Angel Tax Credit Spurred $63.1M for 113 Cos. in ’11

Interest in the tax credit appears to be strong this year as well; $1.7 million of the $12 million available for 2012 has already been allocated.

The angel investor tax credit spurred $63.1 million in funding for 113 Minnesota start-ups last year, according to a state report released Friday.

Both of those numbers are up significantly from 2010, when $28 million was invested in 67 companies within the state. However, the program didn't launch until July 2010-so it was only up and running for the last six months of its inaugural year.

Angel investors collected about $15.8 million in credits from the state in 2011-a figure that included $4 million that rolled over from 2010, when just over $7 million in credits was distributed.

Angel tax credit Program Coordinator Jeff Nelson said Tuesday that the full $15.8 million available in 2011 credits was allocated by mid-November-and $1.7 million of the $12 million available for 2012 has already been allocated.

“If we allocate the credits at the same rate that we were doing in 2011, that [2012] credit will be used up by mid-July,” Nelson told Twin Cities Business.

The tax credit program gives a 25 percent tax break to individuals and investment funds that provide as much as $4 million in seed money to businesses focused on high technology or new proprietary technology.

Among the 113 businesses that received an investment that qualified for the credit, 102 were headquartered in the 11-county Twin Cities area and 11 were located in Greater Minnesota.

Not surprisingly given Minnesota's business climate, 29 of the 113 are medical device and equipment companies and 26 specialize in software; companies in those two industries benefited the most from the tax credit. Eleven biotechnology companies and 11 clean technology companies also received investments, the rest of which were scattered among companies in various industries.

According to the report, 747 investors-71 percent of whom are Minnesotans-provided the $63.1 million in funding that qualified for the credit.

The credit is available to investors and investment funds that funnel money into start-ups that are less than 10 years old, have fewer than 25 employees, and have less than $4 million in previous equity investments. The businesses also must be headquartered in Minnesota and have at least 51 percent of their workers and their full payroll based within the state. The state will fund $12 million in credits through 2014, and credits cannot exceed $125,000 per person per year.