For investors, the adage goes, no risk means no return.

But for years, wealthy investors in Louisiana start-up companies have been able to offload more than a third of their risk onto state taxpayers through a program that offers the investors tax breaks worth up to 35 cents on the dollar.

During a five-year period beginning in 2011, Louisiana's Angel Investor Tax Credit program issued about $21 million in credits to accredited investors who poured about $65.2 million into scores of early-stage businesses, according to a review by The Advocate of hundreds of documents related to the program, including applications, business plans and financial statements.

The credit was reduced to 25.2 percent in mid-2015 as part of a budget deal that subjected certain tax credits to an across-the-board cut. 

It’s hard to say whether the state money has been well-spent. Although the state compiles an annual review of its various tax-incentive programs, it relies largely on self-reported figures and doesn't attempt to determine the return on its investment.

Some experts argue that taxpayers are simply subsidizing potential losses in risky decisions made by well-heeled investors. And they question whether the program actually stimulates investment that would not have occurred anyhow.

"Is it necessary to have a program like this to have any kind of angel investor activity or not? I don't know. I personally doubt it," said Greg Albrecht, the Louisiana Legislature's chief economist and a critic of many of the state’s incentive programs. "It might help a little bit. That doesn't make it pay for itself, that's for sure."

The program's top beneficiaries include well-known successes and spectacular flame-outs. Perhaps most notable among the latter group was Dinner Lab, a onetime darling of the New Orleans entrepreneurial scene that abruptly closed in April and soon filed for bankruptcy.

Investors in the membership-driven catering and events business, which had expanded to more than two dozen cities, were the second-largest beneficiaries of the angel program, receiving credits worth more than $2.7 million, state records show. That’s about 13 percent of the money the program has doled out since 2011.

Brian Bordainick, Dinner Lab's co-founder and CEO, told The Advocate last year that the incentive had helped the company gain crucial momentum. "Raising money is a tricky process, and New Orleans wasn't a capital-rich environment for the type of company we had, so this opened things up," he said.

At the other end of the spectrum, one of the region's more visible successes has been Marucci Sports, a Baton Rouge baseball-bat manufacturer that has 85 full-time employees and makes the most popular bat among major leaguers. The company has been the third-largest beneficiary of the program, receiving more than $2.4 million in credits for its investors, records show.

All told, more than five dozen companies participated in the program through 2015, the most recent year for which data were available, cutting across a range of industries, including technology, manufacturing and entertainment.

The list included a Baton Rouge security and technology firm, a New Orleans music festival producer, a Shreveport specialty coffee roaster and shop, the developer of a Madisonville plant-sourcing system and several craft breweries across the state.

Does it work?

Across the U.S., about 300,000 people have made a so-called angel investment — essentially, put money into a start-up — in the last two years, according to the Angel Capital Association, a trade group.

By definition, it’s risky business. The majority of the ventures will flounder; one or two of every 10 might earn real returns.

Louisiana isn't alone in seeking to spur angel investing. Roughly half the states in the country have offered similar programs in recent years. Louisiana’s program is limited to investors who have a net worth of at least $1 million and an annual income of more than $200,000. (Federal regulatory guidelines for accredited investors stipulate one or the other.)

That’s resulted in an annual cost to the state averaging about $4 million in recent years. That makes the angel investor program a relative midget among Louisiana’s major tax credit programs, whose cost to taxpayers has skyrocketed in recent years, jumping from $207 million in 2004 to nearly $1.1 billion in 2014.

Those spiraling costs mean many if not most of the state’s business giveaways will likely face close scrutiny in this year’s regular legislative session, when lawmakers are expected to grapple with long-term reforms to Louisiana’s budget.

And while the angel investor program is a small factor in the state’s perennial budget crisis, it’s potentially vulnerable in part because officials can’t really demonstrate that it’s worked. It’s also set to expire in July, absent legislative action.

A blue-ribbon panel of economists, business leaders and government officials tasked with recommending wholesale changes to the state's tax system believes the state should give the program closer scrutiny. In a report, the group urged better monitoring and performance-based reporting for tax breaks geared toward development, including the angel credit.

But the group did not recommend eliminating it.

The last time the credit was set to expire, in 2015, state Rep. Franklin Foil, R-Baton Rouge, proposed extending it. That may be "a difficult sell" this year, given the state's budget woes, he said.

"We're going to have to have some specific numbers about how it's performing," he said.

That is the fundamental question that needs to be answered, according to Robert Travis Scott, a member of the tax panel and head of the Public Affairs Research Council in Baton Rouge.

"The No. 1 question you hear about the angel investor credit program among people who are evaluating it is whether or not the activity would have happened anyway, or would have happened with other sources," Scott said. "That is the key question ... (and) another good reason why an objective, thorough evaluation of its impact ought to be made."

Fans of the angel investment program say that despite its relatively small cost, it helps steer crucial capital into the hands of start-ups. And they say it helps create a buzz about Louisiana's nascent entrepreneurial scene.

"What I generally see is it improves the climate for the support of entrepreneurs so much that most states bend over backwards to keep it, even when they're in financial peril," said Marianne Hudson, executive director of the Angel Capital Association, which has more than 13,000 accredited members.

The prospect of losing the program has some state officials and business leaders nervous. They fear losing the program could prompt more entrepreneurs to locate outside Louisiana.

"If you take that off the table, you almost certainly ensure that those who are in search of these types of funding mechanisms will go elsewhere," said Louisiana Economic Development Secretary Don Pierson. "That's going to be some of our best and brightest."

Success stories

By almost any measure, Marucci Sports is a homegrown success story, and Marucci's CEO, Kurt Ainsworth, gives the angel investor program some of the credit.

The bat company has been the third-largest beneficiary of the program, receiving more than $2.4 million in credits for its investors, records show. Meantime, many of baseball's biggest stars, such as former Red Sox slugger David Ortiz, have signed on as investors.

"It definitely helped us get it done," Ainsworth said of the state’s incentive program.

"That's probably the biggest thing for us — that it put us in a position where now we've created something special in Baton Rouge," he added.

Another big beneficiary was Servato Corp., a New Orleans-based company formed in 2014 to provide automated battery management for backup or reserve power in industrial facilities. Servato's CEO, Chris Mangum, also praises the program.

The tax credits "had a significant impact on the interest level of angel investors,” he said. "In a way it de-risks the investment for them by essentially getting them some of their rate back in the form of a tax credit."

Servato's backers were issued nearly $1 million in credits in 2015, making it the program's fourth-largest beneficiary, records show.

Though he’s a fan of the angel program, Mangum said he "can't say with certainty that without it, investors would stop investing. I don't think that's the case. But I do think a lot of the momentum right now on angel investing could lose some wind from its sails if that tax credit goes away."

In fact, investors and economists generally agree that the credit doesn't make or break investors' decisions. But supporters contend — as Mangum suggested — that the credit can reduce risks for investors who are on the fence, or coax them to invest more aggressively.

Skeptics, however, say it’s difficult if not impossible to measure if or when incentives tilted the scales in the state's favor — in other words, whether the investment would have happened without the state’s largess.

"The angel investor credit is a tough one, because the state loses money regardless," said Norton Francis, a senior research associate at the Urban-Brookings Tax Policy Center at the Urban Institute, a liberal-leaning think tank in Washington, D.C., who believes that it's "hard to justify a subsidy for the investment."

Concluded Albrecht: "I don't know that we can't mobilize private angel investor capital without a public subsidy, but it's always easier to do with a public subsidy."

Beer and festivals

While there are few limits on the types of businesses that can qualify for the program — though retail is excluded — angel investing tends to be linked in the popular imagination with technology and innovation. But many Louisiana companies that have benefited from the program have been in much more prosaic lines of work, from making beer and roasting coffee to producing festivals.

The largest beneficiary of the angel investment program to date, according to The Advocate's review, has been H1 Events LLC, a New Orleans company that produces a handful of large-scale music festivals.

The company is involved in the BUKU Music + Art Project, which is scheduled to return to New Orleans next month, as well as the Tortuga Music Festival in south Florida. The company's investors were issued credits worth $2.8 million over three years, records show.

The company works in tandem with another firm, Huka Productions LLC, which is described as "a talent-buyer for music venues and consultant to start-up music-based festivals and events." Huka's investors were issued $490,000 in angel investor credits in 2013.

Some observers question whether a culture-rich but cash-poor state like Louisiana should subsidize ventures like breweries or music festivals that are relatively plentiful and hardly cutting-edge.

But Pierson sees value in having a diverse mix.

After all, he says, a brewery is a manufacturing operation and thus has a broad ripple effect throughout the local economy.

"The idea is to create an environment where if you have new, innovative ideas and a company that you want to build, that you can build it here as easily as you can in other localities," he said.

Follow Richard Thompson on Twitter, @rthompsonMSY.