By Scott Meacham
Copyright © 2014, The Oklahoma Publishing Company
In any economy, there is a multiplier as a dollar turns over and creates more dollars.
An important aspect of every economic development plan is figuring out how to create multipliers in the economy.
The “win” to a state from creating and growing new advanced technology companies is the multiplier effect from new jobs, higher-than-average wages (in Oklahoma $73,395, compared to $38,235), and the leverage of public sector concept and seed stage investment capital attracting private equity.
Whether you believe that the state has a role in creating new companies, it’s a fact that capital attracts capital. Oklahoma has traditionally lacked early stage, or startup, funding for new ventures. That’s why the Concept and Seed Capital Funds managed by i2E were created.
In 2009, there was $17 million in venture capital invested here; in 2013 that number was down to $8 million, with the majority of that being in deals in which i2E invested. From 2012 to 2013, the total venture capital investment dollars in the US grew about 7.5 percent. During this same period of time, venture capital invested in Oklahoma declined more than 50 percent.
There is virtually no other private sector venture capital available to Oklahoma entrepreneurs. The Concept and Seed Capital Funds not only help entrepreneurs get started, they prime the pump for follow-on rounds.
From 1999 to 2013, $10,844,477 in Concept Fund investment leveraged $198,439,722 in private capital investment.
The Seed Capital Fund, founded in 2008, during the worst recession of our nation’s history, invested $5.6 million in 15 companies, and achieved a leverage of $22.7 million in co-investment.
When that funding is taken away (the Legislature just reduced the Seed Fund by $2 million) the state experiences a negative multiplier.
That minus-$2 million means that four to eight new companies won’t get started in Oklahoma.
Considering the expanded impact of this negative multiplier, Oklahoma is missing out on the opportunity to leverage another $8 to $26 million in private equity and create more high-paying jobs that drive our state’s economic growth.
Entrepreneurship is the core driver of Oklahoma’s economic success. Our major corporate presence today — Devon Energy, Continental Resources, Chesapeake Energy, SandRidge Energy, Hobby Lobby, Sonic (the nation’s largest chain of drive-ins, which began in 1953 as the Top Hat root beer stand in Shawnee), America Fidelity, Love’s — are all businesses that started and grew here.
Our state has so much going for it. A climate that encourages entrepreneurship is what Oklahoma has always been about.
The economic multiplier works when we stay committed as a state and when we consistently feed the pipeline of startup companies.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at [email protected].
Did You Know? The state of Oklahoma ranks 44th in terms of venture capital investment dollars. SOURCE: PricewaterhouseCoopers LLP/National Venture Capital Association MoneyTree Reports