Dl. Barkley et al., Certified Capital Companies (CAPCOs): Strengths and shortcomings of the latest wave in state-assisted venture capital programs, ECON DEV Q, 15(4), 2001, pp. 350-366
Certified Capital Companies (CAPCOs) are state-certified venture capital co
mpanies funded by insurance companies. As an incentive to invest in CAPCOs,
insurance companies receive a $1 credit on premium taxes for each $1 inves
ted (tax credits are spread over a 10-year period). The CAPCOs must invest
in specific types of businesses according to an established time schedule t
o ensure the availability of tax credits to the insurance companies. Legisl
ation authorizing CAPCO programs has passed in five states (Louisiana, Miss
ouri, Florida, New York, and Wisconsin) and has been considered in eight ot
her states (Iowa, Illinois, Arizona, Texas, Kansas, Vermont, Colorado, and
North Carolina). This article summarizes the characteristics and experience
s of CAPCO programs in the states that have passed enabling legislation. Le
ssons learned from the experiences of the state programs are provided, and
the advantages and disadvantages of CAPCOs as compared to alternative state
-sponsored venture capital programs are reviewed.