2018 Outlook for Startups
Money Talks from the CI Bench
By Matthew McCooe, Chief Executive Officer
After two decades of steady progress, Connecticut has emerged near the top of the list of desirable locations for startups. According to a new report from the financial website WalletHub, Connecticut is the nation’s 13th most innovative state in the country, outranking New York (22nd), Texas (14th) and Florida (19th). The linchpins of this evolution have been the state’s entrepreneurial business community, world-class universities like Yale, and superior quality of life.
Driven in part by CI investments, along with the support of local government and business leaders, 2018 is going to be another banner year for company founders here in Connecticut. Here are some of the reasons why:
- Investment in Early-Stage Technology Companies
Mentors, small business loans with personal guarantees, and business plan advice are standard fare in most business centers in the United States today. Seed and pre-seed investment dollars are still incredibly hard to come by, and this capital is almost always the difference between a business getting off the ground and a pipe dream (I just saw Denzel Washington in The Iceman Cometh, so this phrase leaps to mind). At CI, we continue to see tremendous growth potential within our core focus areas—biotech, fintech/insurtech, digital health, software and the Internet of Things. And we plan to support our entrepreneurs in a big way—investing around $45 million. We intend to expand our portfolio from 160 to 185 companies by the end of 2018.
- Corporate Partnerships
Once we invest, the real work begins. Much of our energy at CI is devoted to attracting and investing in innovative young companies from around the world and in our own backyard. It is of the utmost importance that we find novel ways (including sourcing top talent) to help our early-stage businesses grow faster.
To that end, we’ve done a great deal of outreach to our many local corporations to foster connections with startups—whether through investments, distribution partnerships or end-user customer relationships. These companies, many of which have recently stood up chief innovation officer roles, want to learn about cutting-edge technologies that are transforming their industries. Many are looking for innovations they can plug into their existing operations. Our current roster of corporate partners includes Connecticut’s most forward-thinking organizations.
- Innovation Places
Innovation Places is an exciting new CTNext initiative to enhance and leverage the assets of several key midsize cities across the state—transforming these high-potential areas into vibrant places for innovative companies and talented young people to call home.
“The program provides a framework for government, industry, business, higher education and others to work in concert to revitalize urban areas to foster innovation, new industry, job creation and economic growth. The Innovation Places designation has already been an effective catalyst to increase private-sector investment in these cities, and we expect that to continue in the future.”
Executive Director, CTNext
After an extensive review of applications from 12 communities across the state, New Haven, Hartford/East Hartford, Stamford and Thames River were selected and awarded grants for projects to stimulate the local entrepreneurial ecosystem. The program will distribute $30 million to the designated cities over a period of five years.
- Favorable Tax Landscape
- New Tax Legislation
The recently enacted 2017 Tax Cuts and Jobs Act contained numerous changes that could be a boon for startups. It included major changes to the Internal Revenue Code, reductions to both individual and corporate tax rates, and a number of changes to credits and deductions. For businesses, this may mean more resources to fund new technologies and possibly mergers and acquisitions. For individuals, there is more money to earmark for angel investments.
- Angel Investor Tax Credit Program
Fortunately, the Connecticut state legislature continues to support this measure to encourage seed capital investments in Qualified Connecticut Businesses. Through the program, an accredited investor can infuse from $25,000 up to $1,000,000 and qualify for a 25 percent state income tax credit, invest $100K, and earn a $25K voucher against state taxes for the next five years. No more reason to complain about taxes in Connecticut!
While there are always challenges, the current Connecticut business environment is rife with opportunity for enterprising young companies to introduce game-changing innovation and technology. We think Connecticut is as good a place to start a company as any today.