New Market Venture Capital: Helping Equity Flow into Distressed Communities
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Pictured here are Tom Pohanka, Lab Assistant (foreground) and Sal Pastor, Senior Research Scientist (back), laboratory workers at Protein Discovery Inc., in Knoxville, Tennessee. Protein Discovery is a life sciences company developing solutions for proteomic research, clinical diagnostics, and drug discovery by enabling wide-spread adoption and application of high throughput mass spectrometry. Kentucky Highlands Investment Company operates the Southern Appalachian Fund, a new markets venture capital fund. Southern Appalachian Fund’s portfolio includes Protein Discovery, Inc. |
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In December 2000, Congress created the New Markets Venture Capital (NMVC) Program to address the unmet equity needs of low-income communities, including communities in rural areas. Under the program new markets venture capital companies (NMVCCs) are licensed as for-profit investment funds with private management. The program is designed to promote economic development and the creation of wealth and job opportunities in self-designated low-income (LI) geographic areas. NMVCCs pursue this objective by making equity-type investments in smaller enterprises located in LI areas, and by providing operational assistance (OA) grants to such enterprises
A NMVCC’s management makes all investment decisions, within the constraints of NMVC statute, SBA regulations, and the terms of the NMVCC’s participation agreement and OA grant award. SBA’s role is essentially the same as with the SBIC program: The agency selects participants for the NMVC program, provides funding for their investments and operational assistance activities, and regulates their operations to ensure that public policy objectives are being met. SBA requires NMVCCs to provide regular performance reports and have annual financial examinations by SBA.
Initially, six NMVCCs were approved and four located in rural areas. Following this first round of approvals, funding for the program was deleted from the 2003 Fiscal Year Omnibus Appropriations Bill and to date no funds have been re-allocated.
More information can be found at: http://www.sba.gov/INV/NMVC/overview.html
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