The American Rescue Plan Act of 2021 includes a $10 billion reauthorization of the State Small Business Credit Initiative (SSBCI), a Treasury-administered federally funded economic development program intended to increase state capacity to support small business “access to capital” programs.“SSBCI 2.0” will provide the Kentucky Cabinet for Economic Development with at least $82 million of federal funds to administer, a substantial increase over the $15.5 million from the initial SSBCI program that operated from 2010-17.With the original $1.5 billion SSBCI program, more than 30 states allocated nearly 1/3 of total SSBCI funds to venture capital programs (VCPs). Kentucky briefly allocated $3.5 million to a VCP that never deployed capital. All SSBCI capital deployed to small businesses in Kentucky was invested via a collateral support lending program. With substantially more capital allocated to the Commonwealth under SSBCI 2.0, and the potential for more to come as Treasury adopts the rules and regulations for $3 billion of supplemental funding, we are hopeful that Kentucky will consider substantial allocations to VCPs to support capital formation strategies for startup ecosystems.
The Kentucky Science & Technology Corporation (KSTC) is a state-sponsored non-profit venture development organization and the leading advocate for technology-based economic development in the Commonwealth. KSTC retained Cromwell Schmisseur, a consulting firm that served as technical advisors to the Treasury for VCPs funded by SSBCI 1.0, to support KSTC in developing strategies for deploying SSBCI capital to high-growth startups in Kentucky via VCPs. This report intends to explain the SSBCI opportunity in the context of the Commonwealth’s relative strengths and needs in the collaborative pursuit to increase the supply and accessibility of risk capital for Kentucky startups.