Chris Thompson · More Money, More Entrepreneurs

July 30th, 2008

Not too long ago I was an active participant in heated conversations that went something like this:

Person 1: “There aren’t any promising new businesses in Northeast Ohio worth investing in.”

Person 2: “You’re wrong. What’s missing is smart investors willing to take a risk and smart enough to turn a good idea into a great success.”

Being a world-class flip-flopper, I’ve played the role of both Person 1 and 2 in those conversations. But I no longer have such conversations, and I believe it’s because we’ve addressed both concerns (or at least have made significant progress in addressing them).

Turning Technologies, Hyland Software, MemberHealth, NDI Medical etc. have all shown there’s lots of good ideas being turned into high-growth companies in Northeast Ohio.

And today we’re reminded again (this time by the Third Frontier program) that there’s a fair amount of capital available for entrepreneurs to pursue. Importantly, there’s now a new fund being formed to help minority entrepreneurs. Yes, more capital is needed. And so are more entrepreneurs with great ideas. But we’ve moved onto other important conversations, and for that I’m grateful.

Category: Business, Economic Development, Entrepreneurs

7 Responses to “More Money, More Entrepreneurs”

  1. Joel Libava Says:
    July 31st, 2008 at 12:24 am

    Chris,
    Everyone will win if more funds are out there.
    Thanx for the post, Chris.
    Joel Libava
    The Franchise King Blog
    Cleveland

  2. Tom Z(ych) Says:
    July 31st, 2008 at 12:23 pm

    Let’s add a third dimension. Many in the early stage community tell me that the lack of entrepreneurial executives/leaders is a bottleneck. Cart, horse and freight all are needed, I guess. But it is being done.

  3. Justin Balck Says:
    July 31st, 2008 at 4:47 pm

    A lot of entrepreneurs don’t like Cleveland because if their gig fails there are few other opportunities.

    What do other regions to do attract entrepreneurs?

  4. Chris Thompson Says:
    July 31st, 2008 at 5:33 pm

    Tom, Thanks for reminding me of that part of the conversation. It was always lurking in the background a few years back and now, as Justin has referenced, it is coming to fore. Perhaps Ed has some ideas/knowledge of what other regions have done to attract experienced/successful entrepreneurs. The Fund for Our Economic Future (my employer) is being encouraged to explore that avenue, and I think there’s a good chance we will in the not too distant future. So I’d love to hear some ideas.

  5. J Murray Says:
    July 31st, 2008 at 5:58 pm

    Chris, it’s a mix of building and attracting them. We have attracted experienced executives to 10 of our 16 companies, but we had to carry the companies to a later stage of development before being able to do that. Getting the companies to that stage involved working with often first-time entrepreneurs, which required a lot of hand-holding. Some of those entrepreneurs will be better the second time around.

    In terms of attracting experienced entrepreneurs, Justin, the key factors are: 1. Quality of life; 2. Quality of opportunities; 3. Tax rates. We’re pretty good and getting better on 1 and 2, but pretty poor on 3. The first thing entrepreneurs who successfully sell a business typically do is buy a home in Florida and plan how to spend enough days there (I think it’s 120 per year) to establish residency, so as to avoid Ohio’s personal income tax.

  6. John Ettorre Says:
    July 31st, 2008 at 7:11 pm

    I think Florida’s weather might also play a small role too. But I think you know that Ohio is never going to be able to compete with an income tax rate of zero. Florida should be ashamed of itself for becoming a tax haven, like some backward third world country. Even O.J. Simpson moved there to avoid legitimate attempts to collect court judgments against him.

    As you know better than most, Jonathan, Ohio has recently made some changes to its tax code that render it a more business-friendly place. One round of changes took effect in 2005, and another round is scheduled to kick in in 2010. Details here:

    http://www.ohiomeansbusiness.com/docs/BRTTaxReformYr1Review.pdf

  7. J Murray Says:
    July 31st, 2008 at 7:30 pm

    John, from what I hear–talking directly to entrepreneurs who have exited their companies–weather isn’t even on the radar of considerations. The first advice they get from their (newly hired) tax advisors is to relocate their primary residence to Florida. That saves them millions of dollars.

    Yes, Ohio has somewhat improved its business tax rates and structures, but what I’m talking about is personal and inheritance tax rates. If Ohio wants to keep its entrepreneurs and their capital in state, it should lower income tax rates and eliminate the death tax so that the capital can be passed on to heirs who will reinvest it locally.

    Remember, also, that “tax rates” and “tax collections” are two separate things. There is an overwhelming body of evidence to suggest that lower “tax rates” results in higher “tax collections.” I know this is counterintuitive to those who believe that the percentage passed into law actually correlates with the percentage of income people actually pay–but the evidence is as I have stated. The lowering of “tax rates” by President Bush resulted in both increased collection of tax revenues, and a higher percentage of taxes being paid by “the wealthy” who are the object of so much class warfare in today’s political rhetoric.

    Florida still collects plenty of tax revenue, just not from personal income taxes.