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Certified Capital Companies (CAPCOs): Strengths and Shortcomings of the Latest Wave in State-Assisted Venture Capital Programs

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  • David L. Barkley

    (Clemson University)

  • Deborah M. Markley

    (Policy Research Group)

  • Julia Sass Rubin

    (Harvard University)

Abstract

Certified Capital Companies (CAPCOs) are state-certified venture capital companies funded by insurance companies. As an incentive to invest in CAPCOs, insurance companies receive a $1 credit on premium taxes for each $1 invested (tax credits are spread over a 10-year period). The CAPCOs must invest in specific types of businesses according to an established time schedule to ensure the availability of tax credits to the insurance companies. Legislation authorizing CAPCO programs has passed in five states (Louisiana, Missouri, Florida, New York, and Wisconsin) and has been considered in eight other states (Iowa, Illinois, Arizona, Texas, Kansas, Vermont, Colorado, and North Carolina). This article summarizes the characteristics and experiences of CAPCO programs in the states that have passed enabling legislation. Lessons learned from the experiences of the state programs are provided, and the advantages and disadvantages of CAPCOs as compared to alternative state-sponsored venture capital programs are reviewed.

Suggested Citation

  • David L. Barkley & Deborah M. Markley & Julia Sass Rubin, 2001. "Certified Capital Companies (CAPCOs): Strengths and Shortcomings of the Latest Wave in State-Assisted Venture Capital Programs," Economic Development Quarterly, , vol. 15(4), pages 350-366, November.
    • Handle: RePEc:sae:ecdequ:v:15:y:2001:i:4:p:350-366
    DOI: 10.1177/089124240101500409
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    References listed on IDEAS

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    1. Timmons, Jeffry A. & Bygrave, William D., 1986. "Venture capital's role in financing innovation for economic growth," Journal of Business Venturing, Elsevier, vol. 1(2), pages 161-176.
    2. Florida, Richard & Kenney, Martin, 1988. "Venture capital and high technology entrepreneurship," Journal of Business Venturing, Elsevier, vol. 3(4), pages 301-319.
    3. Edgar Parker & Phillip Todd Parker, 1998. "Venture capital investment: Emerging force in the Southeast," Economic Review, Federal Reserve Bank of Atlanta, vol. 83(Q 4), pages 36-47.
    4. Peter Eisinger, 1991. "The State of State Venture Capitalism," Economic Development Quarterly, , vol. 5(1), pages 64-76, February.
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    Cited by:

    1. David Hughes & Kris Mallory & Mihaela Szabo, 2004. "Factors Influencing Venture Capital Availability in Rural States: Possible Lessons Learned from West Virginia," Working Papers Working Paper 2005-04, Regional Research Institute, West Virginia University.

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