Startups have big ambitions in the nation's smallest state | Crain's Boston

Startups have big ambitions in the nation's smallest state

In its bid to cultivate a new image of itself as an unsung haven for startups, the city of Providence, Rhode Island, is a bit like a younger sibling overshadowed by its bigger, more successful brothers and sisters.

Caught between the imposing competition of Boston and New York City, Providence has long struggled to attract and retain talent drawn to the thriving tech sectors elsewhere in the Northeast corridor. Lately, however, local entrepreneurs say Providence has emerged as an inexpensive alternative to the better-known startup scenes just a few hours down the road.

“We have some very positive momentum and traction,” said Kelly Ramirez, CEO of Social Enterprise Greenhouse, a local business accelerator, co-working space and community hub. “There’s a real sense of everyone wanting to make this place better.”

Ramirez moved to Providence from Michigan nine years ago and said she was impressed by its accessibility.

“It’s a small state, so it’s a great place to test things out,” Ramirez said. “A startup can have access to our entire delegation and get in front of the governor. ”

The state economic development agency promotes what it says is a superior quality of life, touting the fact that the whole state is within a short drive from the beach. It remains a challenge, however, to rebrand this post-industrial New England city as a tech hub when it seems just about everyone is trying to do the same.

To distinguish itself from other startup scenes, Ramirez said, Rhode Island is trying to carve out a niche for “socially responsible” enterprises. So far that includes businesses like the women’s health company Maternova and Ivory Ella, a clothing retailer that donates 10 percent of its profits to the conservation group Save the Elephants.

“Maybe there’s an opportunity to create a reputation in an area that is less crowded,” said Ramirez. Her organization, Social Enterprise Greenhouse, recently launched an accelerator program for startups focused on local food, for example. They have also partnered with the Greater Providence Chamber of Commerce to develop a socially responsible business certification called “Best for Rhode Island,” similar to the B-Corp designation awarded in a growing number of states to companies that meet certain social and environmental standards.

Ramirez and other local entrepreneurs say the state’s universities, which include Brown and the Rhode Island School of Design, are the engine of the state’s startup scene.

Valentin Perez, a rising senior at Brown, said the university is a natural fit for self-starters because it does not have course requirements.

“That’s a special thing that other schools don’t have. I think it draws people who are naturally entrepreneurial,” said Perez. “Even if someone’s studying, you know, biology, I feel like they have this entrepreneurial spirit.”

Perez, who helped found the annual Startup@Brown conference, studies computer science and applied math, and is currently doing an internship at Snap Inc. in Los Angeles. He said he does not yet have plans for after graduation, but believes ambitious entrepreneurs risk hitting a ceiling if they stay in Providence.

Access to capital remains a challenge for entrepreneurs in the nation’s smallest state. Rhode Island has only one prominent angel investor firm, Cherrystone Angel Group. The state-backed Slater Technology Fund also offers funding to early-stage tech firms.

“Outside of that it’s difficult," aid Ramirez. "We don’t have a super robust corporate scene in the way a larger place would have. The funding scene on all fronts is difficult.”

Led by Democratic Gov. Gina Raimondo, a former venture capitalist, officials in state government say that’s something they’re trying to change. Raimondo has made economic development a policy priority of her administration, earmarking tens of millions of dollars in tax incentives for companies to open up shop in Rhode Island.

In December the prestigious Cambridge Innovation Center announced its expansion into the state, signing on as the anchor tenant in the new Wexford Science & Technology Innovation Center, a $158 million hotel and office complex built on land cleared by the relocation of Interstate 195. The governor has called the center, which received more than $30 million in tax breaks and other public support, a “game-changer” for the state’s economy. Construction on the 191,000-square foot building is expected to begin later this year.

Critics of the governor say the state spends too much money on luring out-of-state businesses. Republican Cranston Mayor Allan Fung, who ran against Gov. Raimondo in 2014, recently slammed the state’s economic development agency after a local report accused it of spending more on out-of-state contractors than Rhode Island firms.

Gov. Raimondo said her strategy is working, citing a state unemployment rate that is the lowest it's been since 2001, and some 13,000 new jobs added since her election.

There's been a hit parade of companies announcing that they're creating new tech centers in Rhode Island,” said Stefan Pryor, whom Gov. Raimondo appointed as the state’s first secretary of commerce in 2015. Pryor points to GE Digital, Virgin Pulse and Johnson & Johnson, three companies that recently announced expansions in the state.

In 2013 Gov. Raimondo established the Rhode Island Commerce Corporation, replacing the state’s existing economic development corporation in the wake of a botched deal with 38 Studios, a video game company founded by former Red Sox pitcher Curt Schilling. The company went bankrupt in 2012, less than two years after receiving $75 million in loan guarantees from the state.

The episode left many skeptical of the state’s strategy of attracting out-of-state business with generous tax incentives, and set the table for the current political debate over economic development. Cranston Mayor Allan Fung, a possible GOP challenger to Raimondo in the 2018 gubernatorial race, has criticized what he calls "failed and weak leadership from the Governor."

For her part, Ramirez, the CEO of Providence’s Social Enterprise Greenhouse, said Raimondo’s administration has made it easier for local entrepreneurs to stay in Rhode Island instead of fleeing for Boston, New York or San Francisco.

“It’s made a huge difference for us,” she said. “There’s a much more proactive focus on improving the environment for businesses to get started. There’s a real focus on it from the top-down.”

July 15, 2017 - 5:42pm