True venture capital firms are set up to provide second-round financing for businesses that already have an existing strong management team and a developed product or process. The venture capital organization invests in the existing company in various ways, which in most cases involves a portion of debt and a portion of equity.
Venture capital firms assess the risk in an applicant's business and make a determination as to the percentage of equity they will hold through either preferred or common stock. They make money by selling their equity position in a five- to seven-year period, or at a point where the business has grown and is generating profits. They may sell to the current business owners, to a third party in an acquisition or to the public. They strive to make a return on investment of 30 to 40 percent per year.
Venture capitalists invest in the applicant or company based upon an assessment of the risks involved. As risk increases, the venture capitalist will require a stronger equity position. Typically, between 10 and 80 percent ownership of the business is required. The venture capital firm will also provide a person to be on the company's board, and they will often require prior consultation on major business decisions.
Category Funding Sources
Oklahoma Venture Forum (OVF)
The Oklahoma Venture Forum (OVF) is a non-profit group organized in Oklahoma City to encourage and promote economic and small business development through private enterprise.
The Forum, formed in 1987, provides a means for investors, entrepreneurs and others to exchange experiences and ideas through discussions and studies of venture investing, and the development and growth of new and existing small businesses. The OVF provides the setting at monthly luncheons held on the second Wednesday of each month, September through June.
Membership in the Oklahoma Venture Forum is open to anyone dedicated to fostering growth of new and existing business ventures in Oklahoma. Annual membership entitles the member to attend educational programs at the monthly luncheons, receive the monthly newsletter, membership directory, notices of upcoming events, and other member benefits.
Contact
Oklahoma Venture Forum
P.O. Box 20209
Oklahoma City, OK 73156
405-341-6545
www.ovf.org
OCAST Technology Business Finance Program
Since 1998, dozens of innovative Oklahoma entrepreneurs have secured make-or-break financing through the OCAST Technology Business Finance Program, a state-funded program that has been recognized both nationally and internationally as a model of best practices.
The program, which began as the brainchild of OCAST, is funded by the state legislature to specifically address early stage capital needs of technology-based businesses.
Operated by i2E, The OCAST TBFP provides proof-of-concept funding for Oklahoma advanced technology companies. This program is funded by state appropriations.
Eligibility
To be eligible for TBFP funding, an entrepreneur must be at the early development stage of commercializing an advanced technology. The business must be classified as a small business based on SBA guidelines, and at least fifty percent of the employees or assets must be located in Oklahoma.
Approximately 10 TBFP awards of $100,000 each are available annually.
The award can be used for anything from refining a prototype, to hiring people, to purchasing equipment, to creating marketing materials. Viable applicants often need i2E's help in constructing a thorough business plan as well as a cohesive proposal for the timing and use of potential TBFP funds. Once the companies are approved for funding they continue to receive support to reach the milestones set out in their contract.
Application Process
For application information on the OCAST TBFP, visit: www.i2e.org, or contact:
i2E
405-235-2305 Oklahoma City
918-582-5592 Tulsa
800-337-6822 Statewide
Oklahoma Seed Capital Fund
Created in 2007, the Oklahoma Seed Capital Fund is a venture capital fund that provides seed and start-up stage equity financing to small, technology-based Oklahoma companies. The Seed Capital Fund looks and operates like a conventional venture fund with the specific goal of furthering economic activity and success in the state by bridging the early stage funding gap between personal sources and traditional sources of venture capital.
An innovative public-private partnership, the Oklahoma Seed Capital Fund operates under the Economic Development Act of 1987 and is managed by a separate subsidiary of i2E. State funding is provided through OCAST. The Oklahoma Development Finance Authority and the Oklahoma Capital Investment Board are co-investors. The Seed Capital Fund seeks and accepts private investment which may offer state tax incentives and benefits.
Eligibility
To be eligible for the Oklahoma Seed Capital Fund, an entrepreneur must be at the seed or early development stage of commercializing an advanced technology. The Oklahoma Seed Capital Fund seeks firms that have the potential to become high growth, advanced technology businesses that will contribute to the ongoing economic growth of the state. The fund anticipates making up to 10 investments from $250,000 to $700,000 per year in rounds of up to $1 million. Investments will be determined by a traditional investment due diligence process that is timely, practical, and thorough.
The use of funds is based on the company's submitted business plan. They may include such activities as developing the intellectual property, building prototype, market study, implementing business operations, identifying the management team and securing the management team.
Application Process
For more information on the Oklahoma Seed Capital Fund, visit www.i2e.org, or contact:
i2E
405-235-2305 Oklahoma City
918-582-5592 Tulsa
800-337-6822 Statewide
Oklahoma Capital Investment Board (OCIB)
For many Oklahoma businesses, venture capital has been particularly difficult to locate. The Oklahoma Capital Investment Board (OCIB) supports investments in venture capital firms who will, in turn, make venture capital investments in Oklahoma businesses. The venture firms make their investments based on normal venture capital criteria and seek returns commensurate with the risk.
OCIB supports investment in funds ranging from early stage venture capital to subordinated debt. The Oklahoma Capital Investment Board manages a $100 million resource for the state.
Eligibility
Among the investments ineligible for OCIB funds are oil and gas exploration, production and processing, real estate raw land and speculation, and agricultural production. Through its venture capital program the board supports investments in private, professionally managed venture capital firms that will commit to building an enduring presence within the state. Through its Capital Access Program the board provides credit insurance to banks to help them make loans to Oklahoma businesses that might not otherwise be made.
Application Process
Eligible venture capital firms and banks may contact the Oklahoma Capital Investment Board to access OCIB funding.
Contact
Oklahoma Capital Investment Board
301 N.W. 63rd, Suite 520
Oklahoma City, OK 73116
405-848-9456
www.ocib.org
Small Corporate Offering Registration (SCOR)
The Small Corporate Offering Registration (SCOR) is a securities offering program available to small corporations and limited liability companies. The program contemplates offerings that are exempt from federal registration under (1) Rule 504 of Regulation D, (2) Regulation A, or (3) Rule 147 of the Securities Act of 1933. Oklahoma is one of 42 states that allow SCOR offerings and the Pacific Stock Exchange lists SCOR securities under certain conditions.
The offering price for common stock or common ownership interests must be greater or equal to $1 per share or unit of interest. The issuer must agree with the state securities administrator that it will not split its common stock, or declare a stock dividend for two years after the effective date of the registration, if such action has the effect of lowering the price below $1.
Standards applicable to these public offerings are intended to assure that the terms and structure of the offering are fair to investors. In particular, those standards are designed to require the promoters of the company to share its potential risks and rewards fairly with public investors.
Eligibility
The company issuing the securities shall:
- Be a corporation or limited liability company organized under the laws of the U.S. or Canada
- Not be subject to the reporting requirements of the Securities Exchange Act of 1934
- Not be an investment company under the Investment Company Act of 1940
- Not be engaged in petroleum exploration and production, mining, or other extractive industries
- Not be a development state company with no specific business plan or purpose other than merger.
Application Process
A filing made on the Form U7 is subject to the guidelines and restrictions set forth in 660:10932 through 660:10936 of the Rules of the Oklahoma Securities Commission and the Administrator of the Department of Securities. The Administrator may waive any of the guidelines and restrictions, upon written request of the applicant, if the Administrator finds the requirements are not necessary to protect the public.
Contact
Oklahoma Department of Securities
First National Center, Suite 860
120 North Robinson
Oklahoma City, OK 73102
405-280-7700
www.securities.state.ok.us/
U.S. Small Business Administration (SBA) Small Business Investment Companies (SBICs)
The Small Business Investment Company program is designed to fill the gap between the availability of venture capital and the needs of small businesses that are either starting or growing. Licensed and regulated by the SBA, SBICs are privately owned and managed investment firms that make capital investments in small businesses. They use their own funds plus funds obtained at favorable rates with an SBA guarantee and/or by selling their preferred stock to the SBA.
Most of SBICs are for-profit firms whose incentive is to share the success of small businesses. SBICs provide equity capital, long-term loans, debt equity investments, and management assistance.
2009 Recovery Act Change: Maximum levels of funding the agency can provide to these companies are now set at up to three times the private capital raised by those companies, or $150 million, whichever is less. The percentage any one SBIC can invest in a single small business is now up to 10 percent of total capital, and the 2009 Recovery Act raises from 20% to 25% the percentage of any licensee’s dollar investments that must be made in “smaller” businesses.
Eligibility
There are two types of SBICs. One invests in small businesses owned by entrepreneurs who are socially or economically disadvantaged, primarily members of minority groups. The other provides funding for all types of manufacturing and service industries. Some investment companies specialize in certain fields, while others seek out small businesses with new products or services because of strong growth potential. Most, however, consider a variety of investment opportunities.
Application Process
Prospective applicants may contact any SBIC office for detailed information, or the Oklahoma City District Office of the U.S. Small Business Administration for general application guidelines.
Contact
Chisholm Private Capital Partners
211 North Robinson, Suite 1910
Oklahoma City, Ok 73102
405-605-1111
Council Oak Investment Corporation
101 North Broadway, Suite 400
Oklahoma City, OK 73102
405-218 4696
First United Venture Capital Corporation
1400 West Main Street
Durant, OK 74701
580-920-4907
U.S. Small Business Administration - Oklahoma City District Office
Federal Building
301 NW 6th St, Ste. 116
Oklahoma City, OK 73102
405-609-8000
www.sba.gov/ok/financing.html
MetaFund Corporation
MetaFund's broad mission as a non-profit, well-capitalized Community Development Financial Institution (CDFI) is the facilitation, development, and financing of Oklahoma businesses and community development projects. MetaFund has 22 investors, including 20 Oklahoma banks, and has more than 100 non-profit and government-related partners. Banks receive Community Reinvestment Act credit for investments and loans in, to, and through the corporation. 
MetaFund also is a Collaborative Community Development Merchant Banking Venture Capital Financial Institution (CCDMBVCFI) and an Oklahoma non-profit 501(c)(3) corporation with $10 million in capital.
MetaFund makes loans and investments in financially viable projects and companies that provide jobs, housing, or other direct benefits to underserved people or distressed places throughout Oklahoma.
Although MetaFund usually partners with banks, it can use investment and venture capital structures that banks cannot use by themselves, such as convertible debt, convertible preferred stock, direct equity investments, and revenue sharing (royalty) agreements. Included in MetaFund's loan/investment portfolio are infill housing, numerous small businesses, and several start-up companies.
Eligibility
MetaFund is able to invest in both start-ups as well as entities in a more mature life cycle phase. Businesses and projects must, however, be both financially viable, and meet MetaFund's mission qualification of providing benefit to underserved demographies or geographies.
Application Process
Generally, a complete business plan, including both past financial performance and future projections, is required for review. Prospective applicants may contact the MetaFund officials below.
Contacts
A. Thomas Loy, Chairman and CEO, tloy@metafund.org
Michael W. Harlan, President, mharlan@metafund.org
MetaFund
2225 N. May Avenue
Oklahoma City, OK 73107
405-949-0001
www.metafund.org
