How Can New Jersey Attract More Venture Capital? We Asked an Expert.
Chris Sugden, Managing Partner at Princeton-based Edison Partners, which has been investing in New Jersey startups for more than 30 years
From social media and ride-sharing to biotech and private space travel, innovation is the lifeblood of today’s economy. Now more than ever, entrepreneurs with bold ideas are driving economic growth and changing how we interact with each other and the world around us.
Venture and growth capital is the electricity that powers the innovation economy. Unlike traditional businesses, startups in the innovation economy are often developing products or services that take years or decades of work to become financially viable businesses. Venture and growth capital investors make this possible by betting on the future potential of entrepreneurs and their innovative ideas; providing the capital necessary to power innovative companies through the seed, early, and growth phases with the expectation of returns on investment commensurate with the significant risk the investors take. Without these investments, many of the technologies that define our daily lives would likely not exist.
For much of the state’s history, New Jersey was a hotbed of innovation. Thomas Edison invented the light bulb at his laboratory in Menlo Park. Albert Einstein refined his theory of relativity at Princeton University. Bell Labs was home to the invention of radio astronomy, the transistor, the laser, and the C++ programming language. In Trenton, Roebling Wire Works produced the wire rope used in the Brooklyn Bridge and the Golden Gate Bridge. Innovation has always been part of the New Jersey story.
Yet in recent years, New Jersey’s position as a leader in the innovation economy has slipped. A key indicator of this has been the precipitous drop of venture capital investment in New Jersey. In 2006, New Jersey ranked as high as 5th nationally for venture capital investment, but over the past decade, venture capital investment has declined 50%, which has resulted in New Jersey’s national rank falling from 5th to 15th.
For New Jersey to reclaim its leadership position in innovation, this downward trend cannot continue. To better understand how to reverse this decline, we spoke with Chris Sugden, managing partner at the Princeton-based growth equity firm Edison Partners. Named as the ‘Most Active VC in NJ’ by CB Insights, Edison Partners has invested in more than 200 high-growth companies including 48 New Jersey-based companies. Edison Partners’ most recent investment, Suuchi, is a New Jersey-grown fashion technology startup founded by an Indian immigrant, Suuchi Ramesh. The company currently employs approximately 120 people in New Jersey and plans to add hundreds more employees over the next three years. Edison also recently invested in Northpass, an enterprise learning solutions company, and its current portfolio includes New Jersey companies Scivantage, Trialscope, and Zelis Healthcare.
As an investor who has worked with companies in many states, Chris knows firsthand what states can do to attract venture capital. The best states for investment, he says, are those where individuals, companies, and cities have come together to recognize that they must problem-solve with an entire technology ecosystem in order to thrive in this 20th century economy.
“New Jersey has done a good job developing policies that encourage technology and innovation as well as creating public-private partnerships that support New Jersey’s entrepreneurial ecosystem, but we can — and must — do better,” he said.
Chris believes most eastern U.S. markets, including New Jersey, remain underserved for growth stage capital and are ripe for becoming innovation economies. “The startup ecosystem in New York and California are well-established. But there is a vast need for venture and growth capital in other parts of the country, especially in states where the ground has been laid for startups to flourish.” He cites state-run programs like the InvestGeorgia venture fund, The Ohio Capital Fund (a fund of funds), and possibly the Innovation Evergreen Fund, an incentive program proposed by Governor Phil Murphy which is designed to attract private venture funding to New Jersey.
Edison Partners sees potential in New Jersey. “We deliberately chose New Jersey for our headquarters because it is uniquely situated between New York and Philadelphia,” said Chris. “We recognize the rich talent pool and are dedicated to helping to both invest in and grow the technology community in New Jersey.” One of the ways Edison Partners does this is with Edison Edge, a value-add platform offered to their portfolio companies at no cost that helps them excel in areas like sales and marketing, financial planning, board leadership, capital formation, and M&A. In Chris’s words, “Edison Edge helps us develop and grow management teams, and also attracts startups to us rather than, say, a Silicon Valley firm.”
In addition to its location at the heart of the Northeast corridor, Chris noted that New Jersey also has one of the country’s most educated workforces and access to many Fortune 500 customers, which creates a wealth of startup talent and customer opportunities for young companies. The state also has distinguished academic and corporate research facilities, existing entrepreneurial networks, and ample management and engineering talent pools. This innovation infrastructure helps balance out New Jersey’s lack of capital relative to the West Coast.
In what may be a surprising consideration for some, Chris also pointed to New Jersey’s vast array of natural and recreation resources from golf courses and ski resorts to beaches and hiking trails as a major selling point. In a business culture that increasingly prioritizes work-life balance, this kind of variety is a recruiting perk for companies who want their employees to enjoy leisure time.
Clearly, New Jersey holds great appeal for innovative companies and the venture capital investors that support their growth, and Governor Murphy and the New Jersey Economic Development Authority are implementing a variety of programs to emphasize these resources and bring VC investment back to the Garden State. These include everything from Founders and Funders events that connect Jersey-based entrepreneurs with VC investors, to the NJ Ignite rent-support program that provides free rent to startups leasing space in participating coworking facilities, and the aforementioned New Jersey Innovation Evergreen Fund, which would be a potential game-changer with respect to bolstering private VC investments in New Jersey companies.
Cultivating a thriving innovation ecosystem in New Jersey by attracting more venture capital investment is critical to building a stronger, fairer economy. Fortunately, we already have a strong base, with investment firms like Edison Partners leading the way, and Governor Murphy’s bold plan to build on our existing assets will create a thriving innovation economy that powers long-term, sustainable growth for years to come.
