Indiana fares pretty well with consumer-tech types.
The right-to-work state welcomes new business models, offers friendly tax policies, provides fast Internet connections and attracts venture capital investment, a recent report found. Those are among the industry’s priorities.
The Hoosier State falls far short, however, in entrepreneurial activity, according to the Consumer Technology Association’s 2016 Innovation Scorecard, which was compiled using U.S. Bureau of Labor Statistics data.
Indiana scored solid A’s and B’s in most categories, but it earned a D+ for entrepreneurial activity.
Northeast Indiana officials aren’t wasting time challenging the grade. They’ve been fostering entrepreneurship from various angles – and don’t intend to stop now. But at least one expert said the report card’s focus is too narrow to accurately evaluate innovation in Indiana and elsewhere.
Patrick Stroh, author of "Advancing Innovation: Galvanizing, Enabling & Measuring for Innovation Value!" said the Consumer Technology Association’s report card is flawed because it relies solely on publicly available data. Additional factors would be harder to find, he said, but would prove more enlightening.
"Innovation is not synonymous with technology," he said. "Why is there nothing in there about (primary and secondary) schools?"
Stroh, who lives in Minneapolis, believes innovation in states’ health care systems would be another significant measure.
"I would not get too concerned that one of the metrics is bad when all of the other ones are good," he said.
Izzy Santa, spokeswoman for the Consumer Technology Association, said the national rankings came down to the data.
Overall, Indiana ranked 43rd in the country in entrepreneurial activity. That placement is based on measuring net job creation by small and young firms and the average number of small firms created per capita.
The list included all 50 states and the District of Columbia. Ohio, which ranked 45th, also scored a D+.
"In Indiana, there’s not enough startups being launched in the state," Santa said, adding that the startup companies didn’t have to be tech-related to count.
The trade organization includes as members Apple, Carrier, Uber, AirBnB and major automakers. The Arlington, Virginia, association organizes the annual Consumer Electronics Show, the headline-grabbing Las Vegas trade show that introduces new technology to the public.
"It’s discouraging," Ryan Twiss said of the D+. Twiss is director of regional initiatives for the Northeast Indiana Regional Partnership. "Clearly, it provides an opportunity to improve."
The region’s economic development leaders look for opportunities to make it easier for people with ideas to turn them into thriving businesses. To bolster that effort, they are launching an inventory of the existing entrepreneurial ecosystem to help identify gaps.
Mike Fritsch, the Northeast Indiana Innovation Center’s entrepreneur-in-residence, was surprised by the state’s poor showing.
"In other studies I’ve seen, we rank fairly well," he said, adding that it depends on which criteria you measure. "What I know is Indiana has an immense amount of entrepreneurial activity that is building."
The innovation center, commonly referred to as the NIIC, was named one of the top four "Best Under the Radar Business Incubators" in the country by Entrepreneur Magazine in its October 2013 issue. The editors evaluated 1,250 business incubators before making their selection.
Twiss noted that the poor grade was given to the entire state of Indiana, which includes many rural areas. Anyway, he said, most new jobs are going to be created by established employers, including manufacturers and hospitals.
Twiss didn’t criticize the trade group’s choice of statistics, however.
"It seems like that’s about as good as any other," he said.
Entrepreneurship is one of five pillars of the Regional Partnership’s Vision 2020.
The nonprofit’s plan for supporting local entrepreneurship includes providing "access to venture capital, strong regional innovation center, formalized entrepreneurial training opportunities and support services including: research, invention evaluation, product development and marketing."
"I would say you’re doing all the right things," Stroh said after hearing a list of programs available in the region.
What doesn’t impress the author is when corporations make a big show of investing in a few blue lights and red bean bags for an office and labeling that floor plan ripe for hatching new ideas.
"That stuff makes me want to gag," Stroh said, adding that generating ideas is meaningless unless they are put into action.
Fritsch, the entrepreneur-in-residence, agreed – at least with the second part.
"A lot of people have ideas," he said, "but most people don’t follow up on them."
Those with entrepreneurial parents have a head start because they grew up hearing about the challenges of business ownership around the dinner table, he said. People without that background need to be surrounded with role models who will offer encouragement when a budding entrepreneur stumbles, Fritsch said.
Communities that support and sustain innovation and entrepreneurs are better able to attract young, talented workers, Stroh said. Northeast Indiana officials have focused on attracting educated members of the millennial generation in their bid to increase the population and make the region more attractive to high-paying employers.
Stroh said various factors would have affected Indiana’s entrepreneurial grade.
For example, if the unemployment rate is low – which it is, at 4.6 percent in January – fewer people would be inclined to take a chance on starting a new business, he said. In states with higher unemployment, launching a startup would be more attractive.
Santa agreed that duplicating another state’s approach isn’t the answer. What works in one place might not be the solution for another, she said.
"Every state is unique because every state has different (strengths and weaknesses)," she said. "It’s not a one-size-fits-all."
Using the grades
From 2009 to 2013, Indiana saw 90,000 startups create 118,000 new jobs, Santa said. Technology parks have been one common element in communities with the strongest growth.
"That’s really helping some areas in Indiana boom," she said.
The scorecard was created to serve as a benchmark for state and local officials to see what they are doing well and where they can improve and learn from other states, Santa said.
"It is mostly used as a legislative tool to guide states to … be the home of innovation-friendly policies," she said. "Overall, Indiana is in a great position."
The entire Midwest is performing well, Santa said.
"We’re trying to showcase that innovation is not just happening in Silicon Valley or New York City," she said. "It’s happening in the heartland, and the heartland includes Indiana."
Sen. President Pro Tem David Long, R-Fort Wayne, agreed.
After asking staffers to review CTA’s scorecard and what factors led to the D+ in entrepreneurial activity, Long noted that "we measure very well in most other categories, and I am confident that will continue to see significant growth in startups, particularly in the health, manufacturing and tech."
Santa might be disappointed to hear, though, that the CTA report "really doesn’t get used" by Long and his colleagues in the statehouse.
"But we are aware that Indiana, just like most non-coast states, continues to have to work to build the venture capital pool that is available to us," he said in an email.
"Available capital has gotten considerably better over the past few years, and our business environment is highly praised," he said, "but it will still take some time and patience to get where we want to go re: entrepreneurship in Indiana."