To Snare Tax Break, Venture Firms Eye Relocating Startups

Parts of the Brooklyn neighborhood of Dumbo have been designated as opportunity zones. Photo: Bloomberg

The federal government is rolling out big tax breaks for investing in economically depressed areas. One strategy that numerous venture capitalists are exploring to take advantage of the new savings: helping portfolio companies move into one of the designated neighborhoods.

One of those investors, Patrick McKenna, founder of Miami Beach–based HighRidge Venture Partners, said he might raise a fund early next year to invest in areas of cities such as Pittsburgh, Columbus, Ohio, and Baltimore, as long as the tax benefit can be applied. He also hopes to persuade portfolio companies to move to areas within their cities that would make investors eligible for the tax incentives, instead of fleeing to California or Boston to be closer to traditional investors, he said.