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NJ’s EDA Helps Tech Startups at NJTC Bootcamp

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One of the advantages of living close to a major NJ academic institution is that universities, especially tech-oriented ones, are often hubs of entrepreneurial activity.

That is the case with NJIT, which is located down the road from me in Newark

This engineering-focused school boasts an incubation program at their Enterprise Development Center, which to date has hatched over 80 businesses and continues to attract seed money.

And NJIT also hosts interesting conferences, like the New Jersey Technology Council (NJTC) Bootcamp, where entrepreneurs get to tap into the wisdom of business veterans, investors, accounting firms, lawyers and the rest of the ecosystem that keeps the tech scene in this area rolling along.

I stopped by NJIT campus earlier today to get some basic bootcamp training.

NJTC is another one of those NJ resources—it’s a private non-profit—and their Bootcamp at NJIT brought together members of the Garden State’s deep talent pool, including angel investor Katherine O’Neill from JumpStart NJ; Vocaltec alumnus and CEO of Phone.com  Ari Rabban; tech attorney (and CPA) David Sorin of SorinRoyerCooper, Kamran Hashmi from the state’s Economic Development Authority; and Scott Barnett, founder of NJ-based Bluenog.

At this event, I was more interested in the public side of the fence and learned from Hashmi’s presentation about NJ’s innovative programs to support tech startups.

Before I delve into that, I tip my hat to Scott Barnett for a memorable business adage: “Nail It Before You Scale It”, which he delivered during hs keynote talk.

That was Barnett’s compressed way of telling the gathered bizfolk that sales people, as some CEOs wrongly think, are not going to solve a company’s structural problems. Or as Barnett put it, “sales guys don’t figure anything out”, and they won’t be able to magically sell their way out of bad products and strategies. There’s more Barnett at his blog (see references below).

Back to NJ’s EDA.

Did you know that in NJ tech and biotech companies can sell their net operating losses (NOLs) to profitable companies?

Hashmi explained that one company’s financial loss can be used by another profitable company to reduce its tax liability, and because the loss actually has a value to them, they’re willing to pay.  Buyers of NOLs in NJ include big players like PSE&G and Bank of America.

Kamram Hashmi from the NJEDA (r.), and Randy Harmon, expert on federal SBIRs.

Very nice.

Another EDA program that Hashmi pointed out was the Business Incentive Employee Program or BEIP, which gives grants to companies considering moving to NJ.

The point of this program is jobs, and BEIP will compensate companies based on their employees’ state income tax liability: therefore the more employees, the larger the grant.

The catch is that BEIP must be a “material factor” that sways companies to move to NJ or expand.

And here’s one more that is especially crafted for early stage startups. The Edison Angel Innovation Growth Fund provides financing by matching an outside investment for up to $250,000 in the form of subordinated convertible debt with warrants.

Translation: the state will give a startup venture a loan, taking a lien on the IP; they’ll have the right to convert debt to equity; and they’ll take a long-term option (10-year expiration).

By the way, no personal guarantees (as in putting up the house) are required.

There’s more information in the links below.

And thank you NJ Economic Development Authority!

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