For the past six years, angel investors could receive a tax credit if they invested in a South Carolina startup company due to the High Growth Small Business Job Creation Act that passed overwhelmingly in 2013. The bill created the tax credit program that sought out these risk-taking investors to put their money into South Carolina startups. The startups had to be in industries that included manufacturing, software development, information technology and others. On May 26, Gov. Henry McMaster signed legislation that included an extension for the tax credit program.
Angel investors are typically defined as a high-net-worth individual who, in exchange for equity in a company, supplies the financial support for small startups. For an angel investor to qualify for the tax credit, the investor must have invested in a company that is less than five years old, has 25 or fewer workers and has a gross income of less than $2 million, according to early-stage investment firm VentureSouth. The angel investor could then claim a tax credit equal to 35% of the investment.
State Sens. Ronnie Cromer (R-Newberry District 18) and Tomas Alexander (R-Oconee District 1) sponsored the bill on manufactured housing tax credits that the angel investment tax credit extension was tacked on to.
South Carolina angel investor tax credits have created more than 1,000 jobs and have benefited almost 300 startups.
Source: Upstate Chamber Coalition
According to the Upstate Chamber Coalition, the program has benefited almost 300 South Carolina startups who have received more than $100 million in investments by angel investors.
“This is for South Carolinians investing in South Carolina companies,” Jason Zacher, executive director of the Upstate Chamber Coalition, said. While many people think companies must head to Silicon Valley for startup funding, the truth is that’s not reality.
Angel investors are key to helping startup companies get off the ground. Many of these companies don’t receive attention from venture capitalists and other funders, so it’s a big help to have a potential local source of funding available.
These startups aren’t “the big fish,” Zacher explained. “But what you are doing by having an angel investors’ tax credit — by working on trying to get more of these kinds of investments moving — is we’re creating the next big company in South Carolina.”
And even if there isn’t a big ribbon-cutting ceremony for the companies these investors fund, they are still impacting local economies.
“In the past six years, [the tax credit] has created about a thousand jobs that are paying about 1 1/2 times the average South Carolina salary,” Zacher said. “These are good jobs.”