An Experiment In Jumpstarting Vermont Tech Startups

A paltry percent of U.S. tech employment is in rural areas—5%, while 12% of the workforce lives in such locations, according to the Center on Rural Innovation (CORI). That’s why, in 2017, Matt Dunne founded the nonprofit, which focuses on job creation and economic development in rural areas by building tech economies in those regions.

It recently got preliminary financing approval from a U.S. Treasury program for the Green Mountain Accelerator Fund, a $3 million pre-seed investment fund aimed at financing and nurturing early-stage tech startups in five rural Vermont communities. And it received a $520,758 Capital Challenge grant via the U.S. Economic Development Administration. That money, half of which must come from matching contributions, will help create the Green Mountain Launchpad, a regional tech startup catalyst hub. “We’re addressing a funding gap for tech startups that especially exists in rural regions lacking a strong angel network,” says Dunne.

Supporting Rural Tech Startups

CORI works mostly with rural micropolitan communities—cities of 10,000 to 50,000 in population—with a college or university campus nearby. To that end, it provides technical assistance, including an assessment of their tech economy, creating a strategy to make the most of their unique local assets, and helping to get funding for three years for economic development. After that, they become part of a network of organizations, currently 37 communities in 25 states. That provides a way to share best practices with each other and to aggregate deal flow by giving investors an opportunity to invest in more than just one small community.

There’s also CORI Innovation Fund, a $4 million seed-stage investment fund launched in 2020 that acts as a first mover for tech startups. (Half of the carry goes back to CORI). It’s invested in nine tech startups in places ranging from Durango, Col., to Wilson, NC. CORI is now mid-way into raising a second fund, which Dunne expects to be larger than the first. In addition, Rural Innovation Strategies Inc., a taxable nonprofit, allows CORI to do fee-for service work.

Filling the Funding Gap in Vermont

Recently, according to Dunne, CORI was contacted by the State Small Business Credit Initiative, a federal program that provides capital from the U.S. Treasury to states to use in investment vehicles. A few weeks ago, it received preliminary approval of funding for the Green Mountain Accelerator Fund, which will invest in very early-stage, pre-revenue, recent graduates of four accelerators that CORI helped fund.

The EDA grant will help support the Green Mountain Launchpad, which will connect startups to pro-bono legal and financial accounting assistance, potential angel investors, and help developing pitches. By the end of the three-year award window, CORI aims to connect 30 local startups with opportunities to access capital.

“This will be an interesting experiment to see what happens when you can fill the funding gap in these areas,” says Dunne. “We’re trying to jumpstart tech companies so they don’t feel they have to leave the place they love to be successful.”

Both grant programs have matching requirements. The SSBCI funding requires that startups have 1:1 matching capital already secured before the investment can happen. The Capital Challenge grant also has a 1:1 match, but it’s either in funding or in-kind support. With that in mind, CORI is tapping the services of Vermont Law School, which has a pro bono program to help support early-stage companies in Vermont. It will be counted as part of the match.