By Stephen Brawley, President and CEO
For 17 years, I’ve served as the president and CEO of the largest early-stage investor group in central and northern Pennsylvania. During that time, Ben Franklin has helped launch or support more than 4,500 technology-based companies in the communities we serve, and worked with local entrepreneurs to bring their ideas to market.
Many of the companies and innovators we work with have a number of questions about the services Ben Franklin provides, and the difference between us and other options such as angel investors or banks. Admittedly, to those who are new to the investment word, the distinction about the services we provide can be a little confusing. But our approach occupies a unique place in the world of technology-based economic development, and here are four reasons why:
1. We Specialize in Startup Companies: While some institutions like banks have a variety of clients they support, Ben Franklin has two primary focus areas – local, innovative tech-based companies and small manufacturers, and the entrepreneurs who lead those companies. Our clients come from a variety of industries --- from computer software, hardware, and telecommunications firms, to fabricated metal and industrial machinery manufacturers, to life science companies. Most tech startups lack the revenue, cash flow, or assets to attract lenders or investors.
Typically banks and angel groups don’t invest in these types of companies. That’s also one of the biggest reasons why state funding for Ben Franklin is of critical importance. Without the services we provide, many of these companies have no other alternative to funding. Few would ever get off the ground, and those that did would be incredibility vulnerable.
2. A Diverse Portfolio: Our portfolio, like the geographic footprint we serve, is diverse. While most angel and venture capital groups have some type of due diligence process, they tend to invest in their comfort zone – sectors in which the group’s members are familiar.
Additionally, traditional leaders such as banks and other economic development funds, lack the capacity to evaluate the technical feasibility, market size, or long-term opportunities that exist with these innovative businesses. But we do. We recognize that these jobs help to diversify local economies and help in efforts to attract and retain a skilled workforce.
3. Our Goals Are Different: Traditional investors do not have "economic development goals" and are typically looking for at least a tenfold return on their investment within a few years. Their goal is, of course, to create wealth. While we pride ourselves on our return on investment for the state, generating $3.90 in additional PA tax revenue for every state dollar invested, our goal is to create jobs.
Brain drain is a serious threat to our commonwealth. If we don’t create and support 21st century jobs for young Pennsylvania families, they will seek those jobs elsewhere. These jobs are in industries that pay average annual salaries of $79,364 per year, 52 percent higher than the average private non-farm salary in Pennsylvania. Those are the kinds of jobs that young people seek to keep them working here. We can’t afford to lose a workforce we’ve spent years educating in our public schools and our high education system to neighboring states. Our loss will be their gain if we don’t properly fund Ben Franklin’s job creation efforts.
4. Patience Is Our Virtue: Unlike other institutions that seek substantial profit in a short timeframe, Ben Franklin's investments are phased and milestone driven. The entrepreneurs with whom we partner must check in with us quarterly, prior to the next check being issued. The nature of this engagement, while thorough and time consuming, ensures that mentoring and support is being offered at critical times or as problems arise. Our objective is sustainability and creating fertile ecosystems where businesses can grow and thrive. This makes Pennsylvania more attractive to entrepreneurs, to existing companies, and ultimately to job seekers.
For 35 years Ben Franklin’s approach has not only worked, it’s made Pennsylvania the gold standard for technology-based economic development programs in the nation. But all of that is at risk.
Other states have adopted technology-based economic development programs of their own. Among the 12 most competitive states in this sector, their spending is now nearly triple Pennsylvania’s. Because state funding has diminished over the years, Ben Franklin has been unable to invest in deserving companies and has seriously short-funded others. This shortfall diminishes our ability to support community infrastructure and take advantage of emerging opportunities for our region – that's detrimental to our economy.
It’s imperative that we can continue to bring more Pennsylvanians into innovative economies – both to stem population loss, and to address the demand for talent. The more vibrant an entrepreneurial ecosystem we have, the more likely we are to attract talent to Pennsylvania and keep what we have.
