Across the state, the biggest pharmaceutical manufacturers have been laying off employees, shuttering facilities and expanding operations elsewhere. At the same time, venture capital for biotechs has remained hard to come by. The double whammy has increasingly left New Jersey, which has long bragged about being the nation’s medicine chest, with the equivalent of empty shelf space.
To plug this yawning hole, a bill that would create a tax credit aimed at so-called angel investors has been re-introduced in the state Senate. The idea is to offer these investors, who are often wealthy individuals looking to provide money to start-up companies, a credit worth 10 percent of whatever investment they would make in an emerging technology business in New Jersey.
“Every time I’m in a room with someone talking about creating or retaining jobs, I hear that we need to cut taxes. But we really need to find a way to get people to invest in businesses,” said Sen. Fred H. Madden (D-Camden, Gloucester), who is the primary sponsor. “If you go down the checklist, a lot of it has to do with money. It’s very expensive to start up companies. My hope is this will give us an edge.”
Typically, angel investors fill the gap between start-up financing that is often provided by the entrepreneur, along with any friends and family, and venture capitalists who look to invest larger sums at a later stage. An angel investor, essentially, provides a bridge that can be a one-time injection of seed money or ongoing support. But the backing provided by angel investors can be substantial.
In 2009, the last year for which figures were available, about 259,500 angels nationally invested $17.6 billion in roughly 57,000 deals, according to the Angel Capital Association. The money rivaled funds provided by venture capitalists, but emphasized the early going — 35 percent was seed money and 47 percent went to early stage, compared with 9 percent of the venture capital investments.
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