Troubled venture capital company Elevate Ventures has been deemed “in breach of” lending language in all of its active loan agreements with the Indiana Economic Development Corp. after defaulting on an angel investment program this month.
David Watkins, IEDC’s senior vice president of entrepreneurship and small business, gave the firm 30 days to cure the breaches before it nears default on those agreements.
In a Wednesday letter, he asked Elevate Ventures to provide a detailed financial plan and schedule, also within 30 days, to “demonstrate how it will be able to fulfill all of its outstanding obligations” — and why the IEDC shouldn’t make all outstanding loans due immediately.
The agency has “unreconciled, ongoing concern” that the company, “in its current state, will be unable to fulfill any of its current or future obligations,” Watkins wrote.
Elevate Ventures did not reply to multiple requests for comments.
The firm operates the Indiana Angel Network Fund, intended to entice and aid angel investments to Hoosier startups. It nabbed the contract with IEDC on Aug. 2, 2011, with repayment due exactly 14 years later.
IEDC sent a request for repayment of nearly $17.2 million the day before. Elevate Ventures repaid about $12.9 million on Aug. 4 — falling more than $4.3 million short.
That prompted another letter, this time a notice of payment default that requested full payment within five business days. The Aug. 5 document warned that the unpaid principal balance would rack up interest at 8%, or about $956 daily.
Elevate Ventures failed to pay in full by Aug. 12, constituting an “event of default” under the contract. Watkins’ letter, sent the next day, noted more than $7,000 in interest had accumulated.
The company offered to repay with a new loan from the returns of the Indiana 21st Century Research and Technology Fund, according to Watkins.
“However, this proposal appears to merely utilize assets designated to pay back other future obligations to pay back the Loan, which would only impair the ability to repay those other obligations,” he wrote in the letter.
IEDC also froze all accounts related to Elevate Ventures. Monthly payments on a separate professional services agreement during the “period of open collaboration” and specific investments that were allocated capital at an IEDC board meeting in June are explicitly approved, however.
The company’s repayment struggle comes about three months after it was dubbed an “entity of interest” — alongside IEDC and its nonprofit arm — in a forensic investigation of potential financial wrongdoing.
The contract with FTI Consulting began May 13 and lasts one year. It’s worth up to $800,000 and will be paid for by IEDC funds, according to Commerce Secretary David Adams.
Gov. Mike Braun promised an audit just days after Indiana Legislative Insight reported allegations of self-dealing, unreported side gigs and more among IEDC and its partners.
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