Sunday April 21, 2019

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NY Convergence ORIGINAL

NYTECH: Alternative Non-Venture Ways to Raise Capital in NY

Ann Kayman, CEO, New York Grant Company

by Lauren Keyson

Last week the New York Technology Council held a raising alternative capital event by using non-VC backed sources of funding at the Citibank Center. While venture financing is the most talked about source of funds, it certainly is not the only available avenue as“Cash is king,” according to Michael Lopez, a NYTECH board member and partner at EisnerAmper.  Besides sales, raising enough capital to support the operations and growth of a small company should be the major financial concern for any successful entrepreneur.”

A cross section of lenders explored some of the alternative financing programs.  Ann Kayman, CEO at New York Grant Company, served in the Giuliani and Bloomberg Administrations as NY chief of business development. Now she finds money for entrepreneurs from unconventional sources, primarily government funding. She said that there are grants and other subsidies including tax breaks, energy discounts and other programs that used to stimulate the economy for startups.

“The federal state and local government offer lots of things and most people don’t know about them, especially entrepreneurs,” she said.  “In a lot of communities in NY there are small business centers, economic development agencies, and the city government here has done a great job of setting up different outposts throughout the five boroughs where people can go.  There are small business centers that are part of micro- lenders, community financial institutions and universities. For instance, Pace  has a small business center that gets funded by the federal government — so all of its services are totally free.”

She also revealed other interesting programs such as SBIR, a small business innovation and research grant that entrepreneurs can get if they have ground breaking ideas. The government can fund them with an initial grant of $100,000 just to take their concept to a prototype stage and a second round of funding for commercialization.  “However, it’s difficult to write-up and it’s competitive,” she continued.  “There are a lot of misconceptions for people who are looking to start a business – often people say ‘I’m starting up a business and it’s a great idea and I need a grant.’ And it just doesn’t work that way unless you are developing something really ground breaking and innovating in the technology or biomedical sectors.

Donald DiMartini, SBA Director for Citibank in NY, explained how the Small Business Administration lending at Citibank works, and how this program can be helpful to entrepreneurs in the tech field. SBA offers a 7A and 504 — one is for working capital and the other is to buy buildings and equipment.  “Small business is a pretty broad definition and it really refers to the size of the employees or how much money they make every year. So you could be looking at a one person doctor to a manufacturer with 150 employees.

“Every industry is open as long as it’s for profit. Gotta be able to repay the loan, they’re not grants; we wish they were but they’re loans.  Generally, at the end of the day, what we are trying to do is create or keep jobs, period. That’s what the SBA does – it lends a guarantee to the bank so that we can do deals. That’s it.”

Another alternative program is BIRD, the U.S.-Israel Binational Industrial R&D Foundation. A matchmaking endowment, it offers funding of up to $1 million to U.S. and Israeli companies that jointly develop and commercialize innovative technologies.  “We take any Israeli and U.S. companies that are partnering on collaborative R&D,” said Andrea Yonah, the East coast representative.  “Basically we match their R&D expenses, which could be anything from assisted manpower to marketing and travel expenses relating to the project. We take any technology – we like disruptive and risky.”

Then there is Silicon Valley Bank’s NY office in midtown. SVP Michael Moretti explained that the bank works with technology startups to help them grow, expand and be successful. “We lend to the startups at an early stage, but we only work on one sector – technology. Companies outside of it should go to Citibank. We deal with venture debt – heavily diluted financing and as long as there’s some tech in it, we’re interested.

“If the startup hasn’t raised money yet, the only potential provider might be a government agency that would provide a grant to them, or maybe the Small business Association would give them a loan. But sometimes those are personally guaranteed. There are also a lot of people that would be interested in providing equity. We would not, but there are a lot of equity providers here in NY – seed and angel funds that will invest in pre-revenue technology companies.”