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South Carolina has done a good job attracting large employers such as Boeing and BMW, but it needs to do more to encourage innovation and tech-related entrepreneurial activity, according to a new report from the S.C. Department of Commerce.
“Cultivating and supporting a strong innovation sector is critical for the future of our economy,” S.C. Secretary of Commerce Bobby Hitt said in a statement.
Last updated in 2013, the Commerce Department this month released the new South Carolina Innovation Plan, which is intended to guide the growth of innovation and tech-related entrepreneurial activity in the state.
It encourages more business startups like those at Spartanburg Community College's Center for Business and Entrepreneurial Development in Duncan and the bGEN incubator in Gaffney.
The plan also notes significant South Carolina firsts, everything from the introduction of sweet tea in 1890 in Summerville to the first electrically powered cotton gin, which was invented in 1897 in Anderson.
The same kind of entrepreneurial spirit should be encouraged — and funded — so that South Carolina can expand its manufacturing successes into other sectors, such as science and technology, the plan says.
Among its recommendations:
Giving the same attention to business incubator startups that larger companies get at groundbreakings and grand openings — with a big splash attended by many dignitaries.
Recruiting innovation companies from other states “that are on the cutting edge of their fields.”
Broadening the SC Launch program, which offers grants of up to $200,000. The program has a $6 million annual cap, and the plan states raising the cap will benefit more startups.
Increasing the size and scope of the angel investor state income tax credit, which is set to expire in 2019. The tax credit offered to startups is up to 35 percent of the investment.
Increasing communication between industry and higher education.
Study expansion of broadband internet service to serve businesses in the innovation sector.
Encourage communities to provide affordable office space for innovators.
One way to measure the growth is the number of patents issued to South Carolinians, which demonstrates innovation. It has mostly gone up each year, from 524 in 2008 to 1,058 in 2015.
Generally, there seems to be widespread support for the idea that smaller businesses deserve the same encouragement as larger ones.
But financing continues to remain a challenge for smaller startups.
Brian Ziegelheafer, co-founder of bGen in Gaffney, said the state plan does not go far enough to address the needs of one-person business startups.
“It does seem to focus a lot on the tech, science and advanced manufacturing industry, which leaves a lot of the mom-and-pop startups in that gap,” Ziegelheafer said.
At bGEN, tenants pay $150 a month for space and get the use of the facility 24/7, along with free Wi-Fi service, coffee and snacks, a printer, desk, chair and landline phone. They also get to use a small photo studio and have access to an internet marketing specialist.
At Spartanburg Community College's Tyger River Campus, the Center for Business and Entrepreneurial Development has a “landing pad” for new businesses, a place to get organized while their facilities are built. It provides space and basic office services without extensive overhead costs, and it serves businesses as large as BMW to individual entrepreneurs just starting out.
Money, of course, is helpful in getting started, but many other factors can make or break a new business.
Beth Smith, a consultant with the Clemson Area Small Business Development Center, has an office at SCC’s incubator, where she helps small business owners make the transition into the national or international market.
“Workforce development, marketing and funding are all important, but individual industry experience and relationships will differentiate the winners,” Smith said. “What you need to fuel entrepreneurism is ‘business savvy’ on the part of the individual — experience, if you will.”
Spartanburg businessman Barry Wynn, president of Colonial Trust, said there is too much red tape for beginners to navigate.
“I think it is the complexity of regulations and administrative burdens that are difficult to navigate through, and addressing solutions to these problems would provide the highest return and success,” Wynn said.
Dirk Brown, a professor at the University of South Carolina Darla Moore School of Business, worked on the previous innovation plan that was adopted in 2013.
“This follows up well,” he said of the plan's latest iteration. “We’ve put a lot of energy and money in landing large companies. Now we’re seeing some truth that these initiatives are working (for smaller businesses).”
The overall benefits from new jobs and spin-off business more than pays for any tax breaks offered new companies, he said. Such incentives can sometimes be prickly political subjects in libertarian-leaning areas of the state.
“I’m convinced the return on this is huge,” Brown said.
Ziegelheafer said what's really needed is to incentivize banks to to issue small loans ranging from $1,000 to $10,000 to startups. He'd also like to see a one-stop website with everything needed for an entrepreneur to get started.
"Every one of our clients says the number one thing they need is more money," he said. "So many are self-funded. They're tapping their savings and 401ks. Micro-lending by banks would help get them through the gap."
Barry Slider, president of First South Bank of Spartanburg, said lending to startups is risky.
"Banks as a whole in South Carolina have had their return on assets nearly cut in half over the last eight years," he said. "New startups are some of the riskiest lending for banks. And if an institution is below par on earnings, it cannot afford to venture too far in the startup arena."