The University System of Maryland may soon have a new pilot program to fund early stage startups.
The measure, which was approved by both the USM Board of Regents Committee on Economic Development and Technology Commercialization and the Committee on Finance on Thursday, would allocate $200,000 per year to the Early Capital Pilot fund over three years.
The fund is intended to give support to companies earlier than the existing Maryland Momentum Fund operated by USM as well as be more flexible than other similar programs in the state.
"TEDCO (Maryland Technology Development Corp.) can only work with technology focused businesses," said Lindsay Ryan, venture development director at USM. "We have the opportunity where if there's a T-shirt company that could become large like Under Armour, and we see that, we can work with them."
The program still needs to be approved by the full board of regents to become a reality. If approved, the fund would begin deploying capital in the fall of this year.
The funds for the Early Capital Pilot would come from money currently allocated for the Maryland Momentum Fund, a venture capital fund that began with $25 million in 2016. The board of regents recently authorized an additional $6 million over three years for the program.
A minimum of $100,000 in matching funds from outside investors must be secured for USM to access the new pilot fund. The goal is for the fund to be matched one-to-one by outside investment.
The proposed Early Capital Pilot fund would have three tracks, each targeted toward an entrepreneur in a different stage of building a company.
The first track would be just for students and faculty so they can be exposed to entrepreneurial opportunities. For example, it would enable a student to incorporate their business or attend a conference. The grants would be small, up to $1,000.
The second track would consist of grants up to $25,000 earmarked for activities such as early prototyping, legal assistance and setting up e-commerce. The third track of funding would be for companies seeking to establish a proof of concept, and include activities such as marketing and a first round of product production. The third track has the largest grants, with companies able to earn $75,000 in grants or other financial vehicles, such as convertible notes.
The current plan is for USM to invest $50,000 annually in the first two tracks, with $100,000 being invested in the last track.
Eligibility may follow the current requirements for the Maryland Momentum Fund, which requires a company to have a presence in Maryland and a founder or investor who is a graduate, employee or student at a USM institution. If a founder or investor does not have connections to USM, the company can be eligible if it uses intellectual property from a USM institution or is based in a USM research park, incubator or rise zone near select universities. Companies that have a significant collaborative relationship with a USM institute may also be eligible.
