What Can Be Done At State and Local Level
July 20 2012 by ChiefExecutive.net
While debate swirls over what role the federal government should play in easing the nation’s seed funding crisis, experts say there are steps that can be taken regionally to improve flows of capital to start-ups:
–The technology licensing units of universities and research institutes should invest more resources in introducing entrepreneurs to potential investors through networking events and other programs. “If you’re a professor in biomedical engineering and you come up with something novel, just getting it licensed is not going to be enough,” says Sean Carr at the University of Virginia’s Darden School of Business. “A university needs far more resources to introduce them to people with MBAs and angel investors. You have to get them together to get them to understand what it means to commercialize. You have to get the whole ecosystem involved.”
–University endowment and pension funds should invest in start-ups coming out of their institutions. The Massachusetts Institute of Technology does this, but few other universities do. It is undeniably tricky. “The core mission of the university is not to be in the investment business,” says Carr. “Who decides what ventures get funded?” But it can be done if university investment arms hire capable investment strategists and limit such investments to a modest percentage of their entire portfolios.
–Governors should use their political power to assemble groups of angel investors. “Government can convene,” says Michael Zapata, an angel investor in North Carolina’s Research Triangle. “If the governor calls a meeting, people come.” Angels acting on their own are not as effective as organized networks of angel investors.
–States should improve the way they grant tax credits to investors who provide seed capital to technology companies, says Zapata. At least a dozen states offer income and business tax credits to angels who invest in new technology-based businesses, but the criteria can be confusing and the programs tend to phase out after only a few years.
–States should expand and improve their emerging technology funds. Some states such as Texas and Florida operate funds that invest in start-ups, but they need to be insulated from political pressures and they need to have budgets that allow them to function over the long term, not just until the next governor is elected.