Louisiana startup program seeks venture capital investment | Innovation

LSU astrophysicist Manos Chatzopoulos just wanted to find a place to park.

Ten years ago, while a postdoctoral fellow in Chicago, he drove around his neighborhood trying to find a spot but ended up having to walk home a few blocks through the freezing cold.

That problem sparked an idea. In 2020, while working as an LSU professor, Chatzopoulos teamed up with an LSU computer science student and the school to create ParkZen, an app that uses crowdsourced data to help drivers find available parking spaces.

Starting that same year, Arielle Brown of New Orleans faced her own problem: Her chronic eczema caused painful, itchy flare-ups, especially during Louisiana’s hot summers. In a moment of inspiration, or maybe desperation, she combined probiotic powder with essential oils to create a homemade salve.

Four years later, Bea’s Bayou, the hair and skin care line that evolved from that experiment, is now sold online. The brand recently struck a deal with one of the largest multicultural beauty distributors in the country.

The two companies operate in different industries and are at different stages of development, but they have one thing in common: Both benefited from a state program, funded by federal funds, designed to provide funding to Louisiana entrepreneurs.

Seven investment funds, both nonprofit and for-profit, are participating in the Louisiana Small Business Credit Initiative, a U.S. Treasury-backed program authorized by the American Rescue Plan Act of 2021.

After a slow start to the program and its launch, investors and entrepreneurs say money is starting to flow, and Louisiana Economic Development, the state agency in charge of the process, said it has met the criteria needed to unlock a second round of funding.

LED has committed about $90 million in equity investments in startups, with the remaining $23 million in loans, an injection of money that the program’s architects hope will attract additional investment on the path to building successful businesses.

An offer that won’t last

Tulane University business professor Rob Lalka, who serves as executive director of the Albert Lepage Center for Entrepreneurship and Innovation, said the program, known as SSBCI 2.0, a reimagining of an Obama-era initiative, could have a transformative impact on Louisiana, a state that has lagged behind the nation’s “big three” venture capital epicenters on the East and West coasts.

According to PitchBook, a private equity database, California attracted $40 billion in venture capital deals in the first two quarters of 2024. During the same period, Louisiana attracted $40 million, or about 0.1% of California’s gains. By comparison, Louisiana had more venture capital investment than Mississippi and Arkansas during that time and slightly less than Alabama.

“This wouldn’t make a difference in Boston, New York or Silicon Valley,” Lalka said. “There, we’ve seen growing ventures regularly raise hundreds of millions of dollars in multiple rounds. But here in Louisiana, it can have a significant impact.”

There’s a catch, though: This offer won’t last forever. In fact, the state must use the federal money, paid out in three installments, within three years of receiving each installment to unlock the next one. That means investors are scrambling to find entrepreneurs worth taking a chance on.

Slow start but progress

Federal authorities approved Louisiana’s funding in late 2022, but a U.S. Treasury report a year later found that Louisiana was distributing the money more slowly than other states.

More than a dozen funds originally planned to participate in the initiative, but about half have dropped out. Some were unable to raise enough matching capital, some were put off by the bureaucracy, and, as LED Innovation Director Josh Fleig said, “some are in purgatory, waiting for the state to make changes” that would make the program a better fit.

But now, almost two years after the launch of SSBCI 2.0, seven funds have finally made investments.

The project includes Boot64 Ventures, Idea Village Momentum Fund, Ochsner Ventures, Tulane Ventures, New Orleans Startup Fund and Propeller — all based in the New Orleans area — and Baton Rouge-based Innovation Catalyst.

Last summer, Boot64 Ventures wrote its first check powered by SSBCI 2.0. The beneficiary of that $100,000 cash was Ingest, a New Orleans software company that helps restaurant owners run their businesses. Since then, the new fund, run by John Roberts and Mickal Adler, has invested a total of $1.5 million in 10 companies.

Roberts said five more checks totaling $900,000 are on the way.

“With this capital, more ideas will come out of hiding,” he said. “A 32-year-old guy who didn’t feel like he was going to be able to get funding might be ready to do that now. Universities and entrepreneurship programs are cultivating great startups.”

All participating funds made at least one investment, injecting more than $3 million into the ecosystem. New Orleans Startup Fund and Innovation Catalyst, two nonprofits that have been investing for more than a decade, each raised more than $500,000. Tulane and Ochsner wrote their first checks to Nest Health, the well-known health care company founded by Rebekah Gee, the state’s former secretary of health.

Investments are expected to top $4 million in the coming weeks, as several funds close more deals. And new entrants are on the way: New Orleans BioInnovation Center, which has run its own startup fund since 2017, has nearly completed the application and approval process. Fleig, of LED, said he hopes to sign deals with Opportunity Machine in Lafayette and BRF in Shreveport by the end of the year.

What is the big idea?

All of SSBCI 2.0’s investors are betting on companies with new products or solutions—like ParkZen in Baton Rouge, which has received $35,000 so far from Innovation Catalyst. The startup has raised $400,000 from all sources, with a much larger investment coming soon. Meanwhile, Bea’s Bayou in New Orleans, which has generated $350,000 in sales since its founding, received a check for $50,000 earlier this year from the New Orleans Startup Fund.

Other program beneficiaries include Glass Half Full, a recycling company building a 3-acre facility in St. Bernard Parish; Axosim, a biotech startup working to accelerate drug development; Helios, a designer of solar-powered mobile generators; and Officer Reports, a software company aimed at streamlining the security industry.

Early-stage companies are risky ventures. And Louisiana’s startup scene has struggled with ups and downs for decades. But local investors are hoping the incoming cash injection will help build on 2021, a record year for venture-backed companies in Louisiana.

In January of this year, Shutterstock acquired New Orleans-based 3-D modeling marketplace Turbosquid for $75 million. Eight months later, Procore Technologies announced its purchase of New Orleans-based Levelset, an online platform for managing construction liens, for $500 million. And later that year, Swedish company Cint bought New Orleans-based research and technology outfit Lucid for $1.1 billion, making Lucid the first New Orleans-based “unicorn,” a tech-speak term for a company worth more than $1 billion.

Tulane’s Doll hopes this new round of investment will help build momentum for the next generation of startups in the city and state. Some see ParkZen as an example of that generation growing up fast. The company, whose five-person team is expected to double in size, now has 13 customers using its app, including several colleges and universities. Late last year, the Virginia Department of Transportation signed a seven-year, $2 million contract covering 59 parking lots.

Chatzopoulos certainly sees future benefits in solving one of life’s biggest problems.

“We want to be the go-to source for parking availability, just like Waze is the go-to source for traffic,” he said. “You should spend less time looking for a spot and more time enjoying what happens after you park.”