Angel investor tax credit reaps rewards

Mystic - As venture capitalists in recent years pulled away from backing risky start-up companies, entrepreneurs noted a serious financing gap that threatened Connecticut's position as one of the country's most innovative states.

"The whole innovation ecosystem depends on capital," said Frank Marco, an attorney for Wiggin and Dana in New Haven.

Marco, who helped launch the start-up technology company Autotether LLC, said the funding gap currently is being filled by so-called "angel investors," who are taking advantage of a tax incentive passed by the General Assembly in 2010 to help small state businesses succeed.

And now an enhancement to the angel investor tax credit enacted last year during the General Assembly's special jobs session is paying dividends for companies like Autotether, which produces a device to prevent boats from operating after a person goes overboard. The start-up company announced Tuesday during a press conference at the West Marine boating supply store that it has raised more than $500,000 from investors to begin marketing the product nationwide.

State Sen. Andrew Maynard, D-Stonington, said Connecticut's angel-investor tax credit previously had been set at a threshold of $100,000. But a tweak to the legislation that Maynard pushed during the special session now allows a 25 percent credit to anyone who makes a cash investment of as little as $25,000.

Mary Anne Rooke of Lyme, president of the Connecticut Angel Investor Forum, said Autotether was able to connect with four or five people who were able to take advantage of the lower investment threshold. Getting smaller investors onboard proved to be key for a start-up company like Autotether, she added.

"One hundred thousand (dollars) was really too high (a threshold)," said Rooke, who is on the Autotether board. "We wanted to tap the individual angels in Connecticut so they could invest."

Anthony Viggiano of Groton Long Point, president and chief executive of the Chester-based Autotether, said about 3,000 of his company's so-called wireless lanyards are currently in use. So far, about a dozen people have reported themselves or a loved one - including pets - being saved thanks to the Autotether, which detects when someone goes overboard and automatically cuts off the boat's motor.

"You're going to have one of these products in every single boat in this country," Viggiano predicted. "Falling overboard is the single leading cause of death on the water."

Viggiano, whose product won the 2011 Connecticut Innovation Award from the Connecticut Technology Council, said he needs to raise another $500,000 to reach the $1 million level he needs to launch the Autotether nationwide this year. Autotether devices, which list for $299, are currently sold in 140 stores, mostly on the East and West Coasts, and his goal is to increase that number to 400 by the end of the year.

Angel investors receive preferred stock in the companies they invest in and can earn dramatic profits within four or five years if a start-up catches the eye of a larger firm and is bought out, Rooke said.

"It's a great deal," she said.

l.howard@theday.com