On January 5, 2023, New York Governor Kathy Hochul announced the establishment of a new initiative to match up to $30 million in funding received by early stage companies operating in New York. The Pre-Seed and Seed Matching Fund Program (the Program) will support start-up companies at the earliest, and often most challenging, stage of their growth and development. Early stage funding is not only vital for getting a business off the ground, it is often a determinative indicator of a business’s longevity and ultimate growth.
The Program will match, dollar for dollar, investments that start-up companies obtain from the private sector. The investment to which the Program is matched may be in the form of convertible debt, a Simple Agreement for Future Equity (SAFE), or equity securities. The assistance start-ups could receive from the Program will range from $50,000 to $250,000, giving a business the opportunity to secure up to half a million dollars in funding at the pre-seed or seed stage.
To be eligible for the Program, the start-up company must, among other requirements:
have a focus on the technology market, including: advanced manufacturing, agricultural tech, climate tech, consumer tech, data/SaaS/AI, fintech, healthcare, life sciences and biotech, and/or medical devices;
have raised $2 million or less of dilutive funding to date (i.e., less than $2 million of stock);
be registered to do business in New York and in good standing; and
have its headquarters and at least one C-suite employee in New York.
The Program will give preference to companies operating as C-Corporations. The other investors in the matching round can be individuals, family offices, or entities (including funds), but they must also be accredited investors. There is a 90-day lookback period for a match (i.e., you can receive Program match funds for investments that have already occurred), but in order to do so, the inclusion of the Program funding must have been memorialized in a term sheet or other side letter with those earlier investors.
The Program is funded by the State Small Business Credit Initiative (SSBCI), which is itself funded by the federal American Rescue Plan Act to support small businesses, and is managed by the Empire State Development’s NY Ventures. Program administrators will have a strong focus on assisting smaller businesses and start-ups that are owned by socially and economically disadvantaged individuals who have not generally obtained this type of capital or support in the past. Applicants will also be required to submit a substantive application to request matching funds.
We think this is a fantastic opportunity for NY-based start-ups to add to their coffers in what is clearly becoming a more difficult environment to raise money for early stage companies.