A new venture capital firm based in Portland is raising a $10 million fund to make seed investments in early-stage, primarily Maine-based companies.

It also appears to be utilizing the state’s Seed Capital Tax Credit program in a novel way by using targeted VC funds as a vehicle to give tax-exempt charitable organizations access to “refundable” tax credits.

Opus Ventures announced its intentions this week. The VC firm is a spin-off of Portland-based Opus Consulting Group, which was founded by Jacques Santucci in 2009.

Andrew Wood, a partner in the VC firm, told Maine Startups Insider that Opus Ventures expects to raise $10 million for its general fund by the third quarter of this year. It will make seed investments up to $500,000 in early-stage companies primarily in the areas of alternative healthcare, technology, manufacturing, environmental, biotechnology, financial services, and emerging industries, according to its website.

Additionally, the firm said it was collaborating with Skowhegan Savings Bank’s charitable foundation to raise a smaller, “first-of-its-kind” fund, initially $1.5 million, to focus on supporting early-stage companies in western and central Maine.

By virtue of its roots in consulting, Wood said Opus Ventures will operate with a “hybrid consulting/VC model,” meaning the company’s principals will work closely with the companies in its portfolio.

“We think it is a good opportunity for startups and investors to meet on a strong platform and benefit from our members’ experience growing startups,” he said.

Opus Ventures lists as its managing members Jacques Santucci, who founded Opus Consulting Group in 2009 and is also a founder of Wellness Connection of Maine, the state’s largest medical cannabis provider; Parker Poole III, who founded Wright Express (now known as Wex) and served as its president from 1983 to 1990; and William Eldridge, who was founder and CEO of Maine’s Own Organic Milk Co. (better known as MOO Milk).

As highlighted in the firm’s news release, and reiterated by Wood, one of the selling points of the firm’s VC funds are that they will provide access to Maine’s Seed Capital Tax Credit program to out-of-state investors and charitable organizations (more on this below).

Western Maine targeted fund

In addition to its $10 million general fund, Opus Ventures also announced this week its intention to raise $1.5 million for what it’s calling its Western Maine Venture Fund.

It’s raising the fund in collaboration with Skowhegan Savings Charitable Foundation, which is a limited partner in both Opus’ general fund and the western Maine fund.

“We are pleased to work with Opus Ventures and proud to be able to put the bank’s foundation capital to work in our communities in this first-of-its-kind venture fund aimed at developing the economic potential of western and central Maine,” John Witherspoon, CEO of Skowhegan Savings Bank and president of its charitable foundation, said in a statement.

The Western Maine Venture Fund will seek to make the same range of seed investments in the same targeted industries, Wood said, while also aligning its investments with Skowhegan Savings Charitable Foundation’s mission of expanding the western Maine economy.

“This is a great opportunity to partner with The Skowhegan Savings Charitable Foundation to bring venture investing to Maine in a targeted way,” Santucci said in a statement.

Wood said Opus Consulting Group is already working with companies that are candidates to receive seed investments from the Western Maine Venture Fund. MaineSole in Dexter is one such company, he said.

The Western Maine Venture Fund is one of what could be several smaller “targeted” funds that could focus on a specific company, industry, or geographic region, Wood said. The investment focus of each of these targeted funds—Wood calls them Opus Ventures Institutional Pledged Fund Class (IPFCs) funds—would be directed by its limited partners.

“We believe that it would allow us to bring targeted capital, through our group of funds, and invest in Maine businesses,” Wood said.

designed to benefit from Seed Capital Tax Credit program

Both of Opus Ventures’ funds—its general fund and Western Maine Venture Fund—are qualified by the Finance Authority of Maine (FAME) to receive tax credits, and pass them onto investors, through the state’s Seed Capital Tax Credit program, which allows investors to recoup 50% of their investment (up to $500,000) in an eligible, early-stage Maine company in the form of tax credits, which can be used over at least a four-year period to reduce state income tax liability.

The tax credit program, which is capped at $5 million a year in tax credits, has already been depleted for 2018.

The program, originally created in the late 1980s, at first was designed to encourage Maine-based investors—who would have Maine tax liability and benefit from the tax credits—to invest in Maine startups. But the program was revised in 2014 to provide “refundable” tax credits to out-of-state venture capital firms—”refundable” means the credits don’t need to offset an existing tax liability and can instead be returned for cash from Maine Revenue Services.

While existing VC funds have taken advantage of the program since it was revised to allow them to claim refundable credits, this appears to be the first time a VC firm is creating funds specifically designed to give charitable foundations, which are tax exempt, access to the program. A tax-exempt organization like Skowhegan Savings Charitable Foundation doesn’t have Maine income tax liability, but it would still be able to recoup 50% of its investment with refundable tax credits.

“One of the unique aspects of the fund is our ability to pass on to out-of-state investors a tax rebate/refund on their investments as part of the Maine Seed Capital Tax program,” Wood said. “Until now this was not available to out of state investors or charitable organizations.”

Wood said that in order for an out-of-state investor, or a charitable organization, to qualify to receive the tax credits from an investment via a targeted fund like the Western Maine Venture Fund, the investor would have to invest in both the general fund and the IPFC.

“This is a FAME specific requirement,” Wood said.

While all the details have not yet been released by FAME, the fact the Maine Seed Capital Tax Credit hit its annual cap of $5 million so early this year (April is the earliest the cap has ever been reached) is thought to be because VC firms are beginning to discover the program and its benefits to its limited partners. When the numbers are released, I expect we’ll see a larger share of the 2018 credits being claimed by VC firms than in the past.

There will likely be an effort to expand the tax credit program in a future session of the Legislature.

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