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Guest MINDSETTER ™ Ed Renehan: Rhode Island Needs to Get Real

Monday, July 20, 2015

 

There was much breathless excitement and hype last week about a "Cybersecurity Summit" held at the Naval War College, Newport – an event during which Governor Gina Raimondo predicted a dominant role for Rhode Island in this important, growing sector of the digital economy.

Well - Positioned?

Per Raimondo: “As we look to spark Rhode Island’s economic comeback, we need to support innovative, cutting-edge sectors like cybersecurity. Our state has the potential to create jobs, protect Rhode Islanders, and lead the charge in this industry.” 

Sadly, this is not the case. We are by no means well- positioned to “lead the charge in this industry.” Far from it. In fact, quite the opposite.

As the Wickford-based publisher of, among other things, a line of books focused on Cloud Computing, Big Data, and Data Science, I pay close attention to evolving data security standards, tools, and enterprises. 

The cybersecurity race has been “on” for quite some time. The gun launching the competition went off more than ten years ago. Early starters are already entrenched with significant leads.

Firms making up the Cybersecurity Ventures benchmark “Cybersecurity 500” reside in a range of states and countries. But not one of them lurks in Rhode Island.

Cybersecurity Ventures identifies California-based FireEye as the number one firm in its “Cybersecurity 500” listing. This publicly-traded company, founded 2004, boasts over 2,700 corporate customers located throughout 67 countries, no less than 157 of these customers being listed in the Fortune 500.

The very last company on the same list, Waltham-based CounterTack (founded as NeuralIQ in 2004 and renamed in 2011), has raised $49.5 million in funding from such venture organizations as Goldman Sachs, Fairhaven Capital, Siemens Venture Partners, OnPoint Technologies, Alcatel-Lucent, TenEleven Ventures, EDBI (Singapore), and Mitsui (Tokyo). CounterTack's real-time endpoint threat detection and response platform has been widely accepted and is recognized worldwide as a major enterprise security solution.

The illusion that Rhode Island – currently hosting not one major player – is somehow poised to “lead the charge” in the cybersecurity industry is, to me, a symptom of a larger problem in this state when it comes to envisioning and fostering economic development.

We have to, as the saying goes, “get real.”

Getting Real

Instead of engaging in starry-eyed, hollow, industry-specific, smoke-and-mirrors rhetoric based on casual assumptions rather than hard market facts, we should be imagining and implementing financially-attractive programs designed to draw to our state quality firms across all industries.

This is quite simple to do. Improve the corporate tax situation and otherwise incentivise smart investment – particularly investment tethered to the relocation and/or creation of well-paying, tech-centric, “new-economy” enterprises, in the same way New York State does with its innovative Start-Up New York program.

Start-Up New York fosters the development of high-end jobs by providing a zero tax for ten years incentive for new and expanding businesses (whether already from New York or migrating from another state). By zero tax, New York means: no income tax, no business or corporate state or local taxes, no sales tax, no property tax, and no franchise fees. There's only one caveat: Set-up on or near eligible university and college campuses, and then partner with those schools to develop new products and paradigms, taking full advantage of those schools' research laboratories, economic development resources, and discipline experts. 

After a slow start, and two years into the initiative, 118 firms have thus far joined the New York program, committing to invest a combined $196 million in the state over the next five years, and to create 3,325 new jobs. These firms range across such fields as biotechnology, software/IT, analytics, audio/video, e-commerce, graphics design, wastewater treatment, LED lighting, artificial intelligence, 3-D printing, and semiconductors.

Writing in Forbes, David S. Rose (CEO of the dominant online angel investor platform Gust) points out as regards development in New York's Silicon Alley: “In the Q1 of 2015, for the first time New York edged out California in total number of startup funding applications. Quarterly data from Gust … shows that Silicon Alley had a 22% increase in funding applications for the first quarter of 2015, propelling the rapidly growing startup hub past its long-reigning Silicon Valley counterpart. Elsewhere in the startup and angel investor ecosystem, the total volume of funding applications across the globe jumped nearly 7% over Q4 of 2014.”

Rose credits the role of Start-Up New York (and, to a lesser degree, New York City Mayor Bill de Blasio's Digital.NYC partnership with IBM) in jump-starting this advance.

Compared to such dramatic, straightforward, and no-nonsense initiatives as Start-Up New York, the economic development toolkit developed by Governor Raimondo and Commerce Secretary Stefan Pryor (and incorporated into the recently-passed state budget) seems at best unwieldly, and at worst chincy and pathetic. Not only are the incentives in the various programs minor, they are also misdirected, for they focus almost entirely on native job creation, with a heavy emphasis on construction, when the paramount aim ought to be attracting tech-centric, forward-looking firms and entrepreneurs from out of state.

Governor Raimondo is correct in looking to technology as a growth area from which Rhode Island can and should benefit. But let's throw something more than toothless optimistic rhetoric into the effort.

Edward Renehan serves as Managing Director of the Wickford-based “digital native” publishing firm New Street Communications, LLC. 

 

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