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ENTREPRENEURSHIP • Our Next Dont starve the entrepreneurs Meet Ticket , : By Harlon Jacobs t:: Opartver the years,there's one inescap- neurs in our midst as a general rule. nerships. Seven able fact of corporate life chat area banks and one util- none of us has to accept,yet most '(/��e cannot afford to ignore n. ... ity company formed a of us readily do.We tolerate the financial V Y these prospective sources of multi-bank, commu- version of the starving artist paradigm as job growth. We need to develop . .r► pity development cor- n applies to the funding of start-up corn- them as quickly as possible. To Y poration(CDC)for the panics.Because of this,we're losing high- that end, we need to address the :.' express purpose of at- wage jobs that would otherwise be created problem of insufficient seed capi- ,. tracting early-stage, and would thereby improve both the tal. To get to the root of the high-tech companies economy and the quality of life here in problem,as taxpayers and policy- Harlon Jacobs and the jobs they bring Minnesota.This is a problem that should holders,we should encourage the to Anoka County. be fixed as quickly as possible. Everyone state pension funds and insurance corn- Other metro-area communities are begin- would benefit. pany investment managers to place a ning to consider or adopt their own ver- In 1979, I had the opportunity to be- reasonable portion of their venture capital sions of this program.This model ought come the CFO at FilmTec Corporation,a portfolio investments in vehicles that are to have the whole-hearted support of all start-up company that ultimately employed committed to making seed capital invest- public and private sector groups whose 200 people and was acquired by Dow ments here in the state of Minnesota. stated intention is the creation of living- Chemical Co.for$75 million in 1985.We At the state level,we need to modify our wage jobs here in Minnesota. need more companies like FilinTec here approach to investment in a manner which Further, we need to encourage more in Minnesota,but the barriers to entry are recognizes that the primary locus of high- prospective investors to join the ranks of quite formidable.These barriers need to tech start-ups exist in the metro area. those business angels that can and regu- 0 be removed,which can be done by adopt- Rather than starve that bounty of start- larly do make investments of$25,000 or ing some common sense approaches to ups in the seven county metro area, we more in early-stage companies. We need enhance capital formation and availability should encourage them to 'partner'with to eliminate those needless aspects of the for early-stage, high tech companies. outstate communities in order to avail paperwork process (and the associated It seems that there is some immutable. themselves of state and private sector expense of costly federal and state securi- law of the financial universe that requires programs that are designed to develop ties laws filings) that deter or preclude all start-up companies to suffer through high-tech jobs.A scan-up company in the undercapitalized entrepreneurs from seek- extended periods of undercapitalization. Twin Cities could be incubated here and ing the very capital they need. The new It's just plain wrong. I believe that Van then, once viability is achieved, it could federal program known as SCOR (Small Gogh would have painted his master- then move all or a substantial portion of Corporate Offering Registration)is not as pieces just as well had he not suffered its operations (and jobs) to that partner well-known as it should be.It represents a privation. To bring the point home to community in the outstate location. federal response and a good one to this very economic development, we should do At the federal level, we could ask the problem.At a state level,we need to make everything we can to nurture the next IRS and the Department of Labor to certain that Minnesota is as'user friendly' generation ofjob-creating engines.Yet we reconcile conflicting rules and regulations as possible with respect to its blue sky rules . have tolerated a system that is virtually that preclude an inventor,entrepreneur, and regulations as they interact with the dysfunctional with respect to the funding officer or board member of a start-up SCOR program. of start-up companies, save a few points company from investing from his or her Finally,in terms of our own enlightened of light here and there. own self-directed IRA into his or her own self-interest, would it upset some vast None of us has trouble with the concept company. If there were 100,000 entre- eternal plan if we helped make certain that of identifying talent on the high school preneurs with$25,000 of investable funds entrepreneurs had ready access to capital? basketball court.We accept the program of in their own IRAs,that would free-up$2.5 The answer is clearly no!In fact,we would recruiters,scholarships and other forms of billion of capital for start-ups nationwide. be helping to create more jobs and more financial support in hopes of landing a Not one penny would be spent for bu- taxpayers. Everyone would benefit. We college player with a good chance of be- reaucrats nor would one penny ever leave simply need to work hard at applying coining the next NBA all-star.Regrettably, the U.S.Treasury.With a stroke of a pen, common sense to establish a comprehen- there is a lack of symmetry when it comes to significant capital could be mobilized and sive solution to the problem. MB&O economic development. We do not readily placed exactly where it is needed. 0 support programs that identify,coach and Take for instance the Anoka model Harlon Jacobs is founder and president of provide direct financial and managerial which represents the finest example of Genesis Business Centers,a high-tech business development assistance for the entrepre- successful public sector / private sector incubator program located in the metro area. 46 Minnesota Business&Opportunities/JANUARY 1996