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Tech Council Warns: Fast-Growing Firms Will Leave Connecticut

By ANNE M. HAMILTON

December 20, 2010

Connecticut, which already lags in creating new businesses, is in danger of losing some of its cherished high-growth technology firms because of its poor entrepreneurial environment, says a report being released today by the Connecticut Technology Council says.

"Our research says we are falling behind other locations in the sheer number of fast-growing firms and most alarmingly, even those doing well may decide to leave in the future," said Christopher Kalish, chairman of the technology council and director of the University of Connecticut/GE edgelab in Stamford.

Many in the tech community have long decried key factors that are missing or lacking in the state. The study used interviews with top executives of fast-growing "gazelle" companies as well as large, established technology corporations to zero in on these factors.

The issues that need attention include formal and informal networks that help connect entrepreneurs; links to research being done at Yale and UConn; and more knowledgeable government agencies, the study shows.

Unlike the concerns of broader-based business groups such as the Connecticut Business and Industry Association, this study shows that cost and regulation are mot major concerns for fast-growing tech firms.

"The firms we interviewed can afford Connecticut. Yet, like luxury car buyers, for the high price they expect impressive performance," the study states. "The good news is that what they want, the new governor can deliver readily."

A general atmosphere of governmental indifference towards business is a key deterrent to growth, the report concluded. Its release was timed to appear as Gov.-elect Dan Malloy makes economic development plans for his administration.

A Connecticut Technology Council task force that conducted the interviews concluded that building relationships among entrepreneurs and providing more governmental encouragement — not vast infusions of cash — are essential to restore the state's edge in technology.

"They don't feel that the state appreciates companies that are successful. The fast-growing companies felt that they were in a sense being ignored here," said Matthew Nemerson, CEO of the technology council. "We risk losing … future job growth to other states or countries unless we address the weaknesses these very successful business leaders are pointing out in our job development strategies."

There has, however, been some progress in a few areas in the past year or so — a new angel investor tax credit, and a $200 million state technology tax credit for startup firms. "That is a step in the right direction," Nemerson said.

The report suggests several low-cost ways to improve the climate for growing technology companies, including hosting meetings where entrepreneurs, financiers and researchers could exchange ideas. In a refrain often heard in Connecticut, the study says more needed to be done to attract young high-tech workers and make cities more appealing.

"It's not that expensive," said Kevin Burns, president of Precision Corporation, who was an advisor to the project, "but it does take conscious effort."

Among the quotes from Connecticut CEO's, who are anonymous in the study: "I've had more meetings with Governor Schwarzenegger than with Governor Rell." "I don't feel like I let anyone down when I don't hire here and I don't feel like I get a win when I do."

Among many specific recommendations are an economic development "war room" for the state, and an increase in "research alliances" in which private firms work with universities on development projects.

"The good news is that this group of business leaders believes that if the new governor implements the kinds of solutions they are recommending, we can become more competitive quickly," Kalish said.