Entrepreneurs are notoriously bad at politics. For a group that spends virtually every waking hour thinking about how to improve reality, we tend to have a blind spot when it comes to the impact of fiscal policy on innovation. We don’t show up at city council meetings. We don’t submit infrastructure plans. We don’t do “lobbying.” And thus, despite our disproportionate impact on economic development and other measures of civic vitality, we tend to be an invisible constituency when the doors get closed and the dollars get allocated.
I’m not naïve enough to think that this is going to change anytime soon; entrepreneurs will always consumed with the building the future rather than negotiating the present. That said, entrepreneurship does not exist in a vacuum. Innovation depends on progressive fiscal policy, good infrastructure, and a political culture that supports dynamism and risk-taking.
Missouri entrepreneurs are facing a sobering possibility in the 2018 state budget—the elimination of the Missouri Technology Corporation. Last year, the MTC provided over $20MM in funding to startups around the state. Governor Greitens recommended this be cut to $5MM, but the current House bill has reduced the funding to zero.
This comes at a time when neighboring states are investing aggressively in entrepreneurship. Iowa and Ohio, for example, are set to spend about 15x more per capita than Missouri on entrepreneurship, even at the $5MM funding level recommended by the Governor. Arkansas will spend roughly 9x more. In fact, Missouri will rank next-to-last in the Midwest (behind only Illinois, also part of our St. Louis MSA) for per capita entrepreneurial development expenditures.
On the positive side, Governor Greitens is asking all the right questions: he wants to know what the return-on-investment is for entrepreneurship programs. He wants to see results, not just headlines. He looks at entrepreneurship as a growth driver, not a social program. In other words, he’s thinking like an investor.
If Governor Greitens is thinking like an investor, then advocates for entrepreneurship in Missouri need to think like, well, entrepreneurs. We need to make a sober, data-driven RoI case that shows the total economic impact of the state’s investments, much as NASA did in its federal budget negotiations throughout the 1970’s and 1980’s.
The challenge is that the RoI on entrepreneurship can be hard to measure. Startups take time to scale, to hire large numbers of new employees, and to generate liquidity for investors. In the political world, this puts startup funding at a huge disadvantage compared to, say, infrastructure spending, which always generates a predictable—albeit temporary—number of construction jobs. Still, we know that the $30MM that MTC has invested since 2011 has generated nearly $400MM in private follow on investment and that several recipients of MTC funding have already had liquidity events. That’s a pretty good return on investment for taxpayers, and it proves that public funding can be a powerful catalyst to private sector support.
Smart investors are an entrepreneur’s best friend. They are tough and disciplined, but patient. They know that even the best entrepreneurs don’t succeed every time and that long term success is a numbers game. They stay at the table even in challenging times. The Governor is willing to invest a $5 million stake of taxpayer’s money. The Missouri legislature should back his decision and keep his seat at the table. We as advocates for entrepreneurship should focus on getting the biggest, fastest return we can for public leaders seeking a return on investment for all of Missouri. We think MTC has a big role to play in this.
Governor Greitens will place his own stamp on entrepreneurship in Missouri. Change is for certain. The entrepreneurial mindset embraces change and seeks to wrest the next level of innovation from such change.