CT Budget Bill Would Create Independent TBED Organization, Programs

June 02, 2016
By: Jason Rittenberg

Ten Connecticut startups competed in a $10,000 pitch competition at CTNext last week, but the five-year-old state initiative finds itself the winner of a much higher-stakes appraisal. Gov. Dannel Malloy approved the FY 2017 state budget bill on June 2, which will make CTNext an independent organization with $67 million in bonding support. Among the powers assigned to the organization are managing an innovation-places program and maintaining a crowdfunding website, in addition to a broad array of activities geared toward promoting tech-based economic development in Connecticut.

CTNext was created in 2011 under Gov. Malloy as an initiative within Connecticut Innovations to foster startups by improving the state's support network. The initiative has established a membership-based network of entrepreneurs and service providers, managed a commercialization voucher program through regional incubators, and hosted the Entrepreneur Innovation Award pitch competition. These activities could be seen as a precursor to preparing the companies for the venture capital programs operated by Connecticut Innovations.

The budget bill significantly alters the programs and structure of tech-based economic development in Connecticut. CTNext will become an independent entity with its own board and administration. The organization's responsibilities will include managing three new programs – Innovation Places, higher education entrepreneurship grants and a high-growth company grant – and creating a website to market crowdfunding opportunities, as well as coordinating several entrepreneurship and SBIR activities previously undertaken by Connecticut Innovations, which will return to focusing more exclusively on providing venture capital.

The bill provides CTNext with a budget authority of $12.4 million per year: $4.9 million for Innovation Places (plus an additional $5 million in 2020), $2 million for Higher Education Entrepreneurship Grants, $500,000 for grants to high-growth companies, and $5 million directly for CTNext. Rather than being new, these revenues will be redirected from Connecticut Innovations and the Manufacturing Assistance Act. Some programs that CTNext will coordinate, such as the state's SBIR office, will still be paid for directly through Connecticut Innovations. This plan not only increases the initiative's budget, but also provide fiscal stability. According to Connecticut Innovation's financial reports, CTNext and the SBIR office have spent a combined $16.2 million in program funds since FY 2011, ranging from a low of $200,000 in FY 2011 to a high of $6.1 million in FY 2014.

The Innovation Places program itself is a significant undertaking for the state. As defined in the bill, Innovation Places would be mixed-use areas with access to public transit that contain at least two "anchor institutions" that support innovation and a mix of startups and growth-stage companies. Applying entities will be eligible for initial planning grants and selected places would presumably receive significant grants to improve physical infrastructure, housing and public spaces, collaborative opportunities and access to capital. The legislation emphasizes the need for these spaces to have and improve livability – in the form of walkability, housing quality and use of public spaces – and broad support for planned initiatives from both higher education and private industry. In addition to grant support, the bill states that selected Innovation Places will receive preferential treatment for several existing economic development initiatives.

The budget bill is not Connecticut's first consideration of an innovation places program this year. Gov. Malloy rejected a similar and broader program this March, citing that proposal's $160 million price tag. The version in this bill is a more modest $30 million (plus a competitive $50,000 incentive program with no specified cap), which likely contributed to the program's passage.

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