In order to qualify for an investment, companies will have not received any — or very minimal — equity capital, including pre-seed and seed funds, and have a substantial presence in the state, according to Neil Martin, the managing director of financial programs for Rhode Island Commerce, who previously worked as the chief financial officer for the Massachusetts Growth Capital Corporation.
The maximum investment will be $250,000. Rogue Ventures must match that amount with at least equal private investment, according to Martin.
Venture capital firms typically provide financial banking for early-stage companies and startups. When a firm provides funding, a startup often gives up equity to the venture capital firm. The firm will sometimes manage the companies they invest in, or advise their founders and executives. More mature companies go public or are acquired to make money for venture capital firms and their investors.
In Rhode Island, venture capital funding is not as prominent as other states. The Providence area, for instance, brought in $169 million in venture capital in 2023, according to PitchBook, a platform that provides private market data. By comparison, $7.67 billion of venture capital was invested in Massachusetts-headquartered companies in 2023, where biotechnology was a major driver of funding.
The lack of access to capital is also one of the biggest barriers to starting a company or sustaining one in Rhode Island, according to business leaders.
The Rhode Island Venture Capital Fund will not focus on specific industries, Commerce spokesman Matthew Touchette told the Globe. It is also expected that most, if not all, of the initial $2 million in funds will be invested by June 30, 2026, he said.
It’s not yet clear when businesses can apply for investment.
Most of venture capital investments are done in the private market. Outside of Rhode Island, government-backed venture capital funds aren’t anything new.
In the Bay State, MassVentures was founded more than four decades ago. Its mission is to focus on helping first-time founders turn research and early-state innovations into viable commercial uses. In the Constitution State, Connecticut Innovations is the state’s strategic venture capital arm, which administers a pre-seed fund, providing up to $150,000 to help early-stage companies. Under the Connecticut Innovations umbrella, the state also has a $100 million climate fund intended to meet the state’s decarbonization goals.
In recent years, venture capital in the private market has also faced some obstacles. Since its peak in 2021, funding for startups has declined sharply amid higher interest rates and reduced investor enthusiasm. In Massachusetts, venture capital funding for startups outside of government-sponsored funds dropped in early 2024 to its lowest level since 2019.
While Commerce’s board of directors voted unanimously to establish the fund, board member Donna M. Sams told Rogue Ventures co-founder and managing director Thomas Sperry that she wants regular updates on the status of the fund.
Oftentimes “you look at the data that’s out there, and these small businesses mostly stay the same size for a very long time, they aren’t getting any bigger, and yet we keep investing money,” said Sams, a partner and principal of both AWE and SpencerConsultingGroup, which are two consulting firms.
“That needs to change,” added Sams. ”They should be getting bigger. That’s what economic development means.”
Alexa Gagosz can be reached at [email protected]. Follow her @alexagagosz and on Instagram @AlexaGagosz.
