Innovation drives the economy, and investment fuels innovation.
Here in Illinois, we are proud of our many innovators whose brilliant ideas have revolutionized the world – from John Deere and his self-cleaning plow to Northwestern University Professor Richard Silverman, inventor of the anti-seizure drug Lyrica.
Today, Illinois has all the ingredients necessary for great economic success: World-class research institutions, solid private-sector resources and expertise, skilled workers, and – most important of all – bold entrepreneurs who can combine those elements into smart, successful new businesses. But we don’t have enough public and private capital to seed all our great ideas, which means that too many of our young companies are lured away by the promise of start-up capital in other states.
We can’t afford to export our best ideas. It’s time for Illinois to step up and start giving our entrepreneurs a head start, through innovation-friendly public policies and through coordinated, long-term public-private partnerships.
The numbers show what we’re up against. Last year, California companies received $14.8 billion in venture capital investment – about half the national total. Massachusetts and New York finished second and third, with about $3 billion apiece in venture funding. Despite our research muscle and our track record of industrial success, Illinois finished ninth, attracting less than 2% of venture capital investments nationwide.
Illinois’ dearth of venture capital has a serious impact on our ability to create and support good new jobs. When it comes to job creation, venture-backed companies punch far above their weight; a 2011 study by IHS Global Insight found that, while less than 0.2 percent of our nation’s GDP is invested in venture-backed companies each year, those companies employ 11 percent of the total U.S. private-sector workforce.
Even more importantly, these entrepreneurial companies play an outsized role in inventing the future of American industry. Venture-backed firms have helped to create, not just new jobs, but entire new sectors. As we look ahead to an economy fueled by green technology, it’s clear that Illinois will have to find new ways to provide our visionary start-ups with the early financial support they will need to get their companies up and running.
When it comes to fostering the growth of fledgling companies, Illinois lags behind many other states. California is far and away the national leader in drawing venture investment, thanks in no small part to the joint efforts of state policymakers and California’s venture-backed companies and their investors.
Following California’s lead, other states have built well-tailored programs to provide venture capital to innovators and entrepreneurs. In Ohio, for example, the Department of Development created the Third Frontier Program in 2002 to invest in targeted high-tech sectors. Since then, the State of Ohio has invested more than $750 million in promising companies – an investment that has leveraged more than $6.6 billion in additional funding and has supported more than 700 Ohio companies. In 2010, voters demonstrated their trust in the Third Frontier program by approving a bond issue to provide additional $700 million of funding through 2015.
Illinois cannot afford to fall further behind as other states invest in their economic futures, build new companies, and attract top researchers and highly skilled workers. We need to develop new, well-considered, growth-oriented public policies and combine them with judicious public and private investment that will help innovative Illinois businesses to grow and prosper.
We’ve already made one important step forward with the Technology Development Account, which allows the State Treasurer to invest 3% of the state’s investment portfolio into venture capital funds focused on high-tech sectors. Unfortunately, many of those authorized investments are not being made – which means that Illinois businesses are missing out on the capital investments they deserve. As a result, we’re all missing out on good new jobs and great new products. So Innovation Illinois supports efforts to make sure the Treasurer makes the full Technology Development Account investment authorized by our General Assembly.
Beyond that, we are fully committed to attracting investors to Illinois by letting them know just how much our state has to offer. Illinois is home to some of the greatest research institutions in the world: University of Illinois, Argonne National Laboratory, University of Chicago, Northwestern University, Fermilab, to name just a few. We have a highly educated, well-trained workforce. We have a long list of thriving businesses, ranging from Fortune 50 powerhouses to innovative new startups. And over the past few years, we’ve seen Illinois’ innovation ecosystem grow and strengthen, through efforts such as Chicago’s tech incubator, 1871, and the newly established Joint Center for Energy Storage Research, which is making Argonne National Laboratory a world leader in building the battery systems of the future.
Our existing assets are amazing, and our future is bright. So we need to work together to let the world know that Illinois is truly the Land of Innovation.