Biotech and Medicine are often touted as the high growth job creation areas for the 21st century. With millions of Baby Boomers retiring every day, it is easy to see why the demand for bioscience/medicine/wellness products and services will be high for a very long time. But, cutting edge companies trying to get new products and services to market face a steep uphill climb.
Early-stage companies focused on bioscience and medicine need significant financial capital to start, develop and grow – usually in the tens of millions of dollars. But, unlike other start-up ventures, they rarely have the physical assets that banks like to lend against. Risk capital is the water that helps these new companies flourish in the desert.
Venture capitalists, who are much more willing to invest large sums of money on unproven or newly disruptive companies, are sorely missing throughout Arizona. In fact, in the United States, 70 percent of venture capital is invested in companies in only three states, and 75 percent of venture capital is managed by firms in those same three states (California, Massachusetts and New York). Without this precious resource that allows new companies to survive and grow, our state will continue to lag behind our neighbors in job creation, educational achievement, infrastructure development and the creation of a stable economic environment on which we all can depend.
There is a solution, however. The formula for success has been built right across our border in Utah. In 2014, venture capitalists poured so many dollars into Utah that Utah’s venture capital funding per capita average was 179 percent of the national average. In contrast, Arizona was only at 25.1 percent of the national average for the same time period.
While it is true that Arizona as a whole is climbing out of the recession and has regained the vast majority of jobs lost during the last five years, it is equally true that our total job growth still lags behind the overall average job growth across the country. This needs to be fixed.
Creating an entrepreneurial environment where investors want to “place their bets” on new companies is a proven way to benefit our state without having to give away tens of millions in corporate tax breaks. New, home grown biotech companies create better paying jobs and better paying jobs are important for several reasons. First, good jobs give a landing place for university graduates, thus keeping talented alumni connected and contributing to the communities that educated them. Keeping smart, motivated people in Arizona benefits us all. High tech jobs also provide a more robust tax base, providing more revenue, and when allocated prudently, allows for more resources in our most critical areas like education or children services. Healthier, better educated kids are more likely to go to school and stay to contribute to the communities that raised them; thus, ensuring the next generation of leaders and problem solvers will be committed long term. Finally, a diversified economy built on long lasting dynamic companies help insulate us all from future housing or tourism bubbles that tend to burst.
In the coming months, you will see much information about statewide initiatives seeking to remedy this problem. If you are so inclined, I encourage you to participate in the dialogue. QCBN
Michael Zervas is a serial entrepreneur and currently is the CEO of the Northern Arizona Leadership Alliance. He also sits on the board for the Northern Arizona Center for Entrepreneurism and Technology.
