In an attempt to improve the state’s economic climate, Gov. Dannel Malloy announced last week that the state will invest $250 million in startup technology companies over the next five years.
The money is set to come from both the state and Connecticut Innovations, the state’s quasi-public authority responsible for technology investing. The funds will then be distributed to both high-tech startup companies and other firms that assist startups in an attempt to make capital more widely available and fostering business-friendly environments, especially around universities.
“Small business ventures really provide the best potential for economic growth in the short and long term,” said Jim Watson, a spokesman for Connecticut’s Department of Economic and Community Development. “It’s about these three things: innovation, entrepreneurship and startups.”
According to Catherine Smith, chairperson of Connecticut Innovations and commissioner of the Connecticut Department of Economic and Community Development, the intent is to create an “innovation ecosystem” conducive to entrepreneurship and business growth. Smith said the state will pay existing companies to provide services for businesses, such as accounting assistance, business classes and help with Internet publicity. Different companies will bid for the opportunity to provide these services, and the state will choose among them based on their proposals.
“We’re not going to do this whole thing by ourselves, because one thing we know about the state government is that it’s really not very good at this stuff,” Smith said. “We are, however, going to fund these services.”
Smith said there will be a focus on developing “business hubs” near universities, where talent is often concentrated. Citing Yale’s Science Park, Smith said there are several companies that originated as startups created by members of the Yale community and eventually grew throughout the state. Among these companies are Higher One, a company that handles financial services at 650 colleges and universities, and Alexion, a pharmaceutical company, according to Smith.
“There’s a lot of evidence that some of the best thinking and new ideas come out of university systems, so as we’re building in Connecticut, we’re going to build off these anchors,” Smith said, citing the University of Connecticut, Wesleyan University and the University of Bridgeport as a few of these “anchors” in addition to Yale.
School of Management professor John Feinstein said small businesses are key to the “economic revival” Malloy promised in his State of the State address last week, but expressed concerns about the cost of the governor’s plan.
“Right now, we’re not really supposed to be spending money, which is a main worry of mine,” Feinstein said. “I’m not a big fan of deficits.”
Still, some members of the University community expressed support for Malloy’s plan.
“Connecticut has been active, but perhaps not as active in the past as some other states, in promoting startup businesses, so I think that’s why Gov. Malloy is trying to turn on the spigot here and make that effort more successful,” University President Richard Levin said.
Annelies Gamble ’13, president of the Yale Entrepreneurial Society, an organization that supports and funds Yale startups, stressed the importance of policies that encourage entrepreneurs to accept risks.
“People don’t necessarily want to open themselves up to the risk of starting a business, so if the government can figure out a way to push and encourage people, that would be great,” she said.
Noah Sheinbaum ’13, CEO of Elmseed Enterprise Fund, a student-run nonprofit that provides lending and consulting services to New Haven entrepreneurs, said that the increased funding is a “great start,” though it should be only one part of the state’s economic development strategy.
“Simplifying the processes that prospective entrepreneurs have to go through to start businesses would be equally, if not more helpful,” he said.
According to the U.S. Bureau of Labor Statistics, Connecticut’s unemployment rate stands at 8.2 percent.