Overview
The Commonwealth of Kentucky has launched an a initiative to provide $117 million in federal funds through the Treasury-administered SSBCI ** program. If you are a founder looking for investment capital, a venture fund investing in Kentucky startups, or a small business looking for loans and collateral support, you may be eligible to participate in these opportunities designed to increase access to capital and help Kentucky businesses thrive with "KSBCI 2.0".
The Kentucky Growth Capital Fund
For scalable businesses looking for investment capital to grow.
KSBCI's Kentucky Growth Capital Fund makes direct investments in early to growth stage, technology-based companies in Kentucky seeking private equity funding from angel and venture capital investors for working capital, growth, and expansion.
This may be the right opportunity for you if you have a great idea AND have achieved significant progress, market validation, or customer traction with a clear growth path. The Kentucky Growth Capital Fund requires companies to find matching investments from private investors.
Funding may be available to Kentucky-based companies that meet the following criteria: *
- Currently raising capital via equity or convertible debt
- Can attract investment commitment from private investors
- Fewer than 500 employees
- The ability to grow and scale your business
Management
Kentucky Growth Capital Fund investments are managed through Kentucky Science and Technology Corporation’s (KSTC) venture arm, Keyhorse Capital in partnership with the Kentucky Cabinet for Economic Development and the #KYInnovation “KSBCI 2.0” program as part of the United States Treasury State Small Business Credit Initiative (SSBCI).
PROGRAM GUIDELINES
The following are general guidelines for a Kentucky-based company to apply for investment from the Kentucky Growth Capital Fund (the "Fund").
1. Eligible Companies: Technology-based partnerships, corporations, and limited liability companies, based in or relocating to Kentucky with 500 or fewer employees.
2. Individual Investment Offerings (Capital Raise) must be no more than $20 million.
3. Maximum Total Investment Amount per Company: $5,000,000.
4. Maximum Investment per Capital Raise: Fifty percent (50%) of the investment offering, or 100% of the Maximum Total Investment Amount, whichever is less.
5. Investment Commitment: Prior to completing an investment from the Fund, the applying company must have received investment commitments from private investors of at least one hundred percent (100%) of the Fund's total commitment.
6. Terms of Investment: An investment from the Fund shall be based on the same terms and conditions provided to other private investors participating in the specific investment offering; specifically, the Fund shall be senior to or in pari-passu to private investors.
7. Restrictions: There are restrictions on eligible use of investment funds (e.g., certain cash-in refinancing, debt repayments, consolidations, repayments of taxes, reimbursements to owners) and types of companies, based on certain primary business activities, such as:
Passive real estate is defined as investment in real estate acquired and held primarily for sale, lease, or future investment. It includes most real estate development (including construction) in which the developer does not intend to occupy or actively use the resulting real property.
A business engaged in speculative activities that develops profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil or dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business.
A business that earns more than half of its annual net revenue from lending activities unless the business is a non-bank, non-bank holding company, or Community Development Financial Institution.
A business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants.
A business engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted (includes businesses that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the business’s intended market). This category of businesses also includes direct and indirect marijuana businesses, as defined in SBA Standard Operating Procedure 50 10 6;
A business engaged in illegal gambling enterprises or business deriving more than one-third of gross annual revenue from legal gambling activities.
8. Kentucky Presence: In general, applying companies have either their principal place of business in Kentucky or no less than fifty (50%) of their property and payroll located in Kentucky or will be committed to meeting these requirements within 30 days of the Fund's investment.
9. Company Formation: An applying company shall be duly and legally formed under applicable state and federal law and does not have to be formed under Kentucky State law but is required to be in verifiable good standing with the Kentucky Secretary of State’s office.
10. Board of Directors: If an applying company has a duly formed Board of Directors, Keyhorse Capital / KSTC shall not serve as a voting member on the Board of Directors but may request Board of Directors Observation rights.
11. Insurance: D&O and/or Life insurance may be required pursuant to prudent investing practices.
12. Company Financial Statements: At a minimum, companies will be required to submit quarterly and annual financial and activity statements, which can be internally prepared. Keyhorse Capital / KSTC may request, among other documentation, annual audited financial statements on a case-by-case basis at the company’s expense.
13. Employment Information: At a minimum, companies shall respond to requests for the number and projected number of employees and average hourly wages, and Kentucky Employer Identification Number(s).
14. Company Information: A company shall provide any information formally requested by Keyhorse Capital / KSTC, and Keyhorse Capital / KSTC shall make available to the Kentucky Cabinet for Economic Development, the U.S. Department of the Treasury Inspector General and the Government Accountability Office all books and records related to the use of funds from the State Small Business Credit Initiative included in the 2021 American Rescue Plan Act, subject to applicable privacy laws, including but not limited to 12 U.S.C. § 3401 et seq., including detailed investment records, as applicable. At the company’s discretion, the company may mark certain documents confidential and/or proprietary. A company shall provide all information formally provided to the company shareholders and/or the company’s non-executive Board of Directors and the total dollar amount of private financing received after the closing of the investment. For transparency, the Fund program reserves the right to disclose the Company’s participation in the Fund program publicly.
* KSTC's services, assistance, and activities are available to all without regard to race, color, religion, sex, marital status, disability, age, or national origin.
** The American Rescue Plan Act of 2021 included a $10 billion reauthorization of the State Small Business Credit Initiative (SSBCI), a Treasury-administered federally funded economic development program intended to increase state capacity to support small business “access to capital” programs. SSBCI provides the Kentucky Cabinet for Economic Development with at least $117 million of federal funds to administer. With substantially more capital allocated to the Commonwealth, Kentucky has directed 70% (nearly $82 million) to venture capital programs and 30% ($35 million) to small business loans and collateral support through "KSBCI 2.0" programs.