Medicis of the Midwest, Part II
The vital role played by the state of Iowa in funding the innovation ecosystem
As we saw in Part I of this series, angel investors invest in young companies across industries. They mimic patrons like the Medicis who sponsored creativity. In this second part, I’d like to introduce readers to four public funding sources that support innovation-focused ventures much like private individuals.
The public programs spread across multiple industries and company maturities. Diana Wright and I wanted to explore the funds’ history and sought public records and conversations with those with first-hand knowledge. Failing, we resorted to the omnipresent magic bullet - AI chatbots. Welcome to the rabbit hole.
Initial Discovery
Can you find and point me to information regarding the Iowa Economic Development Authority’s programs that provide public funding support for young technology companies and provide links to the oldest such programs.
The above LLM prompt led to the motherlode as the tabulated information also pointed to the program’s likely origins revealing the program’s prior names and foci. What remained was hunting for details whose citation the AI graciously revealed as the RG 069 archive at the State Historical Society of Iowa.
Knowing that AIs hallucinate with confidence, I connected to Paul Stueckradt at the IEDA. He confirmed the program names and pointed me to the same archives at the State Historical Society as keeper of the public record.
The State Historical Society
Although the SHSI’s web index listed meeting minutes, agendas, and supporting materials, it didn’t appear to have them online. The RG 69 records are apparently not accessed frequently and required the lead archivist’s help. The six boxes in the photograph below contain original meeting agendas, minutes, reports, presentation materials. CDs, cassette tapes, printed pitch decks and antiquated spreadsheets).
Thank you, Jeffrey Dawson for your amazing help.
Iowa Product Development Corporation
The Iowa Product Development Corporation is the earliest documented public funding initiative for tech ventures. Established in 1983, its mission focused on supporting early-stage technology and bioscience ventures. The 70th General Assembly created the early-stage investment fund and appropriated funds to stimulate development of new products.
Prescient in creating this pool, the legislature recognized the fast-expanding technology, ag-science, bioscience, and manufacturing industries. It went further and established a board of private citizens to steward these public assets.
The meeting minutes speak to the relative obscurity of the program even as it enjoyed widespread support from elected officials. It was highlighted as the first public or private initiative within the state to focus on Iowa product innovation. Perhaps the most encouraging sentiment in the minutes is from 1987:
The Iowa venture capital desert is beginning to show some life.
followed by the listing of a new $10MM venture fund, and sources from Life Insurance Companies including the Iowa Farm Bureau, Iowa Utilities and Rural Electric Cooperatives. The latter three groups remain investors in a variety of funding ventures — forty-two years later!
We’ve encountered some of the companies funded in their early days- CADSI, from the story about Engineering Animation, Inc. started at the University of Iowa Research Park, CADSI requested and were granted a $100,000 royalty investment in 1987 to enhance their software. Engineering Animation sought IPDC support in 1990 and was awarded $150,000. Successful in its own right, EAI would only draw down $53,600 of the award.
Having built a portfolio of investments in just four short years across agriculture technologies, manufacturing, pure software, nursing homes, CAD and engineering, the IPDC went a step further. They organized “Jam sessions” of company leaders so this unique cohort of individuals across industry groups could come together to share their “valuable insights.” Opting for them, they actively chose to avoid calling in external “so-called experts”. I can only imagine the conversations in those rooms!
By 1991, the state legislature had already increased annual funding of this program to $1M. Unspent funds could be carried over across fiscal years, and the IPDC staff included Gregg Barcus as its President. Gregg continues today as a champion of startups in the Iowa technology community.
The 1990-1991 period was one of learning, turmoil, and growth in the funding ecosystem. Notes within the records describe overlapping entities such as the Wallace Technology Transfer Corporation and their impact on the IPDC’s appropriation and administration. Meeting notes also point to learning from Nebraska where attendees observed significant economic shifts:
FDR - Government is the solution to
Reagan - Government is the Problem to
Present day - Government as the Partner
The Iowa Product Development Corporation was rechristened by the legislature as the Iowa Seed Capital Corporation in 1994.
Iowa Seed Capital Corporation
The ISCC operating under this new banner for four years. The legislature had codified that funds allocated via the ISCC as well as any income derived from the corporation’s activities would eventually revert to the State. The emerging portfolio view under the ISCC’s administration begins to record such returns:
The corporation, in its fourteen-year existence, deployed approximately $6.7M in capital to 35 companies. Though a majority of these companies’ names did not enter the public record, records reflect that the companies had trouble raising scaling capital for later stage growth. A few reportedly raised private funds within Iowa, likely from the only known private venture capital fund managed by Equity Dynamics since 1969.
ISCC’s Termination and Liquidation
The winds of support turned unfavorable in the funds’ fifteenth year in existence. A March 1998 law passage spells its death knell, requiring the board of directors of the ISCC to wind up affairs of the corporation, terminate staff and appoint a liquidation transition entity to properly dispose of remaining equity assets.
Present Day
The spirit and mission of the 1983 programs continue under Iowa Economic Development Authority’s leadership and stewardship. It is a critical lifeline for the state’s startups who compete for public funds to help them in various stages of launch and growth. Each public fund requires private partnership and investment via matching funds. The ratio of matching funds increases with the public investment levels in the following programs:
Proof of Commercial Relevance (up to $50,000, low interest loan, 1:2 private:public match)
Demonstration Fund (up to $100,000, loan or royalty, 1:2 private:public match)
Launch Fund (up to $250,000, royalty or loan, 1:1 match)
Propel (up to $500,000, royalty or loan, 1:1 match)
Innovation Expansion (up to $1,000,000, loan, 1:1 match)
The process to access these programs remains straightforward and consistent. The Applications are received continually with bimonthly funding decisions. VentureNet Iowa engages directly with the IEDA to help clarify eligibility and process. Entrepreneurs follow the steps below
Establish contact with VentureNet Iowa via email (innovation@iowaeda.com)
Brief intake call verifies eligibility (Iowa companies, in target industry, employee count thresholds)
Entrepreneur receives and completes application
VentureNet convenes applicable panel of experts within the entrepreneur’s target industry to provide non-binding feedback and SWOT analysis
Entrepreneur presents to the IEDA Technology and Commercialization Committee or State Small Business Credit initiative
Approval by the committee results in contract and funding between the State of Iowa and the startup.
Closing Thoughts
My introduction to the central Iowa startup community in 2010 was through a physician at Mercy Hospital who sought my help in filling out the Demonstration Fund application for his MedTech startup.
Despite years of VentureNet Iowa’s review panels hundreds of companies funded, it is surprising to find startups who have never heard of IEDA’s programs. Naturally, they are strongly encouraged to tap into their state’s support.
Although these funds have existed in our ecosystem for 42 years, none of us in the funding community take them for granted. As we’ve recently seen in Nebraska just this week, funding for such incentives can disappear in times of budgetary pressure. We need to use them and share their positive impact on the ecosystem through continuous advocacy with our legislators.
If you’ve read this far and see Debi Durham or members of her team at the IEDA, please thank her for her tireless and passionate support of this program.
I am grateful for the incredible Iowa Writers Collaborative community which inspires me through its curiosity, writing, poetry, songwriting, photography, and selfless service. You can experience the vastness of its expertise here.
As I researched my work at the State Historical Society, there was just one other person conducting her research. And of course, it was Darcy Maulsby, a fellow member of the Iowa Writers Collaborative.
Nice job, Tej on the archives and being the "story storer" and teller.
Perhaps we should share your story with Iowa's state legislative officers for awareness. Happy to generate the list!
Fascinating. Thanks, Tej