Connecticut’s top economic development official wants to ramp up activity of the state’s quasi-public venture funding arm Connecticut Innovations — potentially more than tripling its annual investment output.
And she sees adding a new chief executive officer to lead the organization’s expanded role in the technology sector. What that may mean for CI’s longtime executive director, Peter Longo, is unclear.
Department of Economic and Community Development Commissioner Catherine Smith says Connecticut Innovations has “a very important role to play” in helping spur job creation, particularly in the technology industry, where hundreds of millions of dollars are being invested in the coming years to try to make Connecticut a larger player in areas like bioscience.
But a lack of venture funding in the state has always been an issue in growing a vibrant tech sector.
Connecticut Innovations is already the most active funder of early and seed stage companies in the state. But Smith says her goal is to eventually triple CI’s annual investment output from its current $15 million level, to up to $50 million a year.
Additionally, Smith said she wants CI to play a more central role in stirring collaboration among the various innovation hubs sprouting up across the state, creating the necessary linkages between Yale and the University of Connecticut as well as among other universities, entrepreneurs and businesses to generate a critical mass of activity.
“We have some great work being done, but it is in isolated pockets,” Smith said in a recent interview. “Serial entrepreneurship is more rampant in states that have greater communication and collaboration.”
It’s not clear if Smith’s vision will get backing from CI’s entire 14 member board, but newly appointed board member Mark E. Ojakian, who is the deputy secretary of the Office of Policy & Management, supports it.
“She seems to really be focused on not only increasing the dollar amount of investments but also the visibility of the organization,” Ojakian said.
Ojakian said Connecticut Innovations has done well keeping up with its investment mission over the years, but the changing economic landscape in the state will require it to take on an even larger role, especially in bringing together the business community and institutions of higher education.
Board member Harris Marcus, who is a UConn engineering professor, declined to comment on Smith’s plans “since it is not yet clearly on the table for moving forward.”
Several other board members didn’t return requests for comment.
Smith was appointed by Gov. Dannel P. Malloy as DECD commissioner in March and she is beginning to make her mark on the agency. The former CEO of Windsor-based ING U.S. Retirement Services is also the chairwoman of Connecticut Innovations, putting her in a powerful position to steer the organization into the future. She also chairs the Connecticut Development Authority and the Connecticut Housing Finance Authority.
Smith said Connecticut Innovations has been a successful organization, but she wants it to get more aggressive and invest in more companies that will add jobs in the state.
The stepped up role will be particularly important as Connecticut invests $864 million in the UConn Health Center, which will double the incubator space at the Farmington campus and lure new scientists who will conceivably bring with them ideas and technology that can potentially be commercialized.
Having start-up cash to fund those opportunities will be crucial, Smith said, and that hasn’t always been Connecticut’s strong point.
Smith said Connecticut ranks fourth in the nation in capital under management, but ranks in the mid-teens, in terms of dollars invested in Connecticut businesses.
That trend has to change if Connecticut is going to mature its technology base, she said.
“We have a ways to go to get those things in balance,” Smith said. “We need to make sure good ideas are finding funding early on.”
Of course there is a tight rope CI will have to walk if it tries to step up its investment efforts. Venture funding is inherently a risky business as many early stage companies don’t pan out. Putting more dollars into more of those types of business ventures would undoubtedly add to the risk in CI’s portfolio.
Smith said she understands that CI will have to tread carefully. “We don’t want to be investing in ventures that aren’t going to make it,” she said.
CI is a quasi-public entity created by the General Assembly in 1989. It initially received bonds from the state to make loans.
That changed in 1995, when the organization became self sufficient and began investing in companies using money from its own returns.
Since its inception, CI has invested over $150 million in about 100 companies and has leveraged over $1 billion in private capital.
The organization, which has its offices in Rocky Hill, invests largely in pre-seed and early stage companies and has several different funds for different size companies in different industries.
CI’s portfolio is dominated by start-ups in energy, biotechnology, information technology, and photonics.
Besides venture funding, CI has helped launch several incubator programs at New Haven’s Science Park at Yale, the University of Bridgeport and UConn Health Center. It’s also involved in other economic development activities.
Over the past five years, CI has not made more than $15.2 million in new investments in any single year. In 2010, for example, CI approved 32 investments in 25 companies totaling $15.2 million. That was its largest annual output since at least 2006. Through July 18 of this year, CI has invested $13.1 million in 37 companies.
In 2002, the state took $17.5 million from CI to help fill a budget gap, which did negatively impact the organization’s investment ability for a period of time.
Beyond its pure investment role, Smith said she wants CI to be a central player in creating more collaboration between research systems and entrepreneurs in the state. One of the larger questions that technology industry leaders have wrestled with is how to create a distinct tech hub in Connecticut when the major players in research and development share little geographic linkage. On the university front, for example, Yale is located New Haven, UConn is in Storrs, while the UConn Health Center is in Farmington.
That isolation poses a challenge, Smith said, and she sees CI playing a larger role in closing the gap. And she has asked CI’s board of directors to consider hiring a new CEO with the industry connections and the networking wherewithal to make that happen.
“We need to find a CEO who could take us to the next level,” Smith said.
Longo, CI’s executive director, has led the organization since 1995. CI spokeswoman Emily Smith said Longo was on vacation last week and could not be reached for comment for this story. Longo did not return a cell phone message seeking comment.
Smith said Longo has a done a good job leading the organization in its current role.
Ojakian said he envisions a CEO that will do more outreach to the business and higher education sector.
“I think organizationally we could have somebody like Peter lead the investment side, but I think there is a need for someone to be out there pounding the pavement, talking to businesses and higher education officials,” Ojakian said.
