Is the US Government turning into a venture capitalist, and again trying to pick the winners? Yes and No...
Through the US Small Business Administration (SBA), the government has supplemented the flow of private equity capital and long-term loan funds to small businesses. In FY 2011, the SBA's Small Business Investment Company (SBIC) program provided $2.8 billion of financing to 1,339 U.S. small businesses.
However, the US Government is not picking the winners. The venture capital firms are, and most of them are very good at it.
SJF Ventures is one of them. "After working for 12 years with thousands of entrepreneurial firms and investing in 34 portfolio firms, SJF has built a deep network of experts able to share highly valuable expertise and insight in the firm’s focus areas" says the company's website.
SJF Ventures is now raising $75 million for their third fund, SJF Ventures III, and has just obtained the SBA "Impact Investment Fund" license.
The "Impact Investment Initiative" is part of Startup America, a White House initiative to bring together public and private organizations to accelerate the growth of America’s entrepreneurs. The goal of the program is to collaborate with private, institutional investors to identify impact investments and provide expedited licensing and capital to fund managers who qualify to organize and operate an Impact Investment SBIC.
SBA will provide $1.5 billion and match up to 2:1 the private capital raised by these funds, in the form of debt. So, for every $1 of capital invested by the venture funds in a startup company, the SBA would provide a $2 loan to the company. However, SJF Ventures said it will not use the 2:1 government matching debt for its fund. "It's all private capital," said David Kirkpatrick, managing director and co-founder of SJF Ventures.
SJF Ventures has already received commitments for a "substantial amount" of the $75 million fund, according to Kirkpatrick. Citi's Community Capital, the community development lending and investing group of Citigroup is planning to invest $15 million in the fund. Other in the fund include Deutsche Bank, Calvert Equity Portfolio, Armonia, Abacus Sustainable Fund, Trillium Asset Management LLC, The CAPROCK Group, OpenBox, ImpactAssets and multiple family and individual investors.
The SBA "Impact Investment Fund" license obligates the SJF Ventures III fund to invest in clean-tech and education, or to make investments that boost the economy in low-to-moderate-income areas. That should lead to the creation of many green jobs.
SJF Ventures has extensive expertise in the clean-tech industry, having invested in many green companies, including CleanScapes, eRecyclingCorps (that just got a $35 million investment from Kleiner-Perkins), groSolar and Sun & Earth.
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