Just days after Volvo became the second automaker this year to pass up North Carolina for our southern namesake, Commerce Secretary John Skvarla suggested the blow be an opportunity to reposition the debate over economic incentives and to boost the state in other ways.
May 18, 2015
Commerce Secretary Skvarla’s Prescription for a Vibrant Entrepreneurial NC
Four ways the state legislature can spur economic development and entrepreneurship in North Carolina
His comments to a crowd of investors and partners in the Raleigh private equity firm Lookout Capital last Thursday revolved around communication, crowdfunding, broadband and building. If all four things can happen, our state might not lose out on the big deals but it also will have a better chance of winning the small ones that make the entrepreneurial community more vibrant.
Here’s a quick summary of his thoughts and the initiatives he’s pushing the legislature to address and adopt:
Communication—Skvarla is an advocate for better communication around economic incentives—they aren’t freebies, he says, but grants that are only awarded should a company like Volvo meet its employment goals. His point is that money is only provided by the state if jobs are created, so there’s either economic gain for the state or there’s no impact whatsoever for offering the incentives. Skvarla is one of the biggest advocates of the continuance and growth of the North Carolina Job Development Investment Grants (or JDIG), which is currently out of funds and a major issue in this year’s legislative session.
It matters to startup companies if they get big enough to warrant economic incentives for massive job growth or a physical expansion, or if say Google wanted to open an East Coast office in town. JDIG could help sweeten the deal.
Crowdfunding—It’s year three of the local entrepreneurial community’s attempt to push an intrastate crowdfunding bill through the Senate and House, but it’s the first year the Governor and his cronies have been vocally supportive of the bill. Called PACES, which stands for Providing Access to Capital to Entrepreneurs and Small Businesses, it lets businesses raise up to $2 million in a year from people within the state of North Carolina who don’t have to meet the federal standards of an accredited investor in order to get in on deals. (We have a handy guide here.)
Communication is also key here. Skvarla believes what’s missing in the bill today is an obligation by the entrepreneur to share with investors the value of the shares they’re purchasing. That’d be similar to what operating shareholders typically have to provide to their bank each year, so the bank understands the value of the equity.
Broadband—A key criticism of economic development initiatives, generally, is that they leave out rural communities. Skvarla argues that the best way to support these communities is to give them the same access to bandwidth and information as in the urban areas. Information, after all, is to the 21st century what interstate highways were to the 20th, railroads to the 19th and rivers to the 18th century. Because it’s cheaper to start a business in an area other than the Triangle or Charlotte, his goal is to get broadband access to strategic areas in rural communities to allow entrepreneurial activity to happen.
For the Triangle, this could be a boon to entrepreneurial businesses that need a manufacturing, storage or production facility and want to operate it more affordably than in the major urban areas. It could also spur along the creation of more suppliers to these new businesses.
Building—With he and the Governor’s so-called Project Phoenix, there’s a dual mission to make North Carolina more of a destination for both residents and visitors, to make it more appealing and beautiful and to rid the state of excess property and build a bigger nest egg. The $1.4 billion plans would also create a lot of construction jobs over time.
Skvarla’s examples to the crowd included turning the NC Zoo, which is the largest land mass zoo in the world, into a major tourist destination with hotels, night-time safaris, ziplines and camp grounds, all with a goal to attract several million visitors each year rather than today’s 750,000. He’d also like to implode much of the state’s government complex, which he calls uglier “than East Berlin on its worst day” to better compete with the beautiful campuses in Austin or Nashville.
Both efforts would be helpful to entrepreneurs recruiting the best talent to the state, and to economic developers drawing new companies to town.
Skvarla has made several public appearances in the startup community in recent months—it’s clear he’s trying to get support from and bend the ear of entrepreneurs. So what do you think? Are these the issues that will be most helpful to your business? Or are there things the legislature is missing in its plans?