Pennsylvania Cannot Afford for Tech Start-ups to be Casualties of COVID-19
By R. Chadwick Paul, Jr., President and CEO
In April, the Ben Franklin Technology Development Authority (BFTDA), which funds the statewide Ben Franklin Technology Partners initiative, awarded $4 million to the statewide Ben Franklin Technology Partners to protect investments in promising clients that are affected by the COVID-19 pandemic, and to support companies that will help in the recovery. The move was very welcome news, as our clients’ innovations are helping Pennsylvania and the world respond to this public health crisis.
The impact of this relief will be felt across the Commonwealth, as Ben Franklin serves all 67 counties through four regionally based centers in Pittsburgh, State College, Bethlehem, and Philadelphia, with numerous satellite offices spread across the state. Each of Ben Franklin’s four centers will receive $1 million to assist clients hit particularly hard by the economic implications of the pandemic. Each of the four centers will match the $1 million.
The funding is much appreciated by our clients, as most of the entrepreneurs and start-ups with which we work are not eligible for support through existing programs available to most established businesses. That’s because many of these programs provide access to capital for larger corporations and more established businesses, or are narrowly targeted at qualified small businesses, and are not focused on providing assistance for start-ups. Fortunately, our leaders identified and addressed this important need and took action.
The COVID-19 pandemic has emerged as the defining experience of 2020, if not a generation. In addition to the virus’ impact on people’s health, COVID-19 has dramatically impacted the U.S. economy, with the Washington Post recently reporting more than 22 million Americans have filed for unemployment aid since President Trump declared a national emergency on March 13.
Already, the pandemic has led to a sharp decline in Pennsylvania business start-ups. A recent report issued by the U.S. Census Bureau found that from March 8 through April 11, business applications in Pennsylvania fell more than 34 percent over the prior year, and nearly 24 percent nationally. Furthermore, business applications with intent to pay wages fell by more than 46 percent in the Commonwealth and by more than 30 percent across the nation.
To put that into perspective, the year-over-year contraction in Pennsylvania’s new business applications is more severe than contractions realized during the Great Recession. As such, there is grave concern that the declines may reflect a permanent loss in economic activity statewide and abroad. But BFTDA’s initiative is part of a broader plan to prevent that outcome – by investing in innovation and tech start-ups in Pennsylvania.
While start-ups, including many of our northeastern Pennsylvania clients, are firmly entrenched on the frontline of our battle against COVID-19, the majority of these companies are particularly vulnerable to decreases in their revenue streams. Many of them don’t have an abundance of capital from which to draw during a massive market disruption, and most are unable to qualify for traditional loans. This is one of the reasons Ben Franklin’s services are so instrumental to the health of Pennsylvania’s economy.
In addition to recent statewide efforts to help innovative start-ups, we also continue to push for assistance at the federal level. Recently, TechNet and the National Venture Capital Association led 126 local, state, regional, and national groups (including Ben Franklin), representing 39 states across the country, in urging the Trump Administration to ensure start-ups and their workers are eligible for the emergency relief loan program included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
As the COVID-19 pandemic unfolds, we will continue to do all we can in partnership with the state to ensure our Commonwealth and its economy recover and put our residents back to work. The $4 million in aid is an important step for recovery and shows that Pennsylvania values the work of Ben Franklin and our clients. Pennsylvania believes that we’ve come too far to lose more than three decades of industry-leading work.
The state funding also reinforces that we need investments like the one announced by Gov. Tom Wolf in January in his proposed 2020-21 General Fund budget. As part of that announcement, the Governor included a $5 million increase for the Ben Franklin Technology Development Authority, which funds the Ben Franklin Technology Partners. Gov. Wolf fully recognized that smart investments in innovation drive economic growth and ensure that Pennsylvania continues to attract and nurture emerging high-tech companies.
Moving forward, we will need that growth more than ever. Our communities cannot afford to see local start-ups listed among the causalities of this pandemic. It is essential that we keep building upon recent budget proposals and assistance efforts and continue to protect the long-term viability of emerging companies that are and will be vital contributors to job creation and retention, and to our economic recovery.