By Matthew McCooe, CEO Connecticut Innovations
Hypergrowth startups are essential for a community’s transformation to an innovation hub. Getting the companies up and running, however, can be a painfully slow process.
Waiting for new companies to emerge from a garage or a university is the traditional way to grow the innovation landscape. Given that the U.S. federal government invested $177 billion in high-risk R&D in 2018, capitalizing and developing this technology is still the best way to grow the local economy.
But the question is, can a region move faster than the 10 or 20 years it takes to become an innovation hub? And what more can be done to accelerate the process?
We live in a time when creativity and technology are changing markets all over. Great entrepreneurial ideas are not unique to Silicon Valley, New York, Boston or London. They come from everywhere and the United States is lucky enough that most of these entrepreneurs want to expand their businesses in the USA. The challenge is to incentivize and recruit these entrepreneurs to help build out your local economy.
Foreign entrepreneurs need U.S. markets
Helping foreign companies launch their businesses can accelerate their expansion in the U.S., and make the difference between their spectacular failure or success. Communities trying to supercharge their innovation transformation should look overseas, to places like Israel, and develop the tools to attract innovation to their region.
Israel is a great example, as it is widely regarded as Startup Nation. Its people are well educated, industrious and creative. But it is a small country/market.
Young companies in Israel have a global entrepreneurial mindset from day one. The founders understand that to be successful they have to expand to major markets, like the U.S. The challenge is to intercept entrepreneurs from Tel Aviv, or such other places as Dublin, en route to the U.S. and convince them that rather than going to the obvious locales, they should instead come to your city.
Heartland communities have selling points
Compared to the usual startup destinations, the Midwest has real advantages. Office rents, housing, and living expenses are less costly. And there is a great deal of educated talent willing to work for lower salaries than in San Francisco or New York. But the biggest differentiator can be risk capital, an entrepreneurial community and access to customers. My advice: deliver all on a silver platter.
Many overseas companies looking to come to the U.S. find it difficult to finance their expansion without first having sales and investment capital to launch, which are hard to obtain without warm introductions and local support.
A willingness to invest in companies earlier than most established venture capital firms might is critical. The funding should come from the state as well as angels and local venture firms from the private sector. States need to financially nurture innovation, not merely play host.
Less trafficked regions seeking to seriously speed the growth of their entrepreneurial ecosystem, should look inward as well as outward. In the same way the U.S. Federal Government takes large financial risks and provides a massive financial commitment to innovation, so too should state and local governments invest in attracting and developing local and foreign innovation.
Take our experience with VoiceITT, an Israeli technology startup with an app that can recognize irregular voice patterns and even tremors and translate them into understandable speech. The company recently agreed to move to Connecticut with an investment from Connecticut Innovations (CI). VoiceITT heard about CI from another Israeli company already in Connecticut, ProjectRay.
VoiceITT hadn’t decided where to expand in the U.S. Big venture firms weren’t yet ready to roll up with the check and invest. CI did. VoiceITT is now the 12th Israeli company we’ve partnered with in the last 24 months.
Hypergrowth is as much an imperative for a community as it is for a company. Widening your pipeline to lure overseas startups can demonstrably speed the transition to an innovation hub.
Matthew McCooe is CEO of Connecticut Innovations, the state’s strategic venture arm. He can be reached at Matt.McCooe@ctinnovations.com and +1 860-563-5851.