Hometown Glory: Get Startup Grants and Seed Investments From Your City

After earning an MBA from the Wharton School at the University of Pennsylvania, Ashrit Kamireddi was prepared to go wherever he had to in order to raise seed money to grow VeryApt, his apartment-review platform. But thanks to a $100,000 angel investment from Philadelphia’s StartUp PHL program, which invests in local entrepreneurs, he didn’t have to leave town. This was good news for Kamireddi, who has hired four full-time employees since raising a total of $270,000 in seed funds, and expanded his operations to 10 other cities. Philly, which launched its $6 million startup fund in 2012, is among several major cities offering grants and seed investments for entrepreneurs. Among them, Detroit boasts two venture funds for early-stage companies, with a portfolio of nearly 80 startups; Denver awards $35,000 in annual grants to new companies.

So, what’s the best way to gain access to these funds? To identify opportunities, check with your city’s economic development office, incubators, accelerators, co-working spaces, networking groups and anywhere else startup founders and advisors congregate. Begin building relationships long before you’re ready to raise capital—even a year or two in advance, advises Archna Sahay, Philadelphia’s manager of entrepreneurial investment, who regularly counsels entrepreneurs about pitching Startup PHL. “The minute you realize you want to take on the investment is when you need to start having that conversation,” she says.

City information sessions on startup grants and seed funds are a great place to start. Be sure to introduce yourself to key players while there. Also, set up one-on-ones with stakeholders receptive to meeting.

“Don’t be shy about asking to run things by them,” says Bethlehem, Pa.-based Steve Boerner, co-founder and president of Hatch House, a 12-month live-work program for founders in or just out of college. Boerner turned to Asher Schiavone -- economic development coordinator for Bethlehem, which has awarded more than $6 million in business grants to 80 local startups since 2004 -- who offered suggestions on everything from what to include in the application to the details of his slide deck to his pitch. That dialogue led to Boerner landing $15,000 from the city.

Prepare thoroughly for these meetups so you can speak with authority about your venture. “You really get one chance with municipal grants,” Boerner explains.

Make that chance count by understanding the fund’s motives. Municipal governments have good reasons for giving money to startups—mainly job creation and economic stimulation. Be sure your goals align with those of the investment program and that you are clear on all stipulations, advises Kamireddi, whose equity investment from Philadelphia came with the caveat that VeryApt stay local for a minimum of 18 months.

To gain extra intel, Kamireddi suggests talking to entrepreneurs in the city’s investment portfolio about their experiences with the program.

“Often people think it’s just about the dollars,” says Patricia Glaza, vice president and managing director at Invest Detroit, which runs the city’s community development funds. But ensuring that an investor’s agenda meshes with yours is equally important. Also key: the mentorship that comes with the funding. For Jonathan Frankel, founder of Nucleus, a wireless intercom that scored $100,000 from Startup PHL this year, having the ear of Josh Kopelman, partner at First Round Capital, the VC firm that manages and selects Startup PHL’s investments, sweetened the deal. “You want to take smart money,” Frankel says. “You want to take money that comes with good advice.”