Emerging Growth Capital Management is a third of the way through an initial fund-raising campaign for its venture capital fund and is ready to invest in promising early-stage start-ups in Iowa, Gregg Barcus, the fund manager, said last week. Barcus also is president of Emerging Growth Group, which shelters technology companies at 300 S.W. Fifth St.

Investments totaling $1 million have been secured from 13 investors, and Barcus thinks the fund will reach its $3 million target late this spring. The investors include banks, insurance companies, businesses and individuals such as Don Blumenthal, Harry Bookey and James Hubbell III.

“This is a great group of people who have joined in, and they bring more than just money to the table,” Barcus said. “They’re great investors, well-known people and they understand how these types of investments work.”

The fund will make investments of $100,000 to $250,000 in qualifying technology companies. Barcus, who oversaw the investment of more than $6.7 million in 35 Iowa start-ups between 1991 and 1998 when he was president of the Iowa Seed Capital Corp., believes the Emerging Growth Capital Fund is the only professionally managed venture capital fund in the state. That could inspire confidence in other prospective investors, he said.

“We think our participation will encourage other investors to come in and co-invest with us,” Barcus said. “They want to piggyback on our deal flow, our due diligence and everything else we do.”

The fund is primarily targeting technology companies in the Golden Circle area of Iowa, including the three companies harbored by Emerging Growth Group. Barcus said his group will also look elsewhere in Iowa for companies that need seed capital, including those in the Eastern Iowa corridor that includes Iowa City, Cedar Rapids, Fairfield and Waterloo.

Barcus said part of the lure for investors is the venture capital tax credit approved last year by the Iowa Legislature. “Those tax credits are huge incentives, and we trust and hope those are going to incent people to invest,” he said.

Businessman and philanthropist Blumenthal said the 20 percent tax credits helped persuade him to invest in the fund. He thinks the safety net provided by the tax credits will encourage more people like himself to invest in Iowa-based deals, which in turn will take ventures from the idea stage to the marketplace. The challenge, he said, will be to keep the start-ups in Iowa once they’re established.

Among the insurance companies investing in the fund is Principal Financial Group Inc. Last year, Gov. Tom Vilsack agreed to sign legislation reducing by half the tax Iowa-based insurers pay on premiums in exchange for a promise from them to invest $60 million in venture capital activities across the state over the next five years. “This is one vehicle by which they can meet that commitment,” Barcus said. “We expect to have several more insurance companies invest in this.”

Two Central Iowa banks, West Des Moines State Bank and Community State Bank, have invested in the fund. “It’s not typical for banks to invest in these things,” Barcus said, but he noted that the fund was structured so that investments by banks were not only legal, but also met the banks’ regulatory requirements under the Community Reinvestment Act.

“This fund meets the CRA requirements, so it was of interest to us,” said Dale Froehlich, president of Ankeny-based Community State Bank. “In addition to that, the fact that it’s an Iowa fund managed by Iowa people with a commitment to this state and Central Iowa was attractive to us. Who knows? Maybe the next Microsoft is in somebody’s garage and we’ll own a piece of it.”