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State plans to better support tech sector

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The state Commerce Department is stealing a page from its manufacturing recruitment playbook to foster more innovation in the state and better support the tech sector.

The state can replicate the aggressive marketing and recruitment tactics used to secure mega-manufacturers, like Boeing and Volvo Cars, to attract more technology companies, corporate headquarters and venture capitalists to South Carolina, according to the state Commerce Department’s new S.C. Innovation Plan.

“I still don’t think people think ‘tech’ when they think of Charleston, and we’re really trying to change that,” said Nina Magnesson, who works as a catalyst for citizenship and social innovation initiatives at Charleston-based BoomTown.

Ideas include telling stories of the state’s tech sector during trade shows across the country and recognizing tech exits and software launches similarly to groundbreaking events for manufacturers, with politicians and business leaders gathering for a news conference.

“Ultimately, there is so much happening in Charleston, Greenville, Columbia, there’s so much happening in the state, and yet, before this report happened, there was a disconnect around communicating to one another what we’re all doing. ... We just need to communicate what’s happening to one another and to the greater world,” said Magnesson, one of the 17 committee members who gave input for the report.

The state typically allocates hundreds of millions of dollars for incentive packages and for meeting manufacturers’ infrastructure needs, such as new highway interchanges and site prep work. Most tech firms do not require the same level of investment, Commerce Secretary Bobby Hitt has said previously.

But startups and tech firms do need to be in communities with fast internet; affordable office space and housing options; and a viable public transportation system. Qualified programmers and executives consider those elements — in addition to quality-of-life factors and the number of companies in their field — when deciding where to work.

The report recommends studying existing incentive packages. The state also wants to help existing technology companies grow by making it easier to secure financing, find qualified software engineers and talk to higher-education leaders about their needs.

The plan piggybacks on the state’s 2013 innovation plan, which included innovation grants awarded to tech-related accelerators and nonprofits. The Legislature cut funding after two years.

The new 19-page report comes from more than a year of conversations between Commerce Department officials, educators and industry leaders. The goal is to identify how the state can help advanced manufacturing, life sciences and tech-related firms thrive.

Advanced manufacturing efforts face the fewest hurdles, according to the report. The sector has a huge base of global manufacturers, a well-established recruitment strategy and success with company retention.

John Osborne, co-founder of The Harbor Entrepreneur Center, said knowing in-state manufacturers’ research and development needs for the next few decades would foster innovation. The state could recruit new companies to meet those needs or tell existing companies the products or technologies that are in demand.

“That’s a strategy that will double down and make good on the wins that we’ve had with the manufacturers here,” said Osborne, a committee member.

The life sciences and biotechnology sector needs a more robust recruiting and marketing effort from the state for the budding industry to flourish, the report said; and financing remains a big issue because drug or device development typically requires a great deal of funding and time before investors can exit.

The report determined that the tech sector needs a more robust state-led marketing strategy, better recruitment of larger companies, better infrastructure in the form of faster internet and less expensive commercial space, and more access to capital through state funds or in-state investors.

The report recommends giving more money to the SC Launch fund, which makes $200,000 investments available for early stage startups. The fund currently has a $6 million investment limit. It also said the state should push the Legislature to extend the Angel Investment Tax Credit beyond its 2019 expiration date.

Osborne said he wants the state to create a seed fund for startups. Investors interested in funding a company could ideally pull a matching investment from the state fund — doubling their efforts — and multiple agencies, in addition to SC Launch, could disburse the investments.

“I don’t think the state needs to be in the business of picking companies and investing in them directly, but I think fostering the environment for the private sector to make it attractive to invest in companies here and raise funds here is a role the state can play,” Osborne said.

He said Commerce’s new plan sends a signal to out-of-state investors and companies that the state is paying attention to the tech sector and cultivating a strategy around it.

“The private sector is going to do what it’s going to do and money is going to follow good opportunities and entrepreneurs are going to create solutions for problems they see in the world, but where I think it’s invaluable to have a plan like this from the state’s perspective is when national and federal grants come about, or when corporate partners are looking at what their R&D strategy going forward,” he said.

Workforce gaps

The report emphasized the innovation sector’s huge need for qualified workers.

Peggy Frazier, vice president of global talent acquisition for Daniel Island-based Blackbaud, said creating state-led apprenticeship and training programs for tech companies, like the existing ones designed for the manufacturing sector, would help build the state’s talent pipeline.

Magnesson said startups working to scale up and well-established tech firms both struggle to find enough experienced software engineers.

“Universities are really good at producing junior-level software engineers, but there’s a gap, and it’s the kind of thing you can’t teach, so it’s a Catch-22,” Magnesson said. “And taking on junior-level developers means you have to make an investment to bring them along and hopefully they turn into the developers you need. A lot of companies don’t have the time and the bandwidth to do that.”

The Jack Russell Software Innovation Center in Charleston is one effort to help backfill the needed training post-college, as well as other coding schools like The Iron Yard and Charleston Digital Corridor’s CodeCamp.

Websites like Charleston Open Source and S.C. Innovation Hub seek to tell developers in other tech hubs around the country about the job opportunities and quality of life benefits in the Charleston region, but recruitment can still prove challenging.

“Many candidates are reluctant to take a position in an area where there are few comparable job options, leaving them stranded and immobile if the company is a poor fit,” the innovation report said.

Magnesson said universities and tech firms need to talk more about the skills that are needed and the available opportunities in the state.

“The more talent that we bring down here, the more our software companies can grow, and then we’ll have the bandwidth and the financial investment that it would take to bring on interns and junior-level software developers,” she said.

This story originally appeared in the Feb. 20, 2017, print edition of the Charleston Regional Business Journal.

Reach Liz Segrist at 843-849-3119.

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