we need all the help we can get in Baltimore."
The conventional wisdom is that angel investors in other regions, particularly Silicon Valley, are better organized and mobilized, and easier for entrepreneurs to find. Several Baltimore area startups over the past year have taken pilgrimages to California to meet with investors, after having trouble finding money in the Mid-Atlantic region.
But TEDCO is striving to organize Maryland's angel investor community, said Robert A. Rosenbaum, president and executive director of TEDCO.
"The angels in this region exist, but they're not terribly well organized and visible, and they're hard to find," he said.
Most angel investors are often too busy with their own ventures to do their due diligence on startup companies they may wish to invest in, Rosenbaum said. In Abell's case, the foundation is putting up the money, while TEDCO will research companies for possible investment and advise Abell on the best choices.
TEDCO has experience doing due diligence and vetting deals because it has done so itself — the agency has been making $75,000 seed investments in startup companies in Maryland for about 10 years, Rosenbaum said.
The Baltimore Angels, a group of about 50 investors who focus on the Baltimore region, has partnered with TEDCO in the past to do due diligence on potential investments. The group is only a couple years old and has invested in about eight companies so far, but it's activity recently has increased, according to members.
"The addition of this fund to the ecosystem is a very good thing for Baltimore," said Greg Cangialosi, a member of the Baltimore Angels and former owner of email marketing firm Blue Sky Factory, which he sold last year.
"There is a large amount of confluence happening in the city now, and this is just more fuel for the fire that will ignite Baltimore as a hotbed of startup activity," said Cangialosi.
In addition to the Abell initiative, Rosenbaum has plans for TEDCO to raise a $50 million investment fund from private investors statewide. His agency would conduct due diligence on the candidate companies.
"My vision is that TEDCO becomes a clearinghouse for angel funds in the state," Rosenbaum said.
With the Propel Baltimore Fund, Abell and TEDCO expect to invest in companies with new technology ideas or innovative business plans that are in Baltimore or expect to move to the city. The fund would play the role of lead investor in every venture it funds – a move that will save time and eliminate uncertainty among investors.
Investors who want to join the Propel fund in investing in a certain company will have to put in 50 percent of what Propel puts in, according to TEDCO.
TEDCO will begin accepting applications for funding on April 2. Information about the fund will be available on TEDCO's website, http://www.marylandtedco.org.
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