PROVIDENCE – Do you recall the Donovan song that begins, “First, there is a mountain,” covered by the Allman Brothers, in a live performance at the Fillmore East, “Mountain Jam?”

Well, first, there was a federal grant worth $13.1 million, under the State Small Business Credit Initiative, awarded to Rhode Island in September of 2011.

The $13.1 million came from the Small Business Jobs Act of 2010, signed into the law by President Barack Obama on Sept. 27, 2010.

The new Initiative was funded with $1.5 billion from the U.S. Treasury, with the goal to support loans to small businesses and manufacturers, in order to leverage private lending. The goal was to help creditworthy firms get the loans they needed to expand and create jobs, in the aftermath of the Great Recession.

The $13.1 million awarded to Rhode Island was funneled through the state agency formerly known as the R.I. Economic Development Corporation [now CommerceRI] and targeted to three programs: $2 million to Betaspring, a start-up accelerator; $9 million to the Slater Technology Fund, to make direct equity investments in small businesses; and the remaining $2.1 million to the state’s Small Business Loan Fund.

The first slice of the money, $4.3 million, arrived in 2012, with $1.9 million going to the Slater Technology Firm and another $2 million targeted to Betaspring.

However, problems emerged with how the money was being spent, according to federal authorities, documented by an audit by Lyon Park Associates conducted in August of 2013.

According to that audit, the money given to Betaspring, which was held in an account named Betaspring 100 Fund LLC, was not being used properly, because more than 70 percent of the money was being used to pay for Betaspring’s operating expenses, while only some $394,000 had been directly invested in companies.

Richard Licht, then director of the R.I. Department of Administration and now a judge, defended the use of money by Betaspring. “We think that Lyon Park didn’t understand the way an accelerator program works,” he said in February of 2014, as reported in a story by WPRI.

The Lyon Park Associates audit also raised some technical questions about how the investments were made by Slater Technology Fund, related to how and when private money was leveraged.

Then, there wasn’t a federal grant
As a result, the remaining money slated to go the Slater Technology Fund, some $7 million, was put on hold until another audit, this one conducted by the U.S. Treasury Department, was completed.

That delay put the plans by Slater Technology Fund to transition from a state-funded operation to an independently chartered fund in limbo.

In an in-depth interview with ConvergenceRI in October of 2014, Rich Horan, senior managing director at the Slater Technology Fund, discussed what he described as a challenging time with significant uncertainty.

“In the last 12 months, Slater has been navigating a challenging year,” Horan began. “We have portfolio companies that are really progressing well. The primary challenge for us has been with funding sources. It’s a multi-dimensional problem we’re trying to solve.”

There had been diminished state funding, Horan continued. “In the FY2015 budget, state support, which has in the aggregate accounted for some $40 million since Slater’s inception in the late 1990s, will have ended,” he said. “It will be the first year that there will be no annual appropriation.” 



Moving forward, Horan explained, “Our strategy is to take the Slater fund to scale. The Slater program has been very successful over the years, relying primarily on state support. The goal moving forward is to take the program to scale through the engagement of private sector investors in one or more private sector funds. The key questions have been about bridging ourselves from state funds to private sector funds.”

In addition to the federal money from the State Small Business Credit Initiative, the second leg of the transition from public sector to the public-private model has been the realization of returns on some of Slater’s portfolio company investments, according to Horan.

“To that end, in the last 18 months or so, we’ve realized some $4 million in gains from prior investments, most notably in the sale of Andera to Bottomline Technology, announced in April of this year,” Horan said. [See link to ConvergenceRI story below.]



Horan spoke with optimism about Slater’s future. “Over the course of the last 12-18 months, we’ve been navigating that challenging course from reliance on state funding to reliance on federal funding, and increasingly capital gains, and ultimately, private sector investment,” he told ConvergenceRI. “It’s challenging, but we’ve made considerable progress along those lines. At this point, I’m quite optimistic.”

Waiting for the audit issues to be resolved required patience. Once the audit was successfully completed, it required an additional dose of patience. Slater then had to wait for the next installment of money, some $4.3 million, to be transferred from the U.S. Treasury to CommerceRI, and then to Slater.

Then, apparently, the details of how to announce the resumption of funding had to be worked out between Slater, CommerceRI and the new Raimondo administration press office.

Finally, in an embargoed release set for Feb. 9, came the good news that the money faucet had been turned back on again – some four years after the grant had first been awarded.

Then, there was a federal grant
One of the reasons why Slater had been invited to participate in the state’s grant application back in 2011 was that it could demonstrate, through its job creation metrics database, the outcomes which the federal grant program was seeking in applicants: an expectation of leveraging 10 times or more in additional investment from private investors.

Slater’s track record was a significant factor in the success of Rhode Island’s application. Since its inception, Slater had invested about $30 million in more than 100 Rhode Island-based ventures, with the more successful ventures going on to raise more than $530 million in new capital subsequent to Slater’s initial investment.

Now that the second installment of SSBCI funding is in hand, Slater has embarked on an aggressive campaign to deploy the capital through investments in the state’s most promising emerging-growth companies in sectors ranging from life sciences and biomedical technology, to software, internet and energy technologies.

In a news release, Horan described the $4.3 million in newly released federal funds as a critical component in Slater’s public-private partnership strategy.

“While it is restricted for use in direct investment only, it is a source of funding well-suited to our seed and early-stage investment activities,” he said. “It supports our efforts to develop early-stage ventures into investment-grade propositions that will attract private equity investors.”

A good news story
In an interview on Feb.7 with ConvergenceRI, Horan was buoyant about the release of the $4.3 million in federal funds.

“With the funding resumed, we’ve got the wind in the sails and we’re back on track,” Horan said, having overcome the hurdle that caused Slater to throttle back on its activities.

A new dialogue has commenced with the Raimondo administration, and a meeting is on the calendar with Stefan Pryor, the newly confirmed head of CommerceRI.

“It’s a good news story,” Horan said.

Even better, once 80 percent of the $4.3 million is deployed, more money will be forthcoming – about $2.8 million.