Hartford Business Journal

20 Hartford Business Journal • August 20, 2018 • www.HartfordBusiness.com OTHER VOICES An emerging venture capital ecosystem in a surprising place By Matthew McCooe W hen you think about the ideal location to launch a technology startup, Connecticut may not immediately make your short list, but it's a comer. Analysis just released by PitchBook Data Inc. points to resources, talent and density of entrepreneurs as three key indicators of a well-developed VC ecosystem and Connecticut has im- pressive scores in those categories. The state ranked fourth nationwide in local capital per venture-backed startup — $3.6 million in 2017. The data also show a healthy presence of experienced entrepreneurs (tied for 13th place) and a high density per population of companies across all stages of financing — ranked ninth in both early stage and late-stage density and 12th in very early stage density. And while the cost of labor may be relatively high (14th), this is what it takes to attract the graduates of the state's top-tier universities. Housing is also comparatively expensive (sixth), but it goes hand in hand with a quality of living that is typically rated in the top five in the U.S., with meccas like Greenwich, Stamford and West Hartford. Another draw for Connecticut is the potential talent within its sizable immigrant popula- tion (seventh largest nationwide). As noted in the PitchBook analysis, the Kauffman Foundation has research to suggest that "immigrants have a high propensity for entrepreneurship" and according to the National Venture Capital Association, "as of September 2017, 51% of unicorns [startups valued at more than $1 billion] were founded by immigrants." Further, according to BEA In- ternational, in 2017 foreign inves- tors tripled the amount they spent establishing, expanding or acquiring businesses in Connecticut to $13.5 billion, trailing only Massachusetts in the eastern United States. That figure is even more impressive when you consider that foreign investment in American businesses as a whole dropped 32 percent over the same time period. Connecticut may be under the VC radar, but it's increasingly poised to give places like Silicon Valley and Bos- ton a run for the money. Matthew McCooe is the CEO of Connecticut Innovations, the state's quasi-public venture capital investor. Matthew McCooe EDITOR'S TAKE Will general election moderate unrealistic policy ideas? T he field of candidates vying for governor has finally been whittled down. Now that the primaries are over, the remaining contenders should also truncate their list of unrealistic policy ideas. Both Ned Lamont and Bob Ste- fanowski, the Democratic and Repub- lican nominees for governor, respec- tively, fed voters a litany of reforms they say will jumpstart the state's economy and/or help solve Connecticut's long-standing budget crisis. Some of these ideas, however, aren't realistic be- cause the state can't afford them, or they don't make economic or fiscal sense. The general election typically forces candidates to moderate some of their policy stances so they can appeal to a wider base of voters. But both Lamont and Stefanowski will be hard-pressed to totally distance themselves from cam- paign promises that seem pie-in-the-sky to those who understand and follow the state's fiscal and economic challenges. Meantime, Oz Griebel, the indepen- dent candidate who is vying to get on the November ballot, has probably of- fered one of the most realistic blueprints to deal with some of the state's prob- lems (adoption of tolls, focus on region- alism to reduce the costs of delivering government services, structural fiscal reforms for the state's cities, etc.) but his campaign still remains a long shot. Bob Stefanowski Stefanowski surprised many people with his Aug. 14 primary victory, but he's also boxed himself in with his promises to eventually phase out the corporate, gift and estate taxes and, most notably, the income tax. While those may sound like sexy policy ideas, especially to ardent Re- publican voters who cast their ballots on primary day, making them work within the confines of Connecticut's budget situation seems like an im- probable, if not, impossible task. Here's the skinny on the income tax: The state's seven-tiered income tax, which ranges from 3.99 percent for the lowest earners to 6.99 per- cent for the wealthiest, generates $9 billion annually, or about half of state government's General Fund revenue. Eliminating the tax would require unprecedented cuts in state spending, at a time when Connecticut's budget is already projected to be more than $4 billion in deficit over the next two fiscal years and is facing continued higher costs from retiree pension and healthcare benefits. Complicating matters further, the next governor can't order wide- scale layoffs immediately because of restrictions imposed by a bad labor deal brokered by Gov. Dannel P. Malloy with state employees. The bottom line: Stefanowski won't be able to make the numbers work, not now and not in the near future. To be clear, Connecticut must resist the temptation to raise taxes further (un- less it's done in the context of broader tax reform, ie. lessening one tax and boost- ing another to make it revenue neutral) and it must take a much harder line with state employee unions. The cost and size of state government must be reduced. But a blanket promise to eliminate the income and other taxes flies in the face of reality. Ned Lamont On the other end of the political spectrum is Lamont, who has been a fervent progressive on the campaign trail, pledging to protect the rights of state and other unionized workers, push for an economic fairness agenda, invest in transportation and clean energy, and possibly raise taxes. Taken as a whole, Lamont's agenda isn't much different from Malloy's, which could be a problem given the current Democratic governor's abys- mal job-approval rating and his inabil- ity to turn around the state's fiscal and economic malaise. And Lamont hasn't been short on fanciful ideas. For instance, he wants to make the first two years of any public college or university tuition-free to in-state stu- dents who commit to living and working in Connecticut for a period of time after they graduate. While it's a nice idea to try to stem the state's brain drain, higher ed- ucation funding is already under attack, so trying to secure more money to offer free college isn't economically feasible. Candidates use the convention and primary seasons to set out a vision, sometimes one that is more ideal- istic than realistic. As we head into the general election, voters need to hold candidates accountable for those promises. Policy ideas must be put in context of the real-world problems this state faces. Opinion & Commentary Greg Bordonaro Editor

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