During most of the last 15 years, Florida was able to boast of an economy that was strong, thriving and recession-resistant. The events of the last 15 months have proven that our economy was not nearly as resilient or recession-proof as we thought.
To compete in today's fast-changing, highly competitive society, Florida needs a strong, high value-added industrial base, and we need it now. If our state is going to enter the 21st century as a winner, we must concentrate on developing high growth industries, particularly those involving science and technology. Our goal is to develop regional clusters of small, high-tech firms that feed off each other _ much like Silicon Valley in the '80s.
This takes access to money, specifically risk capital, to allow entrepreneurs who know how to transform raw materials into value-added products to start their own companies.
Consider this success story. In 1977, a couple of bright young men in California had an idea for a new company. With a small amount of early financial backing, they founded a business in a garage and placed their product on the market against formidable competition, including IBM.
Today we know that company as Apple Computer Inc. Apple grew from nothing to a company with more than 14,000 workers. We don't have very many comparable success stories in Florida.
Florida taxpayers spend millions of dollars every year funding university research, but we do a very poor job of commercializing those ideas and products. As a result, we're paying the research costs so that other states and other countries can develop products that we should be commercializing ourselves. It doesn't make sense, and we must turn that around.
We need more sources of risk or venture capital to transfer research ideas into working products, and to support the startup of other innovative ventures.
We're losing ground to other states in both absolute and relative terms. Although Florida ranks sixth nationally in gross state product, and is the 14th largest economy in the world, it is only 32nd in the nation in venture capital resources.
The total amount of organized venture capital in Florida has been recently estimated from a low of $7-million to a high of $122-million, in the hands of six or less professional firms. Only half of these firms consider investing in start-up or other early-stage companies. Seed capital, the earliest stage of venture capital investment, is almost non-existent.
You might conclude that Florida simply lacks attractive investment opportunities, but that's not the case. South Florida has a burgeoning health technologies industry. Laser and simulation technologies provide the basis for rapidly growing clusters of companies in Central Florida. Other areas of the state are also spawning new companies, but in large measure they have had to obtain their venture capital elsewhere.
A large number of high tech companies call Florida home, and many of them have people on board who could start their own spinoff companies. These would-be entrepreneurs hesitate to even try, however, because of the lack of locally available risk capital.
In view of this situation, the Lieutenant Governor's Science and Technology Task Force recently concluded that the lack of in-state venture capital sources is the single biggest impediment to the development of new, high-growth companies.
There are several steps Florida must take to move forward, starting with placing a priority on the creation and expansion of Florida-based risk capital sources.
We must expand the number of venture capital funds in the state; increase our venture capital base to $250-million by 1995; target investment to young companies in high growth, technology-based industries; and focus state efforts on creating a friendly environment for entrepreneurs.
The state should implement tax incentives or other means to stimulate private sector participation in venture capital formation. Further, we should be cautious but nonetheless consider leveraging public fund investments for this purpose.
Florida also must convince large multinational corporations to keep and expand high-tech, high growth operations in the state now and to locate new ones in the future. Last but not least, we must capitalize on research programs at Florida universities.
Florida can build a strong, recession-resistant economy, but we need the right tools _ starting with risk capital.
Greg Farmer is secretary of the Florida Department of Commerce.