The Maryland Department of Commerce signed a memorandum of understanding (MOU) with two Dutch economic development agencies in October 2016. The purpose of the MOU is to create a “soft landing” cyber and security technology platform to help entrepreneurs from Maryland and the Netherlands.
Taking advantage of the flattening, globalized economy, soft landing measures are designed to attract fast-growing new businesses and promising startups to the state. Based on the press release, this is the first agreement of its kind in Maryland.
We’re all very familiar with the positive economic impact of entrepreneurship. Fast-growing new ventures such as Under Armour or Sourcefire bring new jobs to the economy. Great new ideas introduced by creative entrepreneurial teams can transform the landscapes of industries and open up new economic opportunities for others.
For example, Airbnb allows anyone with a spare room to turn idle assets into a profit-generating business, so we don’t have to be millionaires to enter the hospitability industry nowadays.
In the race to building a vibrant entrepreneurial environment, Maryland has advantages in good infrastructure and high-quality workforces. According to the 2011 census, about 40% of state residents have college degrees, and 16% of the state population holds an advanced degree.
This is not surprising, since Maryland is home to several world-class research universities and federal research agencies, including the National Institute of Standards Technology and the Food and Drug Administration. Maryland also has the third highest median household income in the United States and is consistently ranked among the top 10 destinations for venture capital investment, according to the National Venture Capital Association (NVCA). The association’s recent numbers suggest that Maryland has a healthy convergence of ideas, talents and capital for aspiring entrepreneurs.
It still, however, has to make a few major strides to catch up with more established hubs of entrepreneurship. For example, Massachusetts and Maryland are comparable in population, household income and workforce quality, but the venture capital industry seems to view Massachusetts as more fertile ground for entrepreneurship than Maryland. The NVCA has recorded 2,393 venture capital investments in Massachusetts from 2011 to 2015, totaling 22 billion venture capital investments.
In comparison, about 3 billion venture capital funds were invested in less than 500 new ventures in Maryland during the same period. Maryland can certainly use more ideas, more talent and more capital to rival other states.
Access to Capital
The essence of the new venture, soft landing concept, is to assist foreign entrepreneurial teams entering the American market. Unlike the conventional import business, soft landing operations aim to bring the whole new venture team (or at least a significant portion of a venture team) from a foreign nation to the United States.
While these new ventures are interested in finding clients for their ideas and businesses, the main motivation for many of them is to access the capital and the American entrepreneurial ecosystem. They are not gigantic international corporations who will immediately create hundreds of new jobs right away.
However, soft landing businesses contribute to our state economy by bringing new ideas and innovations. Good ideas and innovations will attract more venture capital money and other growth opportunities to Maryland. Stories of successes will also motivate more international entrepreneurial teams to come to Maryland for better opportunities.
Several Maryland-based incubators have started offering soft landing services to international entrepreneurial teams. The Baltimore-based Emerging Technology Center is perhaps the most recognized facility, as it is one of the 18 soft landing designees in the United States recognized by the International Business Incubation Association. Market entry assistance and capital access are usually provided by the soft landing incubators to help international venture teams settle and grow in Maryland.
In addition to the incubation service providers, the general environment probably plays an equally important or more important role in attracting foreign new ventures.
International venture teams are basically immigrants with a unique asset: their innovations. They are naturally attracted to where other entrepreneurs have succeeded. That is one of the key reasons Silicon Valley continues to be a magnet of talented, innovative new venture teams from other places.
However, after their initial success, many elect to move their more established, bigger businesses to other locations. A California-based corporate relocation service estimates that more than 10,000 businesses have moved out of California between 2008 and 2015.
The Welcome Mat
Although business relocation occurs all the time, we can create a welcoming environment to encourage the international entrepreneurs who have successfully entered the U.S. market to develop roots in Maryland. It may take more root-growing measures, including better public schools, ethnically diverse communities and housing options for active young adults, etc., to convince imported startups to stay. Once they call Maryland home, they are less likely to move away.
Globalization has elevated the competition for new businesses and entrepreneurial talents to the global scale. Maryland has not achieved its full potential to establish a world-class entrepreneurial hub. However, systematic efforts to import soft landing ventures can bring about great improvements to our entrepreneurial ecosystem.
The MOU with the Netherlands is a small step. Hopefully, it is only the beginning of long-term, systematic commitments to develop a home for thousands of innovative and fast-growing new businesses here.
Hung-bin Ding, Ph.D., is an associate professor of entrepreneurship and strategic management at Loyola University Maryland’s Sellinger School of Business and Management, which has a campus in Columbia. He can be contacted at 410-617-5598 and [email protected].