With less than a week left in the “short session” of the General Assembly there is good news to report, but still work to be done to prepare for next year.
A series of meetings with legislative leadership this week points to the unmistakable conclusion that job creation through technology based economic development is very much on the minds of our politicians. The Governor and the members of the State House and Senate have clearly added the software, biotech and general technology communities to their list of important players. Even where there are not a huge number of jobs at stake today, the fact that our community has the only hope of growing significant numbers of high paying and high quality jobs in the future has captured peoples imagination. Plus, there is a recognition that much of what we think of as manufacturing – say, Pitney Bowes and UTC – are really technology as well.
More good news - Connecticut’s anomaly of subjecting most business production oriented equipment to local property taxes is also finally ending. Legislation would phase this tax out over five years. In addition, there will be new money for incubators, matching grants for SBIRs, professors at UConn and needed cash for a renewed effort to make early stage investments at Connecticut Innovations. (Bill 702)
Based on discussions with the leaders of the Finance Committee, it seems as if the proposed changes to the R&D Tax Credit legislation – that would have put the qualifying expenditures for the credit for Connecticut companies in line with most of the rest of the country but robbed us of a key situation where we actually are among the most attractive locations to invest in R&D facilities –will not pass, leaving us with the better result, the status quo.
Many of you have written to legislators about this (S.B. No. 669.) If you can still do so, please write today. If you received more than a dollar of R&D Tax credits, you should write to your legislator or send us the letter to forward so that we can put the stake through the heart of this legislation in the final days of the session.
None of this is to say that there is not a great deal more work to do. We must continue to marshal support for the innovation based economy and add significantly more dollars to key programs, including some of the programs included in SB 702. Still, important progress has been made that needs to be acknowledged and our leaders are to be congratulated.
Innovation Pipeline Accelerator (IPA) Moves Forward
Thanks to a grant from the Department of Economic and Community Development and sponsorship from Edwards Angell Palmer & Dodge LLP, the Council, in its role as the State Software and IT Cluster, now has the ability to add an important element to the technology infrastructure of the state. The IPA will offer high potential firms who are looking for help or who are seek funding from CI, DECD, Angels or VCs a place where they can be evaluated, matched with mentors or strategic partners and, in many cases, prepared for a successful assault on the providers of early stage risk capital.
An outgrowth of the successful FastTrack program, the IPA will include hundreds of growing firms, but will also maintain a group of 20 or 30 so-called FastTrack companies that we have identified as the top prospects with great potential. In the future we would expect to see many of the state’s great ideas and entrepreneurs move from the IPA to FastTrack and show up on the list of our Connecticut Technology Fast 50 winners.
Complementing the IPA will be a database providing a central repository of key technology and strategic information about these firms that will be accessible with the goal of creating partnerships and unions – sort of an innovation oriented version of the on-line dating services.
We are excited about these new programs because data continues to support the premise that regional technology growth requires a healthy innovation based community. The more people, skills and ideas in the community the more likely university research, existing firms and capital will be combined in an exiting and useful way. Connecticut has a problem keeping our sub-cultures and geographies in contact with each other and we hope that these programs will begin to bridge that gap.
An Example of the Work that Remains
An indicator of innovation and entrepreneurship in an economy is the ratio of start-ups and new company failures to existing companies. This is the business churn rate, and it measures the velocity of change in an economy, though not necessarily growth. The latest churn rate data just came out and Connecticut is 45th in the indicator.
The top states were Washington, Nevada and Utah. But places such as New Jersey, Maryland, Delaware, New York and New Hampshire all were among the top 20 states. Now, it is true that New Jersey and Washington are on the list in part because they had so many businesses fail. Still, we need to promote more risk taking and reduce the cost of failure. Evidence points to the likelihood of business success going way up after a leader has a few failures under his or her belt. So the churn rate is worth reviewing.
Finally, a new study out of Ohio points to the fact that a skilled work force brings productivity growth while attractive business “dynamics” in a community correlates to job growth. This sums up the Connecticut experience where fewer people are doing more and better work, if they can find it. Trying to figure out what makes for good dynamics in a region is a complicated issue in itself and something for future columns. Until then, please write your legislator and tell them how you invested your R&D tax credit back into your business.
President & CEO
Connecticut Technology Council