Bob Crutchfield is a general partner with Harbert Venture Partners, an institutional capital firm located in Birmingham, AL and Richmond, VA. Harbert Venture Partners invests in emerging technology and healthcare companies in the Southeast, mid-Atlantic and Texas. Bob has launched five successful new business ventures and has led four M&A transactions during his career.
- Serious tech economies require a cohesive economic development model, combining private and public capital to provide predictable funding to fuel the early growth needs of startups.
- A coordinated partnership between public and private organizations is necessary to commercialize the innovative technology being produced in Southern universities.
- Government dollars, in the form of non-return on invested capital or technology-based economic development site prep, are most needed for seed funding of high growth companies.
- State money relies on private intelligence. Therefore, if private entities allocate portions of their budgets towards seed-stage companies, it’s likely that state funding will follow.
- Tech development is not a short-term process. Government funding vehicles are needed to maintain a level of continuity, and private funders can help facilitate funding predictability by smoothing out the disruptions that can result from political changes.
- Investment should be paired with the organizational structure and management expertise that private industries provide for early stage companies to accelerate their commercialization time horizons.
Q: What are different ways state and local government help small tech companies grow across the southeast?
A: Governments can help in two important ways: 1) Provide early stage funding to promising startups and 2) help facilitate the transfer of technology from university research centers to the marketplace.
Government funding efforts should focus on the seed stage of commercial development because that’s where all the risk resides – which is why it can be difficult to find private capital at this stage. It is difficult for early stage companies to grow without state backing and volunteer mentoring to provide proper business guidance.
On the second point, there needs to be a more cohesive effort, with the appropriate selection discipline, to identify and support promising technology innovations. This means bridging the gap between the business and academic community, as universities are one of the primary sources of innovation in most states.
Throughout the Southeast, I’m noticing that the best practices in these areas are coming from Georgia, Florida and Tennessee.
The Georgia Resource Alliance has done a great job of packaging university-based resources with entrepreneurs. They have paired the top universities in Georgia with public and private investors to effectively commercialize research. The initiative has helped launch approximately 150 companies and have created over 6,000 jobs.
The Florida Institute for the Commercialization of Public Research is a state-funded program focused on advancing the commercialization of university-based research. Their investor advisory board provides a high level of institutional rigor and decision-making that public organizations lack, and provides the kind of mentoring support and guidance that start-ups need in order to grow.
Tennessee’s approach is one of the most cohesive in the region when it comes to nurturing technological development. Money goes to work earlier in the process, as their organized and structured accelerator model helps create early stage investable companies. TNInvestco continues to bring additional visibility and funding to many of these successful early stage companies, which encourages additional outside venture capital placement in the ecosystem. Tennessee has had less direct focus on tech transfer from universities because it is focused on early stage development in general and less concerned on where the technology comes from. As a health care mecca, Tennessee has a built-in source of innovation and hasn’t had to rely on tech transfer from universities as much as other regions.
Q: What roles do access to capital and state involvement play in cultivating economic development?
A: State funding can be very important to early stage companies, as I mentioned above, and to underwriting nurturing and support services, such as startup accelerators. However, creating a successful economic development structure requires a certain amount of private capital, because state money can be linked to political motivations, whereas private capital moves at a pace that recognizes and rewards early successes.
This is why access to private capital is critical for creating a serious tech economy within a state. It’s also important to understand that tech development is not a short-term deal. It’s a legacy play and you need to have the appetite for investing long-term.
Georgia Resource Alliance, again, has done a good job of integrating private capital with public efforts to grow university-based technology.
Q: How does the government have political will to invest during the risky early stage of companies?
A: They must have a long-term commitment. That’s why private capital is so important. It can weather the political changes throughout the years and it can attract additional public money.
Austin, Texas continues to be fertile ground for entrepreneurship because it has demonstrated a long-term commitment of government support. This helps to create an entrepreneurial ecosystem that becomes a pseudo safety net, which is why many of America’s most talented people in the startup world – from CEOs to developers to support teams – are willing to relocate to Austin. They know that if their startup fails, finding another opportunity is likely to be relatively easy, because the city has proven that it wants to nurture high growth businesses.
Q: Does public money follow private money?
A: Public money trusts private intelligence. When an independent decision-making body of representatives from across the country, like the Florida Institute for the Commercialization of Public Research, evaluates a company, the government takes note of their disciplined and business-focused assessments, as well as their participation in the process.
Seed-stage companies often have a difficult time even attracting angel money. If large private entities, like banks, public utilities and other operating companies, would carve out an economic development budget and apply the money to seed-stage companies, the state would come in behind and deploy additional investment capital. Another reason private involvement is crucial is the private industry’s ability to put organizational structure and discipline around the management of these dollars. Just because you allocate dollars towards economic development activity does not ensure that they are being properly managed to create the desired results.
The Economic Development Partnership of Alabama is a public/private partnership that provides what the government alone cannot. The team leverages the economic development capabilities of private entities to support the broader economic development efforts of the state government.
Q: As you look around the whole region, what are some of the highlights?
A: Programs and tech clusters are emerging across the area. Atlanta has built a cluster around healthcare IT and Austin is building a cluster around tech. Huntsville’s defense cluster has been successful in building commercial applications from aerospace to biotechnology. The Mid-Atlantic Venture Association and Alabama Launch Pad have also been leaders in driving entrepreneurship across the region.
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