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Minnesota needs a healthier business ecosystem

There is no question — our economy is a mess. Whether it’s Minnesota’s $5 billion deficit, our nation’s mind-boggling debt, or the near bankruptcies of other nations – we are fighting a financial war on all fronts.
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By John Alexander

Does Minnesota need a more healthy and diverse business ecosystem or are we doing just
fine?

There is no question — our economy is a mess. Whether it’s Minnesota’s $5 billion
deficit, our nation’s mind-boggling debt, or the near bankruptcies of other nations – we
are fighting a financial war on all fronts.

The business ecosystem provides us with a wide range of career opportunities, a diverse
tax base and industrial diversity. A healthy business ecosystem supports our way of life
and protects us.

Like most ecosystems, many components are required to make the entire system healthy
and support growth. When one component is diminished or damaged – the entire system
suffers.

Unlike nature where the system rebalances itself, governments often “act” to fix the
problem in economies. Ironically, governments often play a role in creating the balance.

As we have seen recently, the actions of governments can make matters much worse.

What comprises a business ecosystem? At the core is a diverse array of businesses
supporting a wide choice of jobs. By diverse, I mean businesses operating across an
array of industries and ranging in size from start-up to large publicly held companies.
Supporting this is a workforce that meets business’ needs, but trends over time toward
increasing technical capabilities and creative skills. This results in new products and
services. It also creates an environment for employees to thrive and anchors businesses
where employees want to live.

Businesses and the communities in which they reside need access to efficient and
inexpensive infrastructure, transportation, power, and communications for these thriving
employees.

So besides finding work – current and potential employees must want to live here. To
create the right workforce, and attract and keep skilled people we need to add a few
more things to the mix, including: A world class education system, a safe and attractive
environment, and a culture with amenities that support civic pride and enjoyment.

Ideally, we use government to provide services, support and protect us where private
industry can’t (thank you 17th century political philosopher John Locke). These services
and controls require taxes on and from the private sector. All taxes take capital out of the
economy and slow down the ecosystem. We should apply only where the most benefit
can be gained.

Diverse Businesses: A strong and diverse business segment is a core component of a

healthy business ecosystem. In established economies, the opportunities for employment
start when very large companies provide training and career opportunities.

As employees gain experience and confidence, they often seek those opportunities and
become leaders in smaller, more dynamic, businesses. The money they made in large
companies becomes angel/seed capital for new companies … this supports the ecosystem.

Small companies will not grow until they can afford to hire raw talent they can train.

Medium and small companies that offer experienced employees opportunities for more
career growth, tend to be more innovative and responsive to the market.
They provide more opportunity for investors compensating for higher risk.

These companies exist to develop new products and services that are too risky for large
companies.

Do you see the circle of the ecosystem forming?

As large companies grow, they seek new ideas generated in smaller companies and may
distribute for or partner with them, fueling growth. Capital needs to be available from
public markets, lending institutions, and investors to feed and support the ecosystem.

Restricting capital at any level in the chain impedes growth and new development as
we’ve seen since 2008.

Here’s how we grow and strengthen our ecosystem:

We need to keep large businesses here and encourage businesses to expand their
operations here feeding the ecosystem with talent, capital, and infrastructure
We need businesses of all sizes to start, expand, and relocate to Minnesota
broadening our industrial base and creating jobs

We need to attract capital to Minnesota to invest in established companies and
new ideas

We need to attract and keep experienced and successful people

Simplify and clarify regulations: Policies must be easy to understand, straightforward and
fundamentally match our needs and values without penalizing the business ecosystem.

Reduce and incent investment and business expansion: We must create not just
incremental tax incentives but commit to reduce all Minnesota tax rates to the mean rate
of the other 50 states. Then, we must live within those means.

Businesses, investors, and individuals plan ahead based upon government actions. By
making changes to Minnesota’s tax and regulatory policy, we would attract business and
capital as never before strengthening our business ecosystem, tax base, quality of life and
economic safety.

And, most importantly, we would keep those most successful and accomplished people
and businesses here rather than see them move to more tax friendly states.

John Alexander is President of Business Development Advisors, Founder and Chair of the Twin Cities Angels, and business author of the Angel Investment Tax Credit. Email him at: John@BusDevAdvisors.com

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