Three CEOs Talk To Malloy About Connecticut’s Entrepreneurial Ecosystem
Democratic Gov. Dannel P. Malloy sat down with entrepreneurs from three start-ups Wednesday morning and tried to figure out what the state was doing right in supporting their businesses and how it could improve.
Most of the funding for these programs was authorized as part of the October 2011 bipartisan jobs package.
While the state got a lot of things right, the CEOs of the companies said there are still some challenges.
Ned Gannon, whose eBrevia company is using artificial intelligence and machine learning to more quickly scan hard copies of documents into readable text for lawyers and business executives, said he received a phone call from a friend in Silicon Valley who was having trouble finding software engineers. Gannon said he, too, is having problems finding qualified employees, but the phone call only proves that “it’s a tight market everywhere.”
Jeremy Hamel, co-founder of Umbie DentalCare, a cloud-based software management system for dentists, said about 90 percent of his workforce comes from the computer sciences program at Central Connecticut State University. His advice though was that the state college system should start teaching more web development and less java script.
Hamel complimented Connecticut Innovations for the investments it has made, but warned that it needs to continue to make investments with greater risk if it’s going to succeed.
“We’ve created these environments where elected officials and folks within the bureaucracies themselves are afraid to fail,” Malloy said. “And I think that was very much the situation Connecticut was in a few years ago and quite frankly watching the political debate back and forth could be a problem in the future.”
Malloy said fear of companies failing after the state invests in them is probably the main reason the due diligence “is as great as it is” before the money is doled out. But he said getting these companies an answer about funding quickly is one of the goals of his administration.
Hamel said they hired some veterans and were unaware that there were tax credits they would receive for hiring them. However, when it came time to fill out the paperwork, Hamel got frustrated and hired the veterans without applying for the credit.
“I actually dropped the process. It was way too much of a process for me. I was going to hire them anyway,” Hamel said.
Malloy responded by saying maybe he can talk with the folks in the Labor Department to figure out how to streamline it.
Gannon said eBrevia took advantage of the “small incubator grant program” and used it to hire an attorney who annotates documents to use the software and thereby “train” its built-in artificial intelligence. When the $30,000 grant was depleted, they ended up hiring the person.
“It was a great experience for us to get a feel for him and his skill set and then we hired him as a full-time employee,” Gannon said. “As a start-up, because you have such a finite resources, you have such limited room to make mistakes in terms of personnel, so that’s why programs like that grant have been helpful for us.”
Bryant Guffey, CEO and co-founder of ZetrOZ, which makes a portable ultrasound therapy system, said there are people working at their manufacturing facility in Trumbull that had been unemployed for up to a year. He said his company tried to take advantage of all the programs the Labor Department had to offer.
But Guffey said he was in Connecticut today because of the programs Connecticut Innovations offered.
Guffey said his staff has doubled in size since arriving in Connecticut with 12 employees with a technology they licensed and created at Cornell University in New York. The company was looking for a place between New York and Boston. With $1.5 million in direct investment from Connecticut Innovations, the company was able to find new office space and participate in the Connecticut Angel Investor Tax Credit Program.
What More Can The State Do To Help?
Gannon wanted to know how Connecticut-based technology companies could connect with the relevant state agencies to possibly land some state business.
“This is a real problem in Connecticut,” Malloy said. “In part because of really a very big hangover from what happened in a prior administration with the governor and corruption, so the legislature went hog wild writing legislation that makes it very difficult to adapt quickly.”
Malloy said he shares the same frustration with the state’s contracting process. He said because of former Gov. John G. Rowland’s corruption there is now a lot of “T-crossing and I-dotting.”
“In the nine years following that situation, at least for a majority of that, we bred into the system this fear of making mistakes,” Malloy said.
He said he’s doing his best to change that.
There are other companies vying for state contracts on things such as cleaning solutions. Malloy said he knows to send those folks to the Department of Administrative Services, but was at a loss for where to send Gannon. He suggested he have a conversation with Attorney General George Jepsen, who oversees an office of 200 attorneys and may have use for Gannon’s product.
Malloy has been criticized by both those on the left and the right of the political spectrum for what is often called “corporate welfare.”
Early in his administration the Working Families Party released a report which found that the incentives the state gave to businesses were poorly monitored and rarely came with clawback provisions.
The report authored by two researchers at a nonpartisan, nonprofit organization found just over half of the companies audited in 2010 successfully met their job requirements and those that fell short haven’t been subjected to any clawback provisions. Of the 70 companies the researchers looked at 39 fulfilled their job creation obligations, while 31 have not.
The Malloy administration claims it has given assistance to about 1,600 companies, while the previous governor gave assistance to about 120. Not all 1,600 companies have succeeded. At least a handful receiving Small Business Express grants have failed and a few have withdrawn their request for state assistance.
Malloy has the ability to offer money to up to 15 companies that plan to create more than 200 jobs in the state, but only 12 of those offers have been successful.
Click here for a map of all the companies that have received state assistance.