The U.S. Treasury approved $1.1 billion in funding for California Wednesday under the State Small Business Credit Initiative, a part of President Joe Biden's American Rescue Plan from last year. While most of the funding will go towards various programs making it easier for small businesses to acquire loans, the state set aside $200 million for a unique program aiming to support equity and climate-focused venture capitalists.
"We're launching this exciting new venture capital program that will create a more inclusive venture capital ecosystem and open opportunities to businesses in underserved regions of our state, and promote climate equity and climate justice," said Dee Dee Myers, the director of the California governor’s office of business and economic development, on a conference call with reporters.
The allocation of funds will be handled by the California Infrastructure and Economic Development Bank (IBank) and the program will be launched by the end of the year.
According to IBank Executive Director Scott Wu, the program will be separated into 3 separate initiatives. The first will invest in VC funds of existing fund managers from diverse backgrounds, while the second will invest in first-time fund managers and funds with a "climate equity or climate justice" focus.
"We believe that by investing in more inclusive and representative fund managers that they in turn, as studies have suggested, will invest in the larger and more inclusive cohort of small business entrepreneurs and startup entrepreneurs," Wu said.
He says the third component will be a direct investment vehicle where IBank can directly fund companies run by underrepresented founders or with a climate or equity focus, where the companies will largely come from the portfolio of the VC funds it invests in.
The goal of the program is to diversify leadership among VC and startup founders, while also allocating some funding to socio-economically disadvantaged areas of California that do not typically receive VC funds.
