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A Vice President Pence would be bad for building US culture of innovation

ICE Graveyard 15/07/2016 John Mannes

With a Tweet from The Donald himself, it’s official that Governor Mike Pence of Indiana will be Donald Trump’s running-mate come November.

Gov. Pence has been loudly parading his innovation and entrepreneurship plans for the state of Indiana this week in the run-up to his likely selection as the presumptive Republican Vice Presidential nominee.

Thinking of Gov. Mike Pence as tech forward is the equivalent of thinking of MIT as a liberal arts school. Sure, you can major in Theater or Anthropology. Just… no.

At first glance, the plans sound robust. The Governor touted $100 million to support university entrepreneurship, $30 million a year for a state investment fund, $500 million from pensions to fuel early and mid-stage Indiana startups, and a plan to make venture capital investment tax-credits transferable.

The reason that building startup ecosystems is so difficult is that it is an innately human process. Creation demands a culture of inclusiveness of ideas. Capital is never enough on its own.

$686 million, an ironically similar amount of money, couldn’t save Elizabeth Holmes and Theranos. Great idea, strong demand, but ultimately a lacking culture of openness.

This resinates particularly strong in Pence’s plan to allow transferable VC investment tax credits. These tax credits are designed to attract outside investment to Indiana’s startups. The vast majority of outside capital in the United States is weighted towards Silicon Valley, New York City, and Boston. I don’t doubt that an investor in one of these cities would ever pass on a good deal, but entrepreneurs have to worry about more than just money. Founders need to position their companies to attract and retain top talent.

Indiana must find a way to not just grow entrepreneurial seeds, but find a way to keep rapid-growth, high-technology companies in the state. It’s easy to attract an early-stage founder with a check for $3 million, but it grows increasingly difficult to compete with out-of-state capital for larger rounds in the 10s and 100s of millions of dollars. The dollar amounts become high, word-of-mouth travels, and uncompetitive deals become competitive.

For a Silicon Valley investor, Indiana startups can be a relative bargain. Labor, space, and the competitive market landscape reduce premiums on deals in places outside prominent startup ecosystems. For Indiana’s plan to payoff, it’s critical that startups stay in the state for the long-run.

Pence wrote commentary for CNBC earlier this week. In it, he cast himself as a jobs-savvy Governor with deep knowledge of the tech industry. He attracted sexy Salesforce to invest in the state. Silicon Prairie, it’s a beautiful image, very quaint and very bullshit.

During Pence’s term as Governor of the state, Salesforce CEO Marc Benioff paid some Indiana employees as much as $50,000, who requested to relocate outside the state. He canceled all programs that required employees to travel to Indiana.

Why would a company CEO do this? Gov. Pence supported and ultimately signed the Religious Freedom Restoration Act (RFRA), which protects the rights of individuals who believe their religious liberties are being threatened at the cost of the safety and acceptance of the LGBTQ community. In the video below, re-tweeted yesterday by Salesforce’s Benioff, Gov. Pence refuses to answer any direct questions about whether the intent of the law was to discriminate against the LGBTQ community.

Salesforce, Angie’s List, and other tech companies came out strongly against the RFRA. After Salesforce threatened to halt expansion in the state, Gov. Pence signed a “fix” that prevents the law from being used as a defense to discriminate against the LGBTQ community.

What’s particularly troublesome about this is that Gov. Pence is selling himself as pro-tech and pro-Salesforce. Salesforce wasn’t wooed to pasture in Silicon Prairie by the swift progressive politics of Gov. Pence. Salesforce gobbled up Indiana based email marketing software company, ExactTarget, in 2013 because it had a great product with large economies of scale. The transaction provided the company a large representation in the state and 3,000 employees to look out for. The Government of Indiana does provide Salesforce with tax incentives as a reward for job creation, but that’s where the relationship stops.

Visit Indy, Indianapolis’ convention and business bureau, reported that in-total the RFRA cost Indianapolis alone over $60 million in corporate investment. Angie’s List froze a $40 million expansion to Indiana. The money quickly adds up and starts to chip away at the shimmer of the Governor’s new innovation plan. The state of Indiana might have brought some amazing tech companies to its state, and that’s something to be proud of, but Governor Pence doesn’t get to claim responsibility.

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