South Dakota Changes its Tactics in the Battle for High-Tech Jobs

South Dakota recently announced it is reorganizing its programs to support entrepreneurs and high-tech start-ups. Instead of offering assistance to new firms through small, targeted programs, the state will reallocate the funding for these smaller programs into a larger fund with fewer restrictions on how that money can be spent.

The change will allow the state greater leeway to assist expanding businesses, many of which were not eligible for the existing support programs. Mike Youngberg, finance manager of the Governor’s Office of Economic Development, believes the change in tactics will help the state target higher-paying, high-tech jobs through its support programs and help retain its high-tech businesses.

Earlier this month, the South Dakota state legislature voted to end two smaller programs that offered funding to start-ups and their investors. The programs were created in 2004 and 2005 as sub-funds of the state’s Revolving Economic Development and Initiative (REDI) Fund. South Dakota’s Entrepreneur Support Program provided loans of up to $50,000 to help entrepreneurs begin building their business and seeking other forms of capital. This program targeted start-ups at the earliest stages of business formation and focused the state’s efforts toward new, rather than expanding, businesses. The other cancelled sub-fund, the state’s Capital Investment Entity Program, encouraged investors to increase their investment in South Dakota companies by offering a four-to-one match up to $1 million. This approach, however, required the participation of angels and venture capital investors, which can be scarce — not only in South Dakota, but in most areas outside of Silicon Valley, Route 128, and a few other select metropolitan areas.

Funding for the eliminated programs will be reserved for the larger REDI Fund, which has fewer restrictions on the nature and amount of loans that can be offered to attract and retain new businesses. The fund and its sub-funds resulted in 22 loans in 2006, totaling more than $10 million. The South Dakota Office of Economic Development’s most recent annual report says the REDI Fund, along with its sub-funds, have helped companies create more than 33,178 jobs in South Dakota over the program’s 20-year lifetime.

Find out more about the South Dakota REDI Fund at: http://www.sdreadytowork.com/business/financing/REDI.asp

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