Startups here may have an additional avenue for financing now that the city of Reno is experimenting with investing in new businesses.
The Reno Accelerator Fund is a new, $200,000 fund charged with finding and fostering fledgling businesses. The fund is being financed through part of the city’s annual allocation of U.S. Department of Housing and Urban Development community development block grants.
“We’ve been hearing from our startup and business community that this is what is needed, access to early stage capital,” says Maureen McKissick, strategic development administrator with the city. “HUD’s objectives are to create services for low-income people, including housing and jobs. So this is the jobs component.”
The fund plans to find eight businesses in which it will make investments of not more than $20,000 each by the end of June. McKissick said this first phase is considered a test, at the end of which the Reno City Council will evaluate the program and decide whether to continue it.
The fund is hoping to find businesses that could continue to scale beyond a few employees, which must include the owner, and be more than a local mom-and-pop shop or restaurant.
“We’re looking for startups we believe have the potential to grow into bona fide larger corporations,” says McKissick.
That means the businesses will likely be technology-oriented endeavors, although the fund is not limited to that and will consider all kinds of startups, including manufacturing.
“We’re looking for the kind of companies most likely to create jobs, so we know that’s technology,” says Nicola Kerslake with NewBean Capital. “But that could be across all sectors, could be technology for agriculture, for example, or software for veterans. There are no restrictions in terms of the kind of technology.”
Kerslake is working under contract with the Economic Development Authority of Western Nevada to administer the fund. She and EDAWN plan to work with local accelerators, including the Reno Collective and Girlma.de, which are already providing space and assistance to startups who need financing.
The Nevada Small Business Development Center at the University of Nevada, Reno, College of Business will also serve as a resource, according to Doug Erwin, vice president of entrepreneurial development at EDAWN.
“We have a lot of intake sources. Look at One Million Cups,” says Erwin, referring to the weekly Wednesday gathering of entrepreneurs, investors and others in the business community at Swill Coffee & Wine in Reno. “That started in March and already 70 to 80 companies have presented.”
Erwin says he envisions expanding on the city’s already burgeoning tech scene on First Street where at least 10 young companies, including Cloudsnap, Pinocchio and Understand.com, reside.
“The metrics for short term are not the metrics in the long term,” says Erwin. “I hope we can continue to keep it going. These types of startups don’t pay dividends for three to five years.”
The final decision on which startups to fund will made by an investment committee consisting of representatives from the city, EDAWN and a local third party experienced in startup financing.
The city is also creating a second fund with another $200,000 in HUD community development block grants to make microloans to existing businesses which might otherwise not be able to secure financing. That money will act as a loan loss reserve for Valley Economic Development Center, a community development investment foundation based in Van Nuys, Calif., which will have $3 million to loan to area businesses.
“Both programs are brand new and both are considered test programs,” says McKissick. “They’ll be evaluated month to month and at the end of the fiscal year in June we’ll go to the city council to see if they’ve met the measurements.”
