In an effort to bolster the development of new businesses in high-growth industries, New York State launched the Pre-Seed and Seed Matching Fund Program (the Program), which offers early-startup companies assistance in obtaining investment funding. The Program is funded through the State Small Business Credit Initiative (SSBCI) with the goal to “support high growth start-up companies at the earliest stages of their growth and development.”
On Jan. 5, 2023, New York Governor Kathy Hochul announced the Program’s launch, which gives early-stage companies the opportunity to receive equity investments ranging from $50,000 to $250,000 at the pre-seed or seed stage. The Program matches investments that start-up companies receive from the private sector on a dollar-for-dollar basis – companies must have $1 of qualified private sector investment for every $1 Program investment. Eligible private funding includes convertible debt, a Simple Agreement for Future Equity or equity securities.
Interested companies must complete a competitive application process. Preference will be given to C-Corporations and diverse teams from underserved geographies and socially/economically disadvantaged individuals.
To qualify for the Program, companies must meet the following criteria:
- Be in one of the following industries:
- Advanced Manufacturing
- Agricultural Tech
- Climate Tech
- Consumer Products
- Data/SaaS/AI
- Fintech
- Healthcare
- Life Sciences and BioTech
- Medical Devices
- Raise $2,000,000 or less of dilutive funding (i.e., funding in exchange for ownership in the company);
- Have their headquarters and at least one C-suite employee in the state of New York for at least 12 months after investment;
- Be registered to do business in New York and in good standing;
- Raise matching funds from qualified private sector investors, including investors who are part of an investment entity (venture capital fund, angel fund, family office, investment partnership, or LLC), an individual member of an organized investment group who is an accredited investor and qualified purchaser, or an individual that can otherwise establish credibility as an accredited investor; and
- Complete the application.
The application is rather extensive and requires applicants to disclose current funding sources, a business model, a problem the company is solving, key factors in achieving profitability, target customers, competitors, the status of intellectual property, finances and personal information on team members.
Applications are currently being accepted on a rolling basis, and there is no deadline to apply. If the SSBCI believes a company is a potential fit for the Program, the SSBCI will conduct due diligence, including evaluating the business model, market size, team, product, financials, competitive advantage and potential impact for New York State. After the due diligence process, select applications will be asked to schedule a meeting. Although the application timeline will vary from company to company, the Program requires that its investments be made within 90 days of the closing of the company’s round. Because of this 90-day time requirement, companies interested in the Program should be cognizant of the application timeline and close of funding rounds. The SSBCI recommends that companies begin their fundraising process and secure private investment commitments before applying.
If you have questions about the Program, application/application process, or would like help evaluating whether the Program is right for your company, contact a member of the Emerging Companies & Venture Capital group at Stradley Ronon Stevens & Young.