The Business Council of Fairfield County and the Stamford Innovation Center won $1.2 million in funding to become one of two initial hubs in the new Connecticut Innovation Ecosystem, along with InnoHVN in New Haven.
The latter group was approved despite concerns by the board of Connecticut Innovations that InnoHVN had not cobbled together as much matching funding as the Stamford hub”™s sponsors, as well as questions as to whether Yale University was doing its part to fully back the effort in New Haven.
Connecticut Innovations, a state-backed venture capital entity, kicked off what Gov. Dannel P. Malloy hopes will become a statewide network of business accelerators sharing resources and ideas in a bid to jumpstart what will become a self-sustaining engine of startup formation and growth.
Key to the vision are startup incubators at the city level, such as the new Stamford Innovation Center, linked into an overarching, “agile” Innovation Ecosystem to minimize overhead, respond to client company needs and share ideas, while maintaining a spirit of competition between hubs and services providers.
Four groups were not approved to move ahead in the bidding process, according to Casey Pickett, a Connecticut Innovations manager who is coordinating the creation of the Connecticut Innovation Ecosystem. At a recent Connecticut Innovations board meeting, he said that groups in Hartford and Storrs are close to qualifying as hubs, and Connecticut Innovations is also eying Groton as a potential site.
Given its proximity to Stamford and New Haven, it appears Bridgeport is not in the initial running as a hub site, despite the presence of a startup incubator adjacent to the University of Bridgeport and abundant cheap office space otherwise available downtown.
With its budding Connecticut Innovation Ecosystem, the state hopes to make the state a magnet for both first-time entrepreneurs while helping a small group of existing “stage ”“ two” companies ”“ those with between 10 and 100 employees ”“ grow.
Billable hours
After years of lackluster venture capital investment locally ”“ Connecticut companies won just $14 million in venture capital in the second quarter, the lowest quarterly total since 1996 ”“ Malloy has concluded that the state needs to act as a catalyst in developing networks of entrepreneurs and support organizations needed to draw VC and angel funding until the day those mechanisms are self-sustaining. As part of Malloy”™s jobs bill last fall, the state authorized up to $250 million in new funding for Connecticut Innovations, both for direct investments in startups and for supporting efforts such as the Innovation Ecosystem.
Connecticut Innovations is already disbursing up to $1 million in funding from a new TechStart Fund that lends teams of entrepreneurs up to $25,000 each, if they are selected to join a business accelerator affiliated with the Innovation Ecosystem. Teams do not have to accept TechStart funding if they enter an accelerator with their own sources of capital.
Those loans do not require personal guarantees by founding teams. Accelerators will be expected to raise their own funds to provide stipends and in time the TechStart fund may require matching monies from investors.
And Connecticut Innovations envisions a “proof-of-concept” center to vet for their commercial appeal and entrepreneurs will be able to hobnob in “clubhouses” leading to eventual entry into business accelerators if they so choose.
Early TechStart participants include Stamford-based eBrevia L.L.C., which commercializes artificial intelligence technology created at Columbia University to analyze legal documents.
“The process I unfortunately know all too well,” said eBrevia CEO Ned Gannon in a TechStart presentation in June. “I spent many nights as a junior associate scanning a computer screen at three in the morning. In a typical merger (or) acquisition, the legal due diligence process is extremely expensive because of the thousands of pages that must be reviewed and the fact that all these junior associates are typically billed out at $300 to $500 an hour.”
The irony is that Connecticut hopes the Innovation Ecosystem will furnish far more work for local attorneys, investment bankers, accountants and other professional services firms on which startups rely to get off the ground.
The Innovation Ecosystem will include $100,000 reserved for venture competitions awarding stipends and professional services vouches, funneling winners into city-level hubs for further development and support.
With the goal of developing talented, high-tech workers, the Innovation Ecosystem plans to award at least 30 internships annually, splitting $6,000 grants with companies that hire applicants who are either attending public colleges and universities or who are Connecticut residents in private schools.
And reflecting Glastonbury-based TopCoder Inc.”™s ongoing contests for identifying computer programming talent, the Innovation Ecosystem envisions a similar problem-solving test to build a directory of young talent.
What we know vs. what we do
Connecticut Innovations and the Department of Economic and Community Development (DECD) are to identify 50 new startups and 75 stage-two startups as “high”“performance” companies, using unspecified benchmarks that assess private capital raised, market penetration, revenue growth and jobs.
With $250,000, the Innovation Ecosystem will hire “entrepreneurs in residence” at innovation hubs and other mentors are expected to regularly assess their potential to hit those performance targets. Mentors are expected to volunteer up to three hours weekly working with companies and will be urged to pursue a “Socratic method of engagement” in Connecticut Innovations”™ words.
Specific performance goals include:
Ӣ percentage quarterly growth in revenue;
Ӣ percentage quarterly growth in jobs;
Ӣ average salaries;
Ӣ investment capital raised; and
Ӣ market penetration.
“It always takes time for what we know to become what we do,” said Tim Coates, managing director of the Innovation Ecosystem with the Connecticut Technology Council, in a July blog. “Given that cities like New York and Boston work because of density, critical mass and rich networks of relationships among diverse people, the (Innovation Ecosystem) helps our suburban state act more like a city.”
That means concentrating activity at local innovation hubs, while linking and reinforcing them at the state level.
DECD and Connecticut Innovations selected the Connecticut Technology Council and the Connecticut Economic Resource Center as the Innovation Ecosystems”™ system manager, “responsible for keeping everyone on the bus and keeping the bus traveling in the right direction,” in Coates”™ words.
“Over the past several weeks we”™ve been working with leading organizations from across the state to launch a dynamic system that can diagnose and quickly respond to the needs of the state”™s most promising new companies,” he stated. “There”™s still a lot of work to do before an official ribbon cutting. But in a state like (Connecticut), where home rule is often the default approach, efforts thus far have already proven that more is possible when we work together. It”™s a project that could become a national model for technology based economic development.”
