U.S. Small Business Administration (SBA) Administrator Karen G. Mills announced today, during remarks at a G8 session on social impact investing, in London, England, that the agency’s next solicitation for its Small Business Investment Company (SBIC) Early Stage Fund will be opening in the fall of 2013.
As part of the announcement, Mills announced that the agency has expanded by $50 million the amount of leverage it is investing in funds during this second Early Stage solicitation from $150 million to $200 million. In addition to the new solicitation for Early Stage funds, and increase in investment leverage, the SBA also announced that it had increased its allocation size for its Impact Investment Fund. Previously, an Impact Investment Fund could only receive up to $80 million in SBIC leverage, but now these funds can receive up to $150 million – – a $70 million increase. The agency also recently expanded the definition of impact investing to include rural communities. Both funds operate through the SBA’s SBIC program.
Research shows that early stage companies face difficulty accessing capital, particularly those without the necessary assets or cash flow for traditional bank funding. Early stage financing rounds between $1 million and $4 million are often referred to as the so called “Valley of Death,” with only about 6 percent of all venture capital financing deployed during this stage. The SBA’s Early Stage Fund is designed to help fill that gap.