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In the Community
Wellmark Venture Capital and Economic Development Program
In 2002, the Iowa Legislature passed, and then Governor Vilsack signed into law, a reduction of the state's insurance premium tax from 2 percent to 1 percent, phased in over a four year period through 2007. This legislation was viewed as crucial to keep Iowa-based insurance companies competitive, as many other states offered lower tax rates to insurers.
As part of this change in law, several Iowa-based insurance companies voluntarily agreed to support a plan to commit $60 million of the projected premium tax reduction for economic development in Iowa.
Wellmark, Inc. created its $25 million venture capital program to assist in economic development and job creation across the state of Iowa, Wellmark provides financing through five distinct funding arrangements as follows:
- John Pappajohn Entrepreneurial Centers (JPEC) - Early stage funding program designed to encourage development of ideas and keep the resulting business and job creation in the state of Iowa. Requests are submitted to any of four centers located in the state:
Each location will screen funding requests, and if the request is deemed appropriate, it is forwarded for due diligence and underwriting. Funding is in amounts of $10,000 - $100,000 with a second note option for a total of $150,000 in funding per company and is in the form of debt with rights to convert to equity.
- Late Round Financing – Wellmark participates in later round funding of successful startup companies in Iowa, to develop technology and bring products to market, especially where medical breakthroughs are possible. The basic investment amount for each deal is $100,000 to $500,000 with subsequent investments in the same company may be considered for up to a total for a single company of $1.5 million. Wellmark does not act as a lead investor and would expect other participants taking investment positions with the company.
Tax Credit Opportunities - Purchase of Federal, State and Enterprise Zone Tax Credits to accomplish economic development goals in the communities throughout Iowa. These projects must create jobs in Iowa, so the primary focus is on State of Iowa Enterprise Zone Tax Credits.
Small Business Loan Fund - In order to support smaller companies that are no longer in the start-up stage, but do not wish to take on an equity investor, Wellmark provides a late stage debt financing program. Wellmark selected the Iowa Business Growth Company (IBGC) to provide investigation, underwriting and servicing for its program. The IBGC is certified by the U.S. Small Business Administration (SBA) to offer the 504 loan program to small businesses across Iowa. The Small Business Loan Fund will offer financing in conjunction with Iowa banks and the SBA to allow companies without necessary capital to qualify for the 504 Small Business loans to receive funding. The Wellmark portion of the loan will not exceed 20% of the total financing up to a maximum of $750,000. Iowa business owners who are interested in Wellmark's small business loan program may work with their local bank or may contact Iowa Business Growth Company for more information.
- Rural Vitality Fund - Most recently, Wellmark committed $5 million in venture capital to Iowa Farm Bureau Federation's (IFBF) Renew Rural Iowa program to help encourage business development and expansion in rural Iowa communities with less than 30,000 people.
Wellmark is the first outside investor in Renew Rural Iowa since Iowa Farm Bureau launched the program in September. The Renew Rural Iowa program provides training, mentoring, and business guidance to pre-qualified entrepreneurs through partnership with Entrepreneurial Development Center, Inc. (EDC) of Cedar Rapids. To be eligible for an investment by the Rural Vitality Fund, entrepreneurs must go through the mentoring program. For more information about the program and seminar locations and dates visit iowafarmbureau.com and click on the Renew Rural Iowa logo.
Since 2003, Wellmark has made over 50 venture capital investments in 28 communities throughout the state, including Clinton, Ellsworth, Fairfield, Harlan, Hiawatha, Lake Mills, Mason City, Mt. Pleasant, Pella, Sheffield, Washington, and Waterloo, among others.
For questions, comments, possible investors or small business loans, please email the Wellmark Community Ventures Program.
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