Puerto Rico Venture Capital Access Program

FAQs 

How do I apply?

You can visit www.parallel18.com/vcap and click the application button in Spanish or English based on your language preference. There are no differences in application form other than translation.

Please note that we are unable to share the submitted application answers, thus, make sure to request a copy at the end of the application form portal.

Are the investments made through the VCAP considered a grant or an equity investment?

VCAP provides equity investments by exchanging capital for minority ownership in your company. We rigorously evaluate each investment for its potential financial return. This is not a grant program or non-dilutive funding source.

What types of financial instruments can VCAP invest in?

The VCAP is a direct equity co-investment mechanism, thus only equity and equity-like instruments are considered. The VCAP is unable to consider debt, debt derivatives or any similar instruments. Preferred equity, common stock, convertible notes and SAFEs qualify, among similar instruments.

Where can I find the information relating to how my company can or cannot use the investment capital from the VCAP?

SSBCI funds must be used strictly for business purposes, such as startup costs, working capital, equipment, or property improvements, and cannot be used for passive real estate investment, tax repayments without a payment plan, or reimbursing owners. You can find the full SSBCI guidelines, including restrictions around the use of proceeds here.

How does the VCAP determine if a company is based in Puerto Rico?

We take our commitment to investing in Puerto Rico-based companies very seriously. While we understand that each company’s situation is unique, we assess whether a company is based in Puerto Rico using several key criteria, including, but not limited to:

• The company is registered to do business in Puerto Rico, and is currently in good standing with the Secretary of State of the Government of Puerto Rico.
• The corporate headquarters are in Puerto Rico, and the company publicly purports to be a Puerto Rico-based company.
• The company has an active commercial lease for a Puerto Rico-based office that corresponds with the Corporate Headquarters address.
• The founders and/or co-founders are Puerto Rico residents.
• At least 50% of the equity is owned by residents of Puerto Rico.

If my company is not based in Puerto Rico, am I still eligible for funding?

No. However, we welcome companies that have recently relocated to Puerto Rico. If you’re planning to move here or are currently in the process, you may apply so we can understand your plans and timeline. Your application will only proceed past initial due diligence after your relocation is complete and meets the criteria outlined above.

What are the key investment focus areas of the VCAP?

The VCAP is sector and industry agnostic but is interested primarily in high-growth ventures that align with Puerto Rico’s current economic development strategies including Biopharmaceuticals & Life Sciences, Financial Technologies & Services, Energy, Manufacturing, Supply Chain & Logistics, DeepTech, Artificial Intelligence, and Travel & Tourism, to mention a few. If your sector is not listed here, you are still welcome to apply.

Can I apply for consideration without having raised investment capital?

Yes, we actively encourage companies to apply even if they haven’t raised capital for their current funding round. To comply with US Treasury’s SSBCI Guidelines, we need to show that our program will “cause and result in” private financing. This means we typically try to make our investment commitments before other private investors. Your previous fundraising history won’t affect how we evaluate your application.

Does my company qualify for consideration through the Venture Capital Access Program?

Based on the established SSBCI Guidelines by the U.S. Treasury, the VCAP shall refrain from investing in any Investee entity that falls under the following categories:

1. Employing 750 or more personnel.
2. Aggregating funds, in conjunction with the Program’s contribution or the proposed investment by the venture capital fund, exceeding $20,000,000 within the relevant investment round. This encompasses capital amassed from future issuances of the identical series of securities transacted in said investment round. (Note: Your company remains eligible even if it has raised more than $20,000,000 throughout its lifetime. This limit applies only to a single investment round.)
3. Engaging in speculative activities that gain from fluctuations in pricing, such as wildcatting for oil or engaging in commodities futures trading. The exception lies in instances where these activities are subsidiary to the ordinary operations of the enterprise and form a legitimate risk mitigation strategy against price fluctuations inherent to regular operations or standard trade.
4. Generating over half of its yearly net revenue from direct lending pursuits facilitated by its own capital, unless it qualifies as either (1) a Community Development Financial Institution (CDFI) that isn’t a depository institution or bank holding company or (2) a Tribal enterprise lender not associated with a depository institution or bank holding company.
5. Being involved in pyramid sales, where a participant’s key incentive originates from the sales generated by an ever-increasing number of participants. It is important to note that a lawful multi-level marketing enterprise is distinct from an entity partaking in pyramid sales.
6. Engaging in activities barred by federal law or, if allowed by federal law, the relevant legislation in the jurisdiction where the enterprise operates. This encompasses businesses involved in producing, selling, servicing, or distributing products or services connected to illegal activities, excluding instances where such usage can be proven to be entirely unrelated to the enterprise’s intended market. This category includes both direct and indirect marijuana enterprises, as elucidated in Small Business Administration (SBA) Standard Operating Procedure (SOP) 50.10.61.
7. Deriving more than one-third of its gross annual revenue from lawful gambling pursuits, unless the business is a participant in the Tribal State Small Business Credit Initiative (Tribal SSBCI). In this context, a Tribal SSBCI participant is prohibited from utilizing SSBCI funds for gaming activities, yet remains unrestrained in employing SSBCI funds for non-gaming endeavors due to an organizational association with a gaming enterprise. Within Tribal SSBCI programs, the term “gaming activities” exclusively encompasses “class II gaming” and “class III gaming,” as elucidated in the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. § 2703.
8. Any other entity proscribed by the Program as ineligible for investment from time to time.

Which entity is allocating the funds and/or considered the investor of the VCAP?

The Economic Development Bank of Puerto Rico (“Banco de Desarrollo Económico de Puerto Rico” in Spanish) is the investor and will appear on your cap table if the VCAP invests in your company. Parallel18, a program of the Puerto Rico Science, Technology & Research Trust, is the jurisdiction-sponsored nonprofit entity that oversees application review, due diligence, and other processes related to VCAP’s investment decisions.

How much capital do I need for a match to be compliant with the requisites of the program?

A minimum 1:1 capital match is required from co-investors at the transaction level with the initial VCAP investment as stated in the SSBCI guidelines. SSBCI funds must be the “cause and result” of the private investment into the business, which must be documented.

How much funding can my company request from the VCAP?

The average investment amount ranges from $250,000 to $2.5 million alongside accredited investors (e.g. accredited angel investors, venture capital firms, other institutional investors, etc.)

VCAP is focused on investing in Pre-Seed, Seed, and Series A funding rounds of Puerto Rican companies, with average investments amounts of around $500,000 initially.  VCAP can invest up to $2.5M per company, over multiple fundraising rounds as applicable. By law, VCAP will only consider up to 50% of the total funds raised in the round, but will most likely commit around 20-30% of the rounds we participate in.

What does the process after application look like?

After submitting the application, the due diligence team will revise the information, clean and organize the applicant’s profile, and may follow-up with additional requests depending on the nature of the business and the nature of the financing requested. Do note that given the high volume of applications, the program may take anywhere from 2-3 months to issue a response whether favorable or not.

Will VCAP lead my fundraising round?

The short answer is: it depends. While we typically won’t lead rounds, we get involved early in fundraising to provide a commitment that helps attract a lead investor. We usually aim to be the second-largest investor in each deal.

Will VCAP wire their investment commitment before I’ve secured additional investors?

No, VCAP will not close on or wire more than 100% of the funds already received from other investors in the round. However, depending on the situation, we can draft a letter of intent (LOI) to help secure other investors, including a lead investor.

Can VCAP help me raise capital for my company?

While VCAP maintains relationships with venture capital funds, we do not take the primary role driving fundraising rounds. We offer support during the process, but founders must take primary responsibility for raising capital.

Will VCAP invest in my company if we have already taken on debt?

Holding debt with your company does not disqualify you from applying for investment.

Will VCAP help with my attorney fees?

No, terms set for the fundraising round typically dictate the company pays for the attorney costs outside the funds raised. Only on rare occasions will the lead investor accept terms otherwise.

What if my company has existed for a long period of time? Do we still qualify for investment?

The age of your company is not a consideration in the application process.

What ongoing reporting or information requirements are expected of companies that receive investment from VCAP?

We require quarterly reporting on key metrics including traction, jobs created, cash balance, and other business performance indicators. We may also request a formal Board Observer seat to maintain appropriate oversight as stewards of public funds.

How often are deployments expected to happen?

The VCAP intends to review applications and make decisions on a quarterly basis.

What are the key performance metrics that VCAP is evaluated on?

VCAP’s performance is evaluated on two key metrics:

• Financial Performance: We must generate a positive financial return.
• Private Capital Leverage Ratio: Together with other BDE-sponsored programs, we must generate private lending and investment of at least 10 times the federal contribution amount over a ten-year period.

We share this information to be transparent and ensure our interests align with yours as our partners.

Will these FAQs be updated over time?

Yes, these FAQs may be updated based on new guidance from the US Treasury, Banco de Desarrollo Económico de Puerto Rico, or Puerto Rico Science, Technology, & Research Trust. For the latest information, please contact a member of our team at [email protected].