It has been almost five years since the Minnesota House and Senate made the decision to invest in the entrepreneurs of Minnesota and pass a five-year, $50- million tax credit designed to spur early-stage investment in high tech start-ups, including biotechnology and medical devices. The Minnesota Angel Investor Tax Credit (AITC) took effect in the tax year of 2010 and is currently set to expire for investments after tax year 2014. This bipartisan program provides a 25 percent credit to investors or investment funds that put money into startup companies focused on high technology or new proprietary technology. The maximum credit is $125,000 per person, per year ($250,000 if filing jointly). The credit is refundable and non-Minnesota residents, including residents of foreign countries, are eligible.
Since taking effect, total investment amount made through AITC 2013 was $50.6 million. 193 companies have been certified overall, and128 have received investment. There have been 484 investors certified; 452 of them made investments. 69 percent of those investors were from Minnesota, 31 percent were out-of-state.
Minneapolis is known for its close-knit tech community. In 2005, Popular Science named Minneapolis the “Top Tech City” in the U.S. And with five Fortune 500 corporations headquartered within the city limits of Minneapolis (Target, U.S. Bancorp, Xcel Energy, Ameriprise Financial and Thrivent Financial for Lutherans).
To remain competitive, Minnesota must provide this type of investor funding incentive, especially considering surrounding states (Wisconsin, North Dakota, South Dakota) and the East and West coasts, many of which have generous angel credits in place that would lure homegrown start-ups across the border to seek funding. Minnesota already has an advantage with a low cost of living and an almost endless pool of young talent from the University of Minnesota, but our state government must encourage private investment to promote business, which provides jobs.
Three out of every four startups will fail. Our government cannot create jobs, but they must create an atmosphere where growth is possible. No funding, begets less entrepreneurial activity, begets fewer jobs, begets talent drain to non-Minnesota locations, begets less economic activity, begets less tax revenue base for Minnesota.
I encourage everyone to contact our representatives and ask them to renew the Minnesota Angel Investor Tax Credit. Now is the time to take action by renewing the law so that the momentum can continue by providing another incentive for investors to fund these early stage firms.