As we celebrate South Carolina angel investing tax credit transfer season (among other things), we found this report on the SC Dept of Revenue’s website here (under Publications / Reports / Additional Reports) about who applied for the credit in 2021. We thought you might enjoy reviewing it with us.
The maximum $5M of credits were awarded in 2021. (We noted that here, when the award letters revealed a 30% credit, indicating $5.78M of valid credit applications.) These data tell us (I think for the first time) where those awardees came from, and raises a few interesting questions.
South Carolina
Most credits were awarded to people in South Carolina – $3.37M, or 67% of the total awards. Not a great surprise: South Carolinians are naturally the most likely to be making angel investments in South Carolina companies.
Maybe surprising, though, is Greenville County’s total dominance here. Over half (58%) of the credits to South Carolina locations, or 39% of all the awards, were in Greenville. Charleston was a distant second at 14% overall, and Columbia (Richland and Lexington counties combined) only just over 2%.
Does that reflect a more vibrant tech community in Greenville? More knowledgeable angel investors? Another possible explanation is more “wholesale” applicants in Greenville, which we have thought in the past used up large amounts of credits – but the average award in Greenville ($43k) is lower than in Charleston ($70k), so that does not seem to be it.
Whatever the reason for Greenville’s lead, it is not a small difference!
Not South Carolina
Equally interesting (at least to us) is the location of non-SC investors. First, it’s surprising how few credits went to direct neighbors – just 4% from North Carolina and essentially nothing (0.3%) from Georgia. Apparently, it remains difficult to attract investors up or down I-85!
Second, Virginia posts an impressive showing, and especially the coast – almost 12% of the total awards, and over 1/3 of all out-of-state investors. Could that be because there’s an excellent angel group there (and a VentureSouth group)? Or because Virginia has an angel tax credit of its own so people are more familiar?
Third, New England (MA, CT, NH, NY) has more awards at 8% than the southeast (excluding SC, so NC, GA, FL, TN). Areas with well-established early stage investing ecosystems create investors that become more willing to invest anywhere – if you give them compelling investment opportunities and structures. Or perhaps simply everyone from New England is moving to South Carolina…
And lastly, notably absent are credits to any west coast locations. California usually dominates angel investing and venture capital statistics, but not in this report! Are west coast investors simply not willing to look this far afield for early stage investments? Maybe this data illuminates academic studies like this one on the importance and use of angel tax credits. Whatever the reason, it’s their loss!
Just one more thing
One last interesting note is how many applications were denied. Of the 138 applications sent in, only 123 were approved – meaning more than 10% of applications people thought would get a credit ultimately did not. Given the challenges on paperwork timing, this is a lower rejection rate than I would have guessed – but still disappointing if you’re part of the 10%.
Make sure the company is properly qualified before you invest. And if you are applying for a credit on investments made in 2022, make sure your applications are submitted before the end of the year! More guide here.
Happy Thanksgiving and Happy Investing.
About VentureSouth
VentureSouth is an early-stage venture firm that provides capital and expertise to Southeastern startups through our angel investment network and funds. VentureSouth has grown to include more than 400 active investors, making us one of the largest angel investment groups in the United States. We have been named a Top 10 angel group three times. To date, VentureSouth has invested over $60 million in more than 90 companies.