The Buzz with Doug Beekman, Principal, Advantage Capital Partners; Member, D.C. Coalition for Capital

Advantage Capital Partners is a leading venture capital and small business finance firm focused on investing in promising companies in connection with federal, state and local economic development efforts. With offices in Washington, D.C., New Orleans, St. Louis, Austin and other U.S. cities, Advantage has raised more than $1 billion in capital since 1992 and invested in companies located in geographic areas that are underserved by traditional venture capital.

How does a business qualify for a CAPCO program investment?

The goal of the Certified Capital Company (“CAPCO”) program is to support District businesses, creating new job opportunities and expanding the venture capital infrastructure here.

CAPCOs, which are private investment capital firms with strong local knowledge and industry expertise, have been approved by the District to invest funds in accordance with the D.C. CAPCO statute and regulations.

In order to be eligible for CAPCO program investment, a business must:

-Be headquartered in the District;
-Have its principal business operations located in the District;
-Have at least 25% of its employees as residents of the District;
-Have at least 75% of its employees employed in the District;
-Be a small business concern; and
-Certify that it is unable to obtain conventional financing from a bank or a commercial lender.

Once these qualifications are met, the final investment decision is at the discretion of the individual CAPCO, based on the prospects of the business, as determined by the CAPCO after an extensive review.

Why do CAPCO participants require that a business be turned down by other financial institutions prior to application?

The D.C. CAPCO program was put in place to fulfill the City Council’s intent by growing local businesses and generating significant economic development for the District. The program was specifically designed to not compete with other existing sources of capital, especially commercial banks, and to address the needs of entrepreneurs who have trouble obtaining traditional financing for promising businesses.

How can terms and agreements of an investment be structured? (i.e. structure of equity or debt)

Under the rules of the CAPCO program, CAPCOs are allowed to utilize a wide variety of deal structures and will propose the one that best fits the risk/reward profile of a particular investment. The specific terms are negotiated between the CAPCO and the potential investment on a case-by-case basis.

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