In The News

Take this Job and Love It

Vermont's high tech industries, especially those involved in aspects of software development, argue they are being held back in their growth by a lack of investment capital and by the state's low unemployment rate, which translates into a lack of skilled workers.

In what is considered a growing, if somewhat underground industry, software companies say Vermont has a lot of budding entrepreneurs producing software products. What they need is more investment funding which is not readily forthcoming from this state's risk adverse banking community.

A survey of software companies in Vermont conducted in May by UVM students taking an economic development class found that from over 70 companies who responded (and just 48 in Chittenden County responded completely) employment in those companies is expected to double in the next three years. That would create over 635 new high technology jobs.

That same survey found that from these added employees the state could expect an additional $2.48 million in income tax revenues. Jobs in this industry, the survey notes, average around $60,000 per year, which is considered a conservative estimate from the survey respondents. This same survey found that the companies responding had issues they were concerned about as it relates to their ability to grow: they included financing for product development (71 percent) and for new equipment (35 percent); the availability of skilled workforce (61 percent;) technology access to high speed telecommunications (37 percent;) the availability of space to grow; marketing costs and expertise (46 percent.)

"If you look at the industry it is growing," said Bruce Selfer the Assistant Director for Economic Development in the City of Burlington's Community and Economic Development Office (CEDO) and a board member of the statewide Vermont Software Developers' Alliance.

"It's definitely a niche industry," he argues. "We grew firms that came out of IBM, Digital, and IDX. From a policy perspective I think it's logical for the state to invest in this industry since they are here and are growing."

"The culture of hi tech innovation in Vermont is strong," agrees Mike Quinn the Commissioner of Economic Development at the Agency of Economic Development.

To this end, says Quinn, "the administration supports that (innovation) and wants to keep the jobs and grow them."

Quinn points to Vermont as ranking 26th in high technology wages and contends that Vermont is "doing disproportionately well for a state our size."

The state ranks 13th in high technology employees per 1,000 workers with nearly 17,000 high technology jobs in a workforce of 325,000.

Seifer estimates that 135 software development companies exist in the state and thinks many more than that fly under his alliance's radar.

The Department of Labor has identified just 30-40 of software companies, said Seifer. The preponderance of them, whatever the exact number, is in the northwestern sector of the state, but many are also located elsewhere. Small companies, Seifer figures, have a worldwide customer base.

This spring the software developer's alliance met separately with Jo Bradley at Vermont Economic Development Agency and Agency of Economic Development secretary Kevin Dorn to discuss financing issues for its members. According to Seifer, his alliance wanted to know what the state was doing to help finance software companies. He said Bradley's answer amounted to "not much."

The problem for VEDA, said Seifer explaining what Bradley had said, was that software companies are not fixed asset companies, they are intellectual property companies without fixed machinery as collateral. This makes it difficult for VEDA to fund with its traditional reliance on collateral. The state, according to Seifer, "needs to come up with new financial mechanisms to support the software industry. (If it does) the payout will be high."

For her part, Bradley defends VEDA and the state in its loan practices. "If a person has a good business plan and it looks like a reasonable loan and there is collateral we (VEDA) will take a look at it." The problem, she admits is "they don't often have collateral."

Bradley said software companies should seek out SBDC for help with business plans.

While holding tight to her guidefines, Bradley is not averse to seeing the software sector of high tech in Vermont grow. "It's a great industry and is one we should try to foster within certain risk parameters," she agreed.

The 2006 legislature passed a seed capital program that, according to Bradley, will provide funding for businesses like those in the software industry. "Loans are difficult with no collateral," she explained, "so seed money is more appropriate for these types of businesses." Funding for the program will come from private investors who will receive tax credits.

"There will be enough money to fund the good companies that need it," Bradley believes. "I think it's very exciting, the state is doing something."

Michael Rooney at RingMaster Software in Burlington, a company producing support software for Oracle e-business suite users, said financing issues are difficult to overcome in companies whose products are not machines but intellectual property. "I've come to realize there are very different financing opportunities out there," he said. "There are banks, angels, friends, venture capitalists, customers, creditors, and employees."