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Information technology services industry

Federal Program Catches On with Chicago Technology Backers

Strategic Insights

— 2 min read

As the Small Business Administration (SBA) continues to update its program for private investing in small businesses, Chicago's technology sector is taking notice. The SBA program, which leverages private investment to support small businesses, has gained the attention of local entrepreneurs, including Art.com founder William Lederer. His company, Minotaur Capital Management Inc., has recently cleared the first hurdle in obtaining a small business investment company (SBIC) license for its second fund. This development suggests that local interest in the program is growing, with at least seven SBIC licenses expected to be granted in Illinois this year.

Key Takeaways:

  • The SBA's Small Business Investment Company (SBIC) program is gaining traction with Chicago technology investors, including Art.com founder William Lederer and Minotaur Capital Management Inc.
  • Local interest in the program is growing, with at least seven SBIC licenses expected to be granted in Illinois this year, up from four last year.
  • SBICs receive federal money, typically $3 for every $1 from private investors, to buy stakes in qualified companies, with the government's return capped.
  • This investment strategy has proven profitable for taxpayers, with SBICs being among the government's few profitable enterprises.
  • Innovative marketing strategies, such as guerrilla marketing, are becoming more popular among dot.com marketing directors, with events like the Wine Industry's launch party at Seattle's Space Needle pushing the boundaries of traditional advertising.
  • A lawsuit filed by two former recruiters against Lisle-based divine interVentures Inc. highlights the challenges facing startups in the technology sector, including issues with contract breaches, fraud, and defamation.
  • The lawsuit also raises concerns about the viability of initial public offerings (IPOs) and the impact on early investors, such as the plaintiffs who exercised options to buy divine shares at 75 cents each.

Statistics:

  • At least seven SBIC licenses are expected to be granted in Illinois this year, up from four last year.
  • SBICs invested $228 million in small companies last year.
  • The SBA program has been revamped several years ago, allowing for increased interest in local private investing.
  • The lawsuit filed against divine interVentures Inc. seeks damages in excess of $50,000.
  • If the IPO proceeds at $14 per share with a reverse one-for-six split, the plaintiffs' shares would be valued at about $47,000.

Sources:

  • "Call it handouts for the rich or a job-generating boon, a federal program that leverages private investing in small businesses is catching on with Chicago technology backers." (The Wall Street Journal)
  • Alan Roth, attorney at Chicago's Wildman Harrold Allen & Dixon, specializes in SBICs and notes local interest is growing since the program was revamped several years ago.
  • The SBA is on track to grant at least seven SBIC licenses in Illinois this year.
  • SBICs are among Uncle Sam's few profitable enterprises.
  • Guerrilla marketing: What keeps dot.com marketing directors awake at night? (The Wall Street Journal)
  • BulkMarkets.com Inc. learned that a well-financed wine industry competitor was throwing a launch party last month at Seattle's Space Needle.
  • Two of the first recruiters to join Lisle-based divine interVentures Inc. last year are suing the Internet holding company, charging breach of contract, fraud and defamation.

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