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Tech Tackles Tough Times
CTC's Theodore says state's tech companies must be authors of their own salvation
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Business New Haven
9/16/2002
By: BNH
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Michael Theodore of Glastonbury is director of the Rocky Hill-based Connecticut Technology Council (CTC), an eight-year-old partnership of Connecticut providers and users of technology committed to growing and diversifying the state's technology base. Theodore spent 15 years working in television news in California. Following business school and then a stint as a management consultant, Theodore entered the Internet world by working for startups such as CitySearch (still in business) and Cosmo.com (out of business). Before joining the CTC on September 10, 2001 he was chief operating officer of the New York New Media Association. He spoke with BNH on September 6.
Did the CTC find you or did you find them?
They found me. A recruiting firm had called my boss and asked if she could suggest anybody, and she didn't suggest me because she said she didn't want to lose me. But I begged, so she said, 'Okay' [laughs].
What has surprised you most in your first 12 months here?
What has surprised me is how much longer it has taken the economy to rebound than anyone anticipated. Prior to September 11 there were people who questioned whether the economy was even in a recession. After September 11 and the huge hit that the market took, people were starting to say, 'Okay, first quarter [of 2002] we're going to see some real gains.' And then people started saying, 'Second quarter…third quarter - no doubt about it.' Now people have stopped predicting quarters, so we're hearing, '2003 - yeah, we'll see it come back then.'
What organizational priorities have been reordered since you arrived?
It's the same question for technology companies as for any other company: How can we improve our market position, improve business development, be lean and mean and still grow during tough times. Our mission has always been an economic-development mission. A lot of companies have interpreted our mission in the past one of working with the state to say [on behalf of tech firms], 'We're going to tell you ways you can make the state of Connecticut a better environment for technology companies so we can attract a lot more companies and have a great workforce.' What I'm hearing from our members [now] is, 'Look - it's great to work with the state, but we really need to figure out how to help ourselves now that the state has its own set of financial issues.' So some of the work we've done in professional development and sharing best practices has become even more important. A lot of companies now are having to market without the marketing executives; a lot of companies are doing HR without an HR executive any longer. A year ago we were doing seminars on compensation packages and options; today we're addressing issues like, How do you keep morale up when you do have to lay off people?
I'm not sure everyone understands where and how the CTC intersects with state government, or is the group entirely a private advocacy group?
There are a couple of intersections, but we are an independent, private industry trade association. We have received some non-recurring state grants, but membership fees and corporate sponsorships [comprise] the overwhelming majority of our revenue stream.
What industries fall under the technology umbrella?
The technology council represents four primary verticals: software and information services, advanced manufacturing, life sciences and telecom. Our largest group is software.
Of the three obvious avenues to growing the technology industry in Connecticut - incubating new companies, attracting companies from elsewhere or retaining existing companies - which provides the greatest opportunity today?
In this environment, unless you have a remarkable bundle of tax incentives that would cause companies to say, 'Hey - I'm moving there tomorrow,' what's more likely is persuading [companies exploring opening an East Coast office] that Connecticut may be a sensible alternative to New York or Boston. It's certainly cheaper to do business in Connecticut than in New York or Boston; and there are lifestyle considerations. But my members certainly don't want me to spend a majority of my time [trying to attract out-of-state companies]. That's the state's job. If I can help, great. My job is to look after my members. So helping existing [Connecticut] companies is priority No. 1.
What do most of your members want from state government, besides money?
No more tax breaks are in the offing. If anything, we have to guard against the tax incentives we have being taken away to make up what is now a $250 million [state budget] shortfall. Nevertheless, the incubation of new companies is, to me, phenomenally important. I truly believe that there is an entrepreneurial fervor in Connecticut that right now is as strong as it ever was during the height of the technology bubble. There are companies that have been sitting on the sidelines for two years now waiting for the markets to recover, waiting for a chance to go before the [venture capitalists]. Well, first, they should be disabused of the nation that they're going to get VC money, because that just isn't going to happen. But there are banks out there. The state needs more program that will lend money at little or no interest to start-up technology companies to encourage the growth. I've talked to people at the state level about subsidizing incubators, and I've been told, 'Why do we need incubators during a recession?' I said, 'Of course that's when we most need them.' During the good times the VCs provided enough money that companies didn't care about incubators because they could afford the fancy chairs and desks. But during slow times you can't slow down economic incentives - that's when you need them more.
How are Connecticut's tech companies faring compared to their counterparts in states such
as Massachusetts, New Jersey, southern New Hampshire - the same, or different?
It's not the same, and a lot of it has to do with the market that technology companies serve. For example, in New York City the predominant market for tech companies was Internet-related, content-related, B2C-related. New York took probably a harsher hit than anywhere else in the country, because that market just evaporated. We are fortunate in Connecticut that the primary targets for technology companies, particularly on the software side, are financial services, manufacturing, defense - three sectors that are doing okay, or at least better than most. In Massachusetts, the cluster is so huge that in absolute numbers they could lose 80 percent of their value or employment and still be larger than Connecticut's.
What technologies to you think hold the most promise to generate employment gains in Connecticut in the next decade?
Three areas. One is fuel cells, which is probably the sexiest and most interesting technology in the state right now. And if the price of oil keeps going up it's going to look even better. Bioscience has obviously been hammered since July by the market, but biotech companies are different from other companies, because [investors] know going in that they must be prepared to play a long-horizon game. So VCs will continue to provide sustenance to their key biotech investments. The final area is software, an industry that is much more at the mercy of other sectors than, say fuel cells or biotech. With software, you have to wait until other sectors of the economy feel sufficiently optimistic that they will make the investment that they need to make.
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