Last July, former Gov. Mike Pence issued an executive order integrating the Office of Small Business and Entrepreneurship into the Indiana Economic Development Corporation (IEDC), with the goal of aligning and strengthening Indiana’s efforts to encourage the growth of startups and entrepreneurship. The order included a $1 billion investment over 10 years to help make the state a global hub of innovation and entrepreneurship.
After winning the November election, Eric Holcomb has taken over for Pence as governor, but the $1 billion commitment remains. Although it’s not entirely clear how that money will be parceled out, the IEDC last week announced that it had increased its 2016 spending supporting “startup and scale-up firms.”
Last year, the organization says it invested in 74 “high-potential companies,” which will attract up to $47.3 million in follow-on funding from state, federal, and private sources. In addition, 87 Indiana businesses received a total of $79.1 million in private-sector investment commitments in 2016 using the Venture Capital Investment tax credit.
These IEDC investments are made through programs including the state-backed 21st Century Research & Technology Fund (21 Fund) and the federally-funded State Small Business Credit Initiative, administered by the U.S. Department of Treasury. Managed by the state’s venture partner, Elevate Ventures, these investments are designed to help Indiana-based companies mature and attract additional private investment.
Ian Steff, the IEDC’s executive vice president and chief innovation officer, says that for more than a decade, Indiana has cut taxes and regulations in an attempt to spur job creation and economic growth. To take Indiana’s economy to “the next level,” he adds, the IEDC is focused on creating an atmosphere that attracts investment capital and nurtures startups. The hope is that this environment will help the state attract talent and lead to long-term growth, he says.
“The 21 Fund has had so much success, it warranted a $300 million appropriation,” Steff notes. A Ball State University study last year on the 21 Fund—which was established in 1999 but didn’t begin directly investing in startups until 2005—found that between 2010 and 2014, it helped create 332 new jobs and an $18.5 million increase in the state’s GDP, for a 23.8 percent return on investment.
“The investment climate in Indiana is ripe,” Steff says. “Over the course of the last five years, we’ve seen a tremendous increase in outside capital, and the number of startups is also up. We’re far outpacing the national average.”
Steff credits big tech companies like Salesforce (NYSE: [[ticker:CRM]]) and Interactive Intelligence—now part of Daly City, CA-based Genesys—for giving a jolt to Indiana’s startup scene. Not only are they spawning serial entrepreneurs and bringing the state into the national tech conversation, he says, they’re also functioning as anchors around which Indiana’s entire startup sector can organize.
“We’re seeing major gains in talent attraction and students deciding to stay in Indiana after they graduate,” he says. “I also see great diversification of companies in the startup sector, which is leading us to areas of new ideas coming out of the convergence of industries like ag-bio, advanced manufacturing, pharmaceuticals, aerospace, and medical devices.”
In 2017, Steff says the IEDC will continue its work attracting and retaining companies while expanding the startup ecosystem.
“We’ve got a pipeline of deals with great potential for a major announcement in the tech sector,” Steff predicts. “There is so much enthusiasm around the world for the governor’s $1 billion commitment, and Indiana is a state typified by a pioneering spirit. There are pioneers here ready and willing to create the next million-dollar idea.”
