Montgomery County plans to turn its capital investments in local startups into ownership equity.
In 2010, the Maryland legislature enabled Montgomery to adopt a local law letting it make equity investments in businesses in the county, and that bill is expected to soon come before the County Council, said Steven A. Silverman, the county’s economic development chief.
“This is just simply creating an opportunity for us to use the same dollars that we would give to a company to create jobs,” Silverman said. “It will now be used to create a potential return on the investment.”
Silverman said he had expected the bill to have been introduced before the council went on recess until mid-January, but it was delayed.
A fiscal analysis of the legislation detailed that the investment capital would come from the county’s Economic Development Fund. But figures of the required capital or returns were unclear, according to the statement.
Under the bill, Montgomery would have a limited ownership potential of up to 25 percent of the company. Silverman thought the upper limit was unrealistic.
A more realistic provision would let the county have what he called “options” when the company goes public or goes through a series of financing through the venture capital arena, allowing the county to then cash out, he said.
“If we were going to give Company X $100,000 to create 50 jobs and take 10,000 square feet of office space, now we are saying we want you to create jobs, take office space and want you to give us a piece of the company,” he said. “So that if you become the next MedImmune, the county will get significant dollars back.”
No specific startup has been targeted for equity investment as the county looks to introduce the legislation, Silverman said.
However, he said, discussions with entrepreneurs show an openness to idea of the county gaining ownership stakes.
When asked about the bill, County Executive Isiah Leggett (D) said last week he was not yet ready to talk about it.