2023 will bring Iowa’s innovation stakeholders some of the first opportunities to see the infusion of $96 million from the U.S. Treasury Department’s State Small Business Credit Initiative in action.

Announced in October 2022, the funding is distributed across four new programs, each taking a different angle on increasing funding access. Anna Lensing, innovation team project manager at the Iowa Economic Development Authority, said in an email that the state agency zeroed in on funding efforts due to gaps identified when compiling its data for Iowa’s application to the SSBCI program.

“By increasing access to funding for entrepreneurs, IEDA hopes to help innovative companies overcome the principal challenges of launching businesses and continue their expansion with the help of connections to discoveries and talent at Iowa’s world-class research universities, accelerator and incubator programs, and professional organizations,” Lensing said.

IEDA is overseeing three of the four initiatives:

  • Venture Capital Innovation Fund Program: $22 million to increase funding opportunities across the state’s assistance programs for entrepreneurs. This fund also will provide more funding to address gaps in startup development phases as businesses work through concept, launch and expansion.
  • Manufacturing 4.0 Loan Participation Program: $28 million to help Iowa manufacturers invest in the new technologies that are transforming the industry. The state will purchase part of the loan to help offset risk for lenders.
  • Small Business Collateral Support Program: $15 million to help small businesses offset collateral shortfalls as they secure loans through commercial lenders. Eligible borrowers include small businesses that are 51% owned by women, individuals from diverse backgrounds, veterans, individuals with disabilities, and long-term rural residents; and small businesses that enhance arts and culture in Iowa.

The $31 million allocated to the Venture Capital Co-Investment Fund Program created the InnoVenture Iowa Fund, an independent company that invests in Iowa startups and is run by Investment Director Kaylee Williams.

Lensing provided updates on the three programs.

What action will businesses and the community see on each initiative in 2023?

Venture Capital Innovation Fund Program: 
Funding levels for Iowa’s assistance programs across the entire innovation continuum have been raised, along with the addition of the Launch Fund to address the gap between the Demonstration Fund, refinement of market-ready product or service, and Propel Fund, acceleration of market development with an established customer base. The Launch Fund focuses on overcoming scalability challenges from those two stages to establish a customer base. The first awards at the increased funding level were awarded at the January IEDA board meeting.

Manufacturing 4.0 Loan Participation Program: 
IEDA will partner with lenders to assist manufacturers making the transition to Industry 4.0 technologies, allowing them to compete in a new digital world. In the coming weeks, lenders will request to participate in the program and apply for loan participation on behalf of manufacturers making an investment on technological enhancements.

Small Business Collateral Support Program: 
IEDA will partner with lenders to help fill a collateral gap that businesses would need to secure a loan. In the coming weeks, lenders will request to participate in the program and apply for the collateral support on behalf of the eligible small businesses, which includes socially and economically disadvantaged business owners.

What is the biggest opportunity for each initiative to affect Iowa’s innovation ecosystem?

Venture Capital Innovation Fund Program: 
Iowa has established a strong innovation network with the connections to entities that can aid in the development of ideas and capabilities. Financial assistance can complement those existing resources as an important component to helping our innovative small businesses. Adding SSBCI funds to the programs on Iowa’s innovation continuum will fill a crucial financing gap and retain growing startups that might have previously had to look outside of Iowa for financing at important stages in their business cycle. This type of financial assistance will enhance both the startups and Iowa’s overall entrepreneurial ecosystem. Innovation drives economic growth; the products and services produced by, or benefiting from, the creative startups will boost existing industry strengths, increase productivity and generate jobs for Iowa.

Manufacturing 4.0 Loan Participation Program: 
A global technology revolution – Industry 4.0 – has sparked the need for Iowa to continue growth of digital industrial technology in advanced manufacturing. Supporting innovation in Iowa’s leading industry establishes a competitive advantage and encourages growth in emerging areas. Backed by research and industry leadership, IEDA created Iowa’s Manufacturing 4.0 initiative to help the state’s advanced manufacturing businesses integrate smart technology, data-driven operations and process automation.

Iowa has taken meaningful steps forward to help manufacturers, and the Manufacaturing 4.0 Loan Participation Program will build upon that success to offset the risk for manufacturers taking the leap to incorporate new technology. Industry 4.0 technologies are advancing the industry with increased productivity and efficiencies, faster and more flexible production, and higher-quality goods at lower costs. They also transform the workforce, creating opportunities to train and upskill talent. The investments made in this industry strengthens Iowa’s position in the global economy and supply chain and brings sustainable jobs and economic growth to the state.

Small Business Collateral Support Program: 
Iowa has seen record numbers of new businesses for the last two years, and it’s important that they have the supports in place to grow. The Small Business Collateral Support Program is intended to help small businesses owned by women, minorities, veterans, individuals with disabilities, and long-term rural residents, as well as small businesses that enhance arts and culture in Iowa. For many disadvantaged business owners, making the leap from a state-funded, nonsecured loan to a traditional loan requiring collateral can be difficult to secure, often restricting these businesses from starting, growing and scaling their business.

The program will help remove an obstacle that could prevent these businesses from moving forward. They will be eligible to apply to access cash collateral accounts and obtain funding. In addition to accessing necessary funding for growth, businesses will also establish relationships with participating lenders that could lead to future opportunities. Providing support for socially and economically disadvantaged business owners to grow will create wealth and jobs, and also a stronger, more diverse pipeline of business ownership in Iowa.