NASHVILLE - State officials Thursday selected six venture capital firms, including one with Chattanooga ties, that will split $120 million in tax credits intended to spark investment in new Tennessee companies.

Officials said they also plan to ask the Tennessee General Assembly next year for an additional $40 million in tax credits to expand the fledgling program, dubbed TNInvestco. The extra $40 million would provide two alternate companies with $20 million each in credits.

The six companies identified Thursday will each get $20 million in gross premiums tax credits, which they will market to insurance companies to create a pool of venture capital. The money would be invested in startup and midstage companies in Tennessee.

The state's goals are to develop Tennessee's "entrepreneurial infrastructure," bring additional venture capital to the state, diversify the state's economy and create clusters of business innovation which can generate additional new companies or attract new talent to the state, according to a news release.

Among the venture capital firms is Nashville-based XMi High Growth Development Fund, which has operations in Nashville through XMi Holdings and in Chattanooga through The Lupton Co., according to state documents.

David Belitz, The Lupton Co.'s chief financial officer, said the effort can be a stepping stone to establish a capital network in Chattanooga.

He added that XMi having a Chattanooga branch makes sense with the city on the border of Georgia and Alabama.

"We can reach across Georgia and Alabama and entice some younger companies to cross the border," Mr. Belitz said.

He said John T. "Jack" Lupton, the former Coca-Cola bottling magnate whose name the company carries, supports the initiative.

Tennessee Revenue Commissioner Reagan Farr, who along with Economic and Community Development Commissioner Matt Kisber announced the selections, said XMi "brings a strong team of experienced managers to the table as well as people with strong operational experience and experience as businessmen."

Citing its ties to Tennessee certified public accountants, XMi's head, Michael Schmerling said "we're going to be looking all over the state for opportunities." David Tulis 11/5/09 He said the company is interested in not just growing jobs, but headquarters as well.

While XMi has been around for 26 years, XMi High Growth recently was created to get involved in the TNInvestco program, he said. Its equity partner is The Lupton Co., Mr. Schmerling said.

"You know the history of the Lupton's family complete transformation of Chattanooga," Mr. Schmerling said.

Mr. Lupton, who sold his Coke bottling empire in 1986 for $1.2 billion, was a major supporter of the Tennessee Aquarium. The downtown landmark helped spur the renaissance of Chattanooga's central city.