By: Todd Saxton
The Indiana Chamber of Commerce recently released an update to its Vision 2025 report — a “report card: for the state’s economic progress that measures an array of data, from electricity prices to educational achievement. This “Vision” is generally an optimistic one, but there is one sobering area.
In 40 of the 59 statistical metrics used by the Chamber, Indiana either advanced or held its ground relative to other states. But in its assessment of our entrepreneurial efforts, the report notes that Indiana ranks 47th in the most recent Kauffman Index of Entrepreneurial Activity, and 36th in venture capital invested per capita.
As a professor, I’m wary of students bearing too many excuses for poor performance. But having been active in the local startup scene for more than 15 years — as an educator, observer and participant in launching and advising new ventures — I see another side to this dismal narrative.
Anecdotes don’t equal analysis, of course … but there’s no denying that venture creation is a dynamic exercise, while data provide a static snapshot of a moment in time. So I’d like to offer a mix of personal observations and a few countervailing statistics that provide a different view on a complex issue:
“Building the best sandbox”
The phrase comes from former Governor Mitch Daniels (refraining from mentioning his current affiliation with our in-state rival!), referring to the foundational work of creating a pro-growth environment for business. The Vision 2025 report notes that Indiana has the best business climate in the Midwest; I believe this extends to entrepreneurial development: The Consumer Electronics Association recently hailed Indiana as one of 10 “innovation champions,” largely on the basis of innovation-friendly policies. The state boasts aggressive venture capital and R&D tax credits (we rank 12th among states in business R&D activity).
Indiana has also incentivized and encouraged its universities to be sources of intellectual capital — we rank among the top 20 states in university science and engineering R&D, tech licensing income, and business spin-offs. The entrepreneurial recipe is complex, but innovation is an indispensable ingredient.
Finally, there’s been significant growth in physical (and virtual) infrastructure to nurture new companies. The soon-to-be-completed 50,000 square-foot expansion of the Launch Fishers co-working space has made recent headlines, and our Kelley Evening MBA students capitalize on our hands-on partnership with DeveloperTown, the thriving entrepreneurial space in Broad Ripple. Indiana’s decade-old Certified Technology Park program has authorized 24 locations across the state. I anticipate additional accelerators and incubators like Launch Fishers springing up across the area.
While the Indiana Chamber has a statewide mandate, I’d submit that entrepreneurship doesn’t adhere to state lines. Most entrepreneurs I’ve worked with haven’t been drawn to particular states to launch their companies — they pick places, based on proximity to innovation, talent, and capital.
Teaching and working in Indianapolis, I see the greater regional start-up community growing. We still have a long way to go, but looking at data from the Indianapolis metro (the state’s largest metropolitan economy) provides a sense of local progress: Among the top forty U.S. metropolitan areas, Indy ranks 28th in Kauffman’s 2015 Startup Activity Index — not outstanding, but up two spots from 2014.
Looking more closely at the metro rankings, Indianapolis beats most of our Midwest peers in start-up activity — Cincinnati, Cleveland, Milwaukee, Pittsburgh, Detroit and St. Louis. (We’re in the running with Nashville — often mentioned as a benchmark, ranked 24th.)
Is more always better?
It’s also worth discussing start-up activity as a matter of volume versus value — i.e. is it better to have lots of business formation, or fewer new companies with higher potential and success? Ideally, you’d have both; there is value in the risk-taking culture and churn of new ideas that come with even failed start-ups.
However, it is important to note that small business survival rates in Indiana during the 2000s have been slightly ahead of the U.S. average, and that the state ranks 21st in the number of headquartered ‘Inc. 5000’ (fastest-growing) companies. So while Indiana may lag behind in overall start-ups, our new ventures are as durable as most, and we have a track record of encouraging highly-successful privately-held companies. I believe the recent efforts of Verge, the Venture Club, and VisionTech angels, for example, will lead to better (and perhaps more) ventures.
The challenge of measuring momentum
I don’t mean to parse numbers and geographies to obscure a central truth: Indiana — and the Indianapolis region — fall short of our entrepreneurial ambitions. The Chamber’s Vision 2025 does a service in measuring the data and highlighting the challenges.
But numbers can’t always capture movement, and I’m seeing progress in our venture community. The investments in Launch Fishers and initiatives like it across the region are responding to real demand by aspiring local entrepreneurs. The annual Innovation Showcase — co-hosted by Launch Fishers, Verge, VisionTech, and the Venture Club and generously sponsored by IU and the Kelley School — is on pace for the biggest event in its seven-year history on July 9th: More than 110 companies chased 75 spots in its feature pitch competition, and attendance will eclipse 1,000. (See www.theinnovationshowcase.com for details.)
I see more early-stage capital resources becoming available, too. VisionTech Partners is hard at work building a new generation of local start-up investors; TechPoint’s HALO network has invested more than $20 million over the past five years from prominent Hoosier angels. The Indy Chamber manages the nation’s largest Chamber-affiliated microloan program, and BioCrossroads continues to direct venture capital to the state’s booming life sciences industry.
I could go on and on. To use legendary coach John Wooden’s memorable phrase, I don’t want to “mistake activity for achievement” in singing the praises of the local venture community. But there’s no mistaking the momentum, and I’m confident that continued effort and regional growth will move the needle in reports like Vision 2025. Venture on, Indiana!
A version of this commentary originally appeared on Inside Indiana Business — visit www.InsideIndianaBusiness.com for more news and perspectives.