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

LSU astrophysicist Manos Chatzopoulos just wanted a place to park.

A decade ago, as a postdoc in Chicago, he was driving around his neighborhood trying to find a place, only to have to walk a few blocks home in the bitter cold.

The problem sparked an idea. In 2020, while working as an LSU professor, Chatzopoulos joined forces 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.

Beginning that same year, New Orleanian 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 balm.

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 struck a deal with one of the largest distributors of multicultural beauty products in the country.

The two businesses are in very different industries and stages of development, but they have 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 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 getting the program up and running, investors and entrepreneurs say money is starting to flow, and Louisiana Economic Development, the state agency responsible, said it has met the criteria to unlock a second round of funding.

LED has designated about $90 million for equity investments in startups and the remaining $23 million for loans. It’s an infusion of money that the program’s architects hope will attract additional investment to build successful businesses.

An offer that won’t last

Tulane University business professor Rob Lalka, who is 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 transformational 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. In the same time frame, Louisiana attracted $40 million, or about 0.1% of California’s investment volume. 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, I observed growing businesses that regularly raise hundreds of millions of dollars in numerous investment rounds. But here in Louisiana, it could have a significant impact.”

There’s a catch, though: This offer won’t last forever. In fact, the state must use the federal money, released in three installments, within three years of receiving each installment to unlock the next one. That means, for investors, the race is on to find entrepreneurs worth trying.

Slow start but progress

Federal officials approved Louisiana’s funding at the end of 2022, but a year later, a U.S. Treasury report showed Louisiana was distributing money more slowly than other states.

More than a dozen funds originally planned to participate in the initiative, but about half dropped out. Some couldn’t raise enough equity capital, others were 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 will make the program fit better.

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

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 Baton Rouge-based Innovation Catalyst.

Last summer, Boot64 Ventures wrote the first verification based on SSBCI 2.0. The recipient of that $100,000 cash infusion was Ingest, a New Orleans-based software maker that helps restaurant owners run 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 another $900,000.

“More ideas are going to come out of the woodwork because of this capital,” he said. “The 32-year-old who didn’t feel like he was going to be able to get financing, maybe he’s ready to take that leap now. Universities and entrepreneurship programs grow 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 healthcare company founded by Rebekah Gee, the state’s former health secretary.

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

What is the big idea?

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

Other beneficiaries of the program include Glass Half Full, a recycling company building a 3-acre facility in the Parish of St. Bernard; 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 ventures. And Louisiana’s startup scene has faced ebbs and flows for decades. But local investors hope the upcoming infusion of cash will help build momentum from 2021, a banner year for venture capital-backed firms in Louisiana.

In January of that year, Shutterstock acquired New Orleans-based 3D model marketplace Turbosquid for $75 million. Eight months later, Procore Technologies announced its acquisition of New Orleans-based Levelset, an online construction warranty management platform, for $500 million. And at the end of the year, Swedish company Cint bought New Orleans-based research technology company Lucid for $1.1 billion. With that deal, Lucid became New Orleans’ first “unicorn,” which in tech describes a company worth more than $1 billion.

Tulane’s Lalka hopes this new round of investment will help create momentum for the next generation of startups in the city and state. And some see ParkZen as an example of that fast-rising 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 profits in improving one of life’s big problems.

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