If you haven’t yet read it, we’d highly suggest Maine Governor Janet Mills’ recently released 10-year Economic Development Plan. The primary challenge to companies and entrepreneurs: grow the workforce over the next decade by 75,000 workers at minimum, and more if we’re ambitious about an even brighter future for Maine.
From a founder’s perspective, accessing the capital required to build great companies and meet this challenge can feel daunting. So where to start? Below, Maine Venture Fund offers advice on navigating Maine’s wider funding ecosystem, including our own position therein.
Overall, the investor community in Maine supports businesses across the growth spectrum. A simple way to envision that spectrum:
- Formation – setting up the business; hiring core team; research and development
- Validation – product or service testing; early revenue; vetting business model
- Growth – hiring; scaling; investing more heavily in property and equipment
In parallel, consider the different types of investment a company can generate. In order from least time/effort required to secure funding to most time/effort required, a company’s primary options include:
- Bootstrapping – radically limiting cost and stretching existing resources as far as possible
- Grants – company business model must align to grant program profile; application process
- Debt – must provide collateral; underwriting process; must pay back loan with interest
- Equity – must give up some company ownership/control; significant due diligence
In general, the further a company moves up this scale, the larger the sums available.
So which type of funding is most appropriate by stage? While there is no one-size-fits-all approach, here’s how most companies orient, with font size corresponding to method fit:
Formation:Bootstrapping, Grants, Debt
Validation: Bootstrapping, Grants, Debt, Equity
Growth: Grants, Debt, Equity
Now let’s take a look at which resources exist for each option:
By its nature, Bootstrapping largely consists of leveraging personal savings and friends and family. Organizations like SCORE Maine and Maine Center for Entrepreneurs offer mentoring and support at little or no cost. Additionally, crowdsourcing through platforms like Kickstarter, Patreon, Indiegogo and Crowdfunder are a form of Bootstrapping, but make sure you understand a given sites’ unique terms before you embark down that road, as requirements differ for each.
Several grant programs exist across Maine, some of which include:
Maine Technology Institute – 7 Technology and Innovation Sectors
Maine Community Foundation – 20+ Grants across a broad range of populations in Maine
Libra Foundation – Grants for non-profits
New Ventures Maine – General support and Mini-Grants
Grant-writing is an art. Guidance is offered through organizations like SCORE Maine or through freelance grant-writers across the state.
Taking on debt creates a liability in the form of monthly payments over the course of time. If cash flow can support debt payments (with some cushion), most banks in the state of Maine will finance small ventures, sometimes working closely with the Finance Authority of Maine (FAME) and the US Small Business Administration (SBA) to extend loan programs to businesses that may be particularly early stage or may lack required collateral for a more traditional loan.
Note that while larger national and international banks may be a common option for generic banking, business loans typically involve a more nuanced application, and support after the loan is approved can be critical, so we highly recommend banking closer to home. The same caution could be applied to quick-approval online loan platforms; tread lightly!
There are many loan programs across Maine that cater to specific underserved populations, so spend the time to better understand the many options that exist. Namely, there are 11 Community Development Financial Institutionsacross the state that offer a wide variety of programs, primarily based on region. Coastal Enterprises, Inc is the largest of these CDFIs and features loans for veterans, women, people of color, non-profits, and more. Slow Money Maine focuses on agriculture and aquaculture.
Equity means ownership: when a company raises equity it is generally selling part ownership to the investor. This ties the fate of the company to the investor. If the company fails, investors can be left with nothing; if the company is successful and “cashes out” in a sale to a buyer, the investor shares in the upside. Because of this high-risk model, equity is generally the most complex form of capital to access (closing an equity round can easily be a six-month process), but for companies raising several million dollars or more, few other funding sources exist.
Maine Venture Fund is an equity investment fund, and the only one focused exclusively on Maine companies. Like most venture capital firms, MVF seeks high-growth companies that have an opportunity for significant success in order to compensate for the high level of risk. Unlike traditional venture capital, however, any proceeds MVF receives upon the sale of a portfolio company are recycled back into the Fund and deployed into other Maine companies. This virtuous circle has helped to create more than 1,000 well-paying jobs in Maine over the last 20 years, and funded 68 Maine companies.
Other equity investors in Maine include CEI Ventures (a for-profit arm of CEI, described above), MaineStream Finance, Black Point Group, and the Maine Angels, a group of accredited individuals who make personal investments in Maine companies and beyond. Additionally, MTI, mentioned in the context of grants and loans, also provide equity investments from time to time based on company stage and needs.
Finally, tax incentives from FAME and the Maine Department of Economic and Community Development (DECD) are available for certain larger projects and can mitigate costs significantly.
For companies seeking larger sums and willing to dive into the competitive fray of a much larger market, Maine is lucky to have two of the largest venture ecosystems in the world nearby in Boston and New York, and increasingly investors in those markets are seeking opportunities outside of major metro areas.
On a federal level, there are many more services, especially grants and loans, that can overlay or directly augment state programs. The US Small Business Administration offers myriad mechanisms to help entrepreneurs.
Phew! Underneath each of these hyperlinks lies much more specific information about the particular opportunities for funding in Maine, but hopefully this provides a general framework for consideration, and a solid jumping off point! Here’s to the next decade, the current and future entrepreneurs in Maine, and the 75,000+ jobs we’ll create here.
Did we miss a Maine resource? Do you have experience with any of these funding sources? Let us know!