Over the course of the 2016 Connecticut General Assembly legislative session, a great deal of time and effort went into analyzing the state and future of economic development.
Much emphasis was placed on identifying mechanisms to catalyze entrepreneurship and innovation. For much of the session the concepts developed in this process were described in SB 1, An Act Concerning Innovation, Entrepreneurship and Connecticut’s Economic Future.
SB 1 was revised and amended several times, and the final distillation of the various policies proposed in the bill became the first 35 sections of the much larger bill that revises the current biennial budget.
What follows is an overview of these provisions, referred to here as the Innovation Bill.
In catalyzing entrepreneurship and innovation, the Innovation Bill makes several changes to the powers and duties of Connecticut Innovations and the Department of Economic and Community Development, but most importantly, establishes a new subsidiary of CI, CTNext.
The distinctiveness of CTNext’s mission is expressed in part by the makeup of its Board of Directors, a majority of whom must be “serial entrepreneurs”—individuals who have brought at least one start-up business to venture capital funding by an institutional investor.
Central to CTNext is the establishment of “Innovation Places.”
These compact geographic areas are meant to:
- Foster innovation and entrepreneurship;
- Encourage collaboration among colleges and universities, medical institutions, established businesses, start-up businesses, growth-stage businesses (businesses incorporated for 10 years or less, which have raised private capital and whose gross annual revenue has increased by 20% during each of the past three years), researchers and investors
- Connect entrepreneurs to each other and with private and public resources.
Physically, Innovation Places link anchor institutions (entities having a “significant and stable” presence in a community); start-up businesses; growth stage businesses; recreational spaces; public transit; and mixed-use housing, office and retail space.
The bill provides $29.5 million over five years for CTNext to fund both applications for Innovation Place status (up to $50,000 per application), and the activities of Innovation Places.
The bill establishes a program to provide aid grants to facilitate the growth of start-up businesses.
- Connect to public transit;
- Leverage private investment and use CTNext funding; attract anchor institutions, start-up businesses, and growth stage businesses;
- Develop with private partners a “business incubator,” “coworking space,” “business accelerator,” or public meeting space;
- Foster events and community building;
- Conduct marketing and outreach;
- Improve open spaces;
- Develop housing;
- Improve technology infrastructure;
- Develop bicycle paths.
The bill establishes a CTNext program to provide grants-in-aid to facilitate the growth of start-up businesses that have transitioned to growth stage businesses.
These growth grants are limited to a maximum of $25,000 per applicant (a total of $450,000 per year) and may be used for sales assistance, marketing, strategy, organizational development, technology assistance, bid assistance, beta testing of products, and prototype development.
CTNext is provided $2 million per year (beginning in 2019) to make “higher education entrepreneurship grants-in-aid.”
The bill states that such grants are to be reviewed by a Higher Education Entrepreneurship Advisory Committee to be established by the CTNext Board.
CTNext is charged with creating two websites.
The first is to serve as an online community for entrepreneurs that lists services, programs and events offered to entrepreneurs, posts research related to entrepreneurship, provide information concerning innovation and entrepreneurial programming available at colleges and universities, and connects businesses seeking to buy Connecticut-made products.
The second site is to advertise Connecticut-based start-up businesses that have been qualified by CI for angel investor investments and/or are seeking funding on crowdfunding websites.
CTNext is charged with producing, implementing, and annually updating a statewide innovation and entrepreneurship marketing plan to promote Connecticut as an “innovation and entrepreneurship hub.”
The bill provides CTNext with $500,000 to hire a research organization to conduct a baseline assessment of innovation and entrepreneurship in Connecticut by June 1, 2017 and provide updated assessments biennially thereafter.
The bill broadens CI’s investment powers and requires it to take a variety of new economic development measures.
CI, for example, is given the power to invest in various forms of private equity funds.
Such CI investments may be in private equity funds with investments located outside Connecticut, provided that at least the amount invested by CI supports the growth of Connecticut businesses or the relocation of companies to Connecticut.
The bill also requires CI to establish a program to solicit Connecticut state residents to invest along with CI in such private equity funds.
It provides that 50% of the value of any such investments may be used by Connecticut residents to reduce their estate tax (up to $5 million per decedent; the total amount that may be claimed under this provision is capped at $30 million).
The bill also requires CI to solicit Connecticut state residents to invest in private equity funds.
The bill charges CI with establishing a competitive program to award $50,000 grants to start-ups located in a municipality chosen by CI which has at least one Innovation Place.
In addition to the grant, CI must provide grantees with access to mentoring, co-working spaces, business accelerators, talent acquisition services, angel or venture capital networks and “a community of entrepreneurs.”
The bill directs CI to create other financial incentives to induce certain out-of-state businesses and venture capital firms to relocate to Connecticut.
CI is also required to have a performance audit of its operations conducted by an independent firm and to consider moving its main office to and establishing satellite offices in innovation places.
Connect 500 Project
The bill establishes a “Connecticut 500 Project” to develop a plan to, within 25 years:
- Increase private sector jobs by 500,000;
- Increase Connecticut’s population by 500,000;
- Increase by 500 the number of start-up companies organized around Connecticut-developed intellectual property;
- Increase by 500 the number of students graduating from each state college and university;
- Achieve a national ranking within the top five for economic growth, public education, quality of life, and private sector employee salary;
- Maintain Connecticut’s position within the top five for productivity, higher education, and income per capita.
Department of Economic and Community Development
In addition to being given authority to favor innovation places under many of its programs, DECD is charged with establishing: a Talent Advisory Committee to assess shortages in the software development and other technology workforces, and develop pilot programs to correct such shortages; and knowledge enterprise zones around colleges and universities with the same benefits accorded entities in enterprise zones.
DECD’s First Five financial assistance program to encourage business expansion and job creation is increased under the bill to 20 projects from 15.
Office of Policy and Management
The Office of Policy and Management is charged with establishing a pilot program for assessment of commercial property based on net profits.