These Louisiana venture capitalists, armed with federal money, are racing to invest in startups.

LSU astrophysicist Manos Chatzopoulos just wanted a place to park.

A decade ago, as a postdoctoral fellow in Chicago, I walked around my neighborhood trying to find a place, only to have to walk several blocks home in the cold.

The problem generated an idea. In 2020, while working as a professor at LSU, Chatzopoulos joined forces with an LSU computer science student and the school to create ParkZen, an app that uses multi-purpose data to help drivers find available parking spaces.

Beginning that same year, New Orleans native Arielle Brown faced a problem of her own: Her chronic eczema caused painful, itchy breakouts, especially during the hot Louisiana summers. In a moment of inspiration, or perhaps desperation, she combined probiotic powder with essential oils to create a homemade salve.

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

The two companies are in very different industries and stages of development, but they share one thing in common: Both benefited from a state program, fueled by federal funds, designed to put money in the hands of Louisiana entrepreneurs.

Seven investment funds, both not-for-profit and for-profit, participate in the Louisiana Small Business Credit Initiative, a US Treasury-supported program authorized by the American Rescue Plan Act of 2021.

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

LED has designated approximately $90 million for investments in emerging companies and the remaining $23 million for loans. It’s an infusion of cash that the program’s architects hope will attract additional investors along the way to build successful companies.

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, which is a reboot of a President Barack Obama-era initiative, could be transformative in Louisiana, a state that lags behind the nation’s “big three” venture capital epicenters on the east and west coasts.

According to PitchBook, a private capital markets database, California attracted $40 billion in venture capital deals in the first two quarters of 2024. During that same time period, Louisiana attracted $40 billion, or roughly 0, 1% of California shipping. For context, Louisiana had more venture capital investment than Mississippi and Arkansas during that time and slightly less than Alabama.

“This wouldn’t move the needle in Boston, New York or Silicon Valley,” Lalka said. “There, we saw companies grow that regularly raised hundreds of millions of dollars in numerous investment rounds. But here in Louisiana, it could have a significant impact.”

Still, there’s a catch: This offer won’t last forever. In fact, the state must use the federal money, released in three pieces, within three years of receiving each tranche to unlock the next one. This means that, for investors, the race is on to find entrepreneurs worth a shot.

Slow start, but making progress

Federal officials approved funding for Louisiana at the end of 2022, but a year later, a report from the US Treasury showed that Louisiana was distributing money more slowly than other states.

More than a dozen funds had planned to participate in the initiative, but about half dropped out. Some haven’t been able to raise enough matching capital, some have been scared off by red tape and, as LED chief innovation officer Josh Fleig said, “some are in purgatory waiting for the state to make changes” that make the program a better fit.

But now, nearly two years after SSBCI 2.0 began, seven funds are finally making investments.

The participants are Boot64 Ventures, Idea Village Momentum Fund, Ochsner Ventures, Tulane Ventures, New Orleans Startup Fund and Propeller, all located in the New Orleans area, and Innovation Catalyst, based in Baton Rouge.

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

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

“More ideas are going to come out of carpentry because of this capital,” he said. “The 32-year-old who didn’t feel like he was going to be able to get funding might be ready to take that leap now. Universities and entrepreneurship programs are cultivating great startups.”

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

Investments are expected to exceed $4 million in the coming weeks as several of the funds close more deals. And there are new entrants on the way: The New Orleans Center for BioInnovation, which has been running its own seed fund since 2017, has almost completed its application and approval process. Fleig at LED said he hopes to sign up at Opportunity Machine in Lafayette and BRF in Shreveport by the end of the year.

What’s the big idea?

All SSBCI 2.0 investors are betting on companies that offer new products or solutions, such as ParkZen in Baton Rouge, which has received $35,000 from Innovation Catalyst to date. From all sources, the startup has raised $400,000 with a much bigger investment coming soon. Meanwhile, Bea’s Bayou in New Orleans, which has generated $350,000 in sales since its founding, received a $50,000 check from the New Orleans Startup Fund earlier this year.

Other beneficiaries of the program 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 mobile solar power generators; and Officer Reports, which makes software designed to streamline the security industry.

Early stage companies are risky companies. And Louisiana’s startup scene has dealt with ups and downs for decades. But local investors hope the next infusion of cash will help build momentum from 2021, a breakout year for Louisiana venture-backed companies.

In January of that year, Shutterstock acquired New Orleans-based 3D modeling marketplace Turbosquid for $75 million. Eight months later, Procore Technologies announced the purchase of New Orleans-based Levelset, an online platform for managing construction liens, for $500 million. And, later in the year, Swedish company Cint bought New Orleans-based research technology company Lucid for $1.1 billion. With that transaction, Lucid became New Orleans’ first “unicorn,” which, in tech, describes a company worth more than a billion dollars.

Tulane’s Lalka hopes this new round of investment will help fuel the next generation of startups in the city and state. And some see ParkZen as an example of that fast-growing generation. The company, whose five-person team is about 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 $2 million, seven-year contract covering 59 parking lots.

Chatzopoulos certainly sees future benefits in improving one of life’s great problems.

“We want to be the number one source of information about parking availability, as Waze is the number one source of information about traffic,” he said. “You should spend less time looking for a spot and more time enjoying what happens after you park.”