Missouri Group Lobbies for Statewide TBED and Capital Strategy

Although Missouri frequently ranks in the top 20 states for federal research grants and academic R&D, the state consistently ranks much lower in the creation of new high-tech companies. A recent report by Dr. Mark Parry of the University of Missouri-Kansas City Bloch School of Business suggests that early-stage high-tech entrepreneurs and companies have been unable to secure sufficient capital to launch successful ventures. Part of this capital deficit has been due to a lack of state investment in capital formation and access programs, he contends. While neighboring states spent an average of $2.79 per resident in 2006 on capital formation initiatives and similar states such as Arizona, Ohio and Minnesota spent $2.94, Missouri spent only $0.10. Parry argues that this lack of spending has contributed to the state's persistent difficulty in translating its intellectual capital into new companies.

 

One problem identified by the report is that although the amount of early-stage capital under management in Missouri has increased over the past six years, the amount invested in Missouri companies has declined. Angel and venture investors are not finding high-quality deals. The state's current capital strategy, which has primarily focused on tax credits such as the Small Business Investment Credit and the New Enterprise Credit, has been successful at attracting venture firms but not at helping pre-seed and seed-stage companies develop into desirable candidates for investment.

 

Parry presents several guiding principles for a capital formation strategy in Missouri that could begin to successfully address the state's needs. The report argues that the state's investment in capital programs should be no less than $15 million annually and should focus on increasing investment in pre-seed and seed-stage companies. Also, the state's capital strategy should be embedded in an overall strategy to improve Missouri's innovation economy. This approach helps to ensure that these funds are contributing to high-tech development and effectively leveraging intellectual capital.

 

Last month, a group of representatives from Missouri companies and economic development organizations released a proposal for a statewide TBED strategy built on Parry's recommendations. The proposal, dubbed the Grow Me State Initiative, calls for the creation of a statewide blue ribbon panel of representatives from the high-tech and finance community to design a five-year strategy for technology-based development. This strategy would create new networking opportunities, facilitate the creation of new angel and sidecar funds, and seek to expand the state's TBED offerings.

 

The initiative also calls for the governing boards of Missouri's 116 state and local pension funds to focus a portion of their investments on strategic in-state companies and industries.

 

Finally, the initiative would create three new programs to support early-stage companies and investors:

• An angel tax credit providing a 25 percent credit, up to $50,000 per investment, for accredited investors;
• A proof of concept technology business finance program that would competitively award 25 $50,000 grants per year to cover pre-seed expenses; and,
• A seed capital technology business finance program that would make equity investment in seed-stage companies through a professional equity firm.

To find out more about the Grow Me State Initiative and to read Dr. Mark Parry's report, Missouri’s Need for Risk Capital: An Assessment and Recommendations, visit: http://www.growmestate.com