government subsidising tech companies

Tue Dec 1 15:51:57 MST 2015

oops, didn’t mean to go off-list.

I just hit Reply. I guess it’s b/c you CC’d me directly. I’m adding the list back in.

I’d encourage everybody interested in this subject to attend some of the Phoenix Startup Week sessions coming up next month.

I’ve been to several sessions like them throughout the year and the VCs mention this stuff regularly. They’re certainly not a secret.

There’s one law here that effectively prohibits setting up any kind of investment funds larger than $150M or so, which isn’t very big for VC firms. 

See this article for more info:

http://www.bizjournals.com/phoenix/news/2015/05/06/arizona-bill-to-boost-venture-capital-for-biz.html

"As one of 13 states refusing to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act, Arizona inadvertently allows a crucial exemption opportunity to go by the wayside."

This is one of those “screw-Obama” things that right-wing states have become notoriously known for implementing, mainly to the detriment of their own residents.

(What’s going to happen when Obama leaves office? These states won’t have anybody to blame their idiotic policies on.)

Another is a quirk in AZ’s Corporation laws that date back 25 years or so, that effectively keep VCs from investing in AZ Corps. If they’re interested in you, they’ll require you to re-incorporate in another state first. It’s possible to circumvent this with specific language in the original Articles of Incorporation, but most don’t, and the law’s defaults prevent you from changing it later. Something about requiring ALL shareholders to approve certain things, not just a majority. Minority shareholders and ex-spouses can basically run the business into the ground that way if they so choose; it’s too risky for VCs to bother with.

-David Schwartz

> On Dec 1, 2015, at 3:04 PM, Keith Smith <techlists at phpcoderusa.com> wrote:
> 
> 
> Hi David,
> 
> Thank you for your feedback.  Not sure why you went off list.
> 
> What specific laws are holding back VC's?
> 
> How specifically is "old-west ultra-conservative keep-the-government-out-of-our-business mentality" holding the state and / or cities back?
> 
> What "long-term planning objectives" need be instituted?
> 
> I appreciate you help!!
> 
> Keith
> 
> 
> On 2015-12-01 14:45, David Schwartz wrote:
>> Is WHAT sustainable? The current self-destructive way of planning this stuff?
>> Sure it is! That’s how we got where we’re at!
>> The Phoenix-40 ran this area for decades. The Good Thing about that
>> (self-appointed) group of businessmen was that their self-interest
>> managed to sustain a long-term vision over growth in the valley. Of
>> course, it helped a lot if you were one of them or a close friend of
>> theirs.
>> Having over a dozen cities and towns, plus the County (or two, if you
>> include Pima) and the State all working against each other now with no
>> coherent long-term planning objectives is really not productive over
>> the long-run.
>> There are some fundamental structural problems with Arizona’s laws
>> that present a HUGE impediment for attracting venture capitalists
>> here. You’d think they’d be fixed quickly, but they go agasint the
>> grain of the otherwise old-west ultra-conservative
>> keep-the-government-out-of-our-business mentality in the state.
>> When the needs for changes to laws to make them more friendly to VCs
>> and business investors to fit their long-term needs are considred “too
>> liberal”, you don’t need to ask about sustainability. They’re
>> non-starters.
>> There’s exactly ONE VC Fund here in AZ, and it’s relatively small.
>> Until the laws change, this is unlikely to chage either.
>> Remember, this is a state where State officials have spent tens of
>> millions of taxpyer dollars to avoid investing in improvements to our
>> educational system, even after multiple citizen initiatives, court
>> orders, and segregated funding initiatives that were legally supposed
>> to go to education -- but the Legislature spent it on tax cuts for
>> large corporations instead.
>> "Sustainability" is going to depend on our elected officials and how
>> much value they see in not just setting a long-term (25-40 year) plan
>> but sticking to it.
>> The current crop of people being elected dont’ want to spend money on
>> anything but tax cuts, and see no benefit in setting long-term goals.
>> “That vision thing” as George W. Bush described it, is anathema to
>> these guys.
>> We HAVE sustainability. That’s what has led to our slowly
>> disintegrating educational system over the past 25 years.
>> If you want something ELSE sustained … vote for people with vision and
>> a will to commit to it, rather than those who simply want to gut
>> government spending every chance they get.
>> Until then, it’s every city / town / county / state agency to
>> themselves.  THAT is what’s being sustained these days.
>> -David Schwartz
>>> On Dec 1, 2015, at 1:29 PM, Keith Smith <techlists at phpcoderusa.com> wrote:
>>> So what is the solution?  Is there a way to make this sustainable?
>>> On 2015-12-01 13:11, David Schwartz wrote:
>>>> Have you called the organization and looked into their charter?
>>>> The general idea is to invest a little up-front in tax abatements of
>>>> various sorts to encourage companies to set up shop here. The theory
>>>> is they’ll create a lot of good jobs and their employees will boost
>>>> the overall tax base of the community, while the local economy will
>>>> expand.
>>>> It’s great in theory, but these folks often don’t think things through
>>>> very well.
>>>> About 30 years ago, the good folks with our State / Country / City
>>>> decided they wanted to steal business from Wyoming or Montana or
>>>> wherever and become the credit card processing capital of the nation.
>>>> So they passed laws and provided tax incentives to draw these
>>>> businesses — and jobs — to the Phoenix area.
>>>> After a few years they realized the error of their ways because it
>>>> created a flood of minimum-wage jobs with high turnover rates. From
>>>> what I’ve read, these companies have enjoyed lower taxes and higher
>>>> profits, most of which went to headquarters located in other states
>>>> (mostly Delaware), while the jobs they created did nothing to boost
>>>> the ecoomy.
>>>> Bringing in high-tech companies is a much smarter plan. The jobs tend
>>>> to pay much higher than minimum-wage, although what I’m seeing is a
>>>> lot of those software jobs are paying awfully low relative to other
>>>> cities. I guess their argument is the cost of living is lower;
>>>> relative to SF and Silicon Valley, yes. But not in comparison to other
>>>> cities with large tech hubs (eg., Atlanta, D/FW, Houston, Austin,
>>>> Denver, Portland, etc.)
>>>> Then there’s the obvious fact that AZ ranks 48th out of 51 in terms of
>>>> school quality and funding, so who in their right mind would want to
>>>> move here with school-age kids to take a job that pays a below-average
>>>> salary in a state that protects businesses over consumers? (We’re a
>>>> lot like Texas in that respect, these days.)
>>>> For as long as I’ve lived here (I’m a native and lived here most of my
>>>> life), I’ve never seen much in the way of “smart policy” when it comes
>>>> to business development here. It’s run by an Old-Boy’s Network, and
>>>> the same Old-Boys get the benefits most of the time.
>>>> Exceptions are mde now and then for encouraging corporations, but they
>>>> can be fickle. Intel bought a huge chunk of land along I-17 and
>>>> Beardsley way back in the 80’s, looking to build a huge campus. Then
>>>> the City planners decided to run a freeway through the middle of it to
>>>> appease some local (long-term) land-owners.
>>>> One thing has become painfully clear to me over the years: Govt
>>>> planners like to bend over backwards to attract NEW business, but once
>>>> you’re here, they don’t really give a rip. They spend money to woo new
>>>> companies into an area where existing companies are going bankrupt,
>>>> then just move on to lure the next one.
>>>> That area of Chandler is mostly NEW development.
>>>> Take a look at MetroCenter, Fiesta Mall, and some other areas where
>>>> business has died for lack of investment and support by the community.
>>>> I remember when these places were built! They were buzzing with all
>>>> kinds of efforts by local politicians to attract new businesses. Now
>>>> you’ve got the same handful of bottom-feeders who move in to these
>>>> areas, like burrito vendors, payday loan places, thrift shops (that
>>>> are tax-exempt), and other scrappy service providers. Fiesta Mall is
>>>> turning into a huge office complex while buildings around it are being
>>>> razed. There’s a new apartment complex going in South of Southern
>>>> around Extension (E of Alma School) but …. where are the jobs and
>>>> other services?
>>>> That’s what the Chandler Price Road Corridor will look like in 20 years!
>>>> That’s just how things roll here.
>>>> I was going to add that the only small-biz incentives I’ve heard of
>>>> are focused on two groups: vets and the “disabled”. I put the latter
>>>> in quotes because it refers to individuals who are served by
>>>> non-profit entities that pay them a pittance to keep busy and
>>>> supposedly learn some skills while employing lots of other
>>>> “volunteers”, and ultimately sending the vast majority of their
>>>> proceeds to a handful of executives.
>>>> There’s always money somewhere to do something to benefit vets,
>>>> although most of it never ends up doing much good for anybody but the
>>>> business founders. (Ask Univ. of Phoenix about that!)
>>>> I tried for years back in the 90’s to get any kind of funding I could
>>>> find. Nobody was interested. I founded what might have been one of the
>>>> first co-working tech spaces in the valley; at our peak, we had 6
>>>> businesses or so and about 15 employees there. Nobody would give me
>>>> the time of day. (The building we were in at 16th St and Coulter was
>>>> torn down last year. It’s still an empty lot. Some developer will
>>>> probably buy it and put up more high-end luxury apartments or condos,
>>>> which seems to be the rage in town right now.)
>>>> -David Schwartz
>>>>> On Dec 1, 2015, at 11:38 AM, Keith Smith <techlists at phpcoderusa.com> wrote:
>>>>> Hi,
>>>>> I'm doing research on government subsidising tech companies to entice them to move into a community.  In this case I'm wondering about the Chandler Price Road Corridor.  I know someone on the list must work in that area.
>>>>> I discovered the Chandler Price Road Corridor existed a couple months ago.  Normally I would not be a fan of government spending millions a year for multiple years to build a business environment.  In this case I am intrigued and am wondering if this is a case where local government can create a sustainable high tech business environment.
>>>>> I am wondering what ingredients will cause this environment to survive after the initial contract period.
>>>>> Some of my thoughts are housing, shopping, entertainment, and a workforce that can be brought together to do things like build chips at Intel.
>>>>> Does ASU aid this?  What about skills learned at the Maricopa Community College network of colleges?
>>>>> At present the City of Chandler is only working with large companies like eBay, Wells Fargo... etc.  The City Council is looking at this and may modify this requirement so smaller companies can build and occupy within this corridor.
>>>>> One thing I have not read about is venture capital.  Given the cost of doing business in Silicon Valley, I would think a tech rich environment might pull some from Silicon Valley.
>>>>> What about Chandler Gang Plank?  Could this come into play?
>>>>> Please help me discover what I should be looking at and how to look at it.
>>>>> Your thoughts are much appreciated.
>>>>> Keith
>>>>> --
>>>>> Keith Smith
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>>> --
>>> Keith Smith
> 
> -- 
> Keith Smith