The SBA said it is inviting experienced early stage investmentfund managers to apply to its Small Business Investment Companycapital investment program.

Managers can apply for licensing as Early Stage InnovationFunds, according to the agency. The application deadline is 5 p.m. EST on March 1.

The initiative promotes innovation and creates jobs byencouraging private sector investment in early stage small businesses, said SBA Administrator Karen Mills. Earlystage small businesses face difficult challenges accessing capitalin this financial climate, while venture capital funds are findingit difficult to raise money from institutional investors, sheadded.

By licensing and providing SBA financial backing to Early StageInnovation Funds, the SBAhopes to expand entrepreneurs' access to capital and encourageinnovation as part of President Obama's ongoing Start-Up AmericaInitiative launched in 2011, Mills said.

High-growth potential, early stage companies commonly experiencea gap in the availability of funding between $1 million and $4million levels, according to the SBA. The agency said this gap isoften referred to in the venture capital industry as the “Valley ofDeath.”

Since January 2006, less than 10% of all U.S. venture capitaldollars went to seed funds investing at those levels, and 69% ofthose dollars went to just three states: California, Massachusetts,and New York, the SBA said.

The Early Stage Innovation Fund initiative targets this gap bylicensing and guaranteeing leverage to funds focused on early/seedstage investments. The SBA said its improved licensing timescomplement the Early Stage Innovation Fund program.

In 2011, its first year, the program attracted 33 applicationsand approved six qualified funds to continue through the licensingprocess after raising their private capital, the agency said.

The SBA said it has committed up to $1 billion in SBA guaranteedleverage over a five-year period to selected Early Stage InnovationFunds using its current program authorization.

Licensed Early Stage Innovation Funds can receive up to amaximum of $50 million in SBA-guaranteed funding to match theirprivately raised capital. Early Stage Innovation Funds must investat least 50% of their investment dollars in early stage smallbusinesses.

SBICs are privately owned and managed investment firms that arelicensed and regulated by the SBA. SBICs use a combination of funds raised from private sourcesand money raised through the use of SBA guarantees to make equityand mezzanine capital investments in small businesses. There arenearly 300 SBICs with more than $17 billion in capital undermanagement.