Venture Capital Continues to Say Oregon Has Good Business Climate

Chuck Sheketoff

Is it too much to hope that, in view of the news of G5 Marketing’s success in attracting venture capital, the Bend Bulletin and OPB will set the record straight about Oregon’s business climate? Is it too much to hope that the editors at those outlets will explain that, despite all the heated rhetoric, the tax measures have not had an adverse impact on Oregon’s business climate? Can’t they hear the venture capital speaking?

If venture capitalists’ money could talk, it would be telling you that Oregon is an inviting place to do business.

The latest bit of anecdotal evidence that Oregon’s business climate is good, and wasn’t harmed by Measures 66 and 67, is the news that Bend, Oregon-based G5 Marketing just landed $15 million in venture capital and plans to double its workforce. G5 Marketing’s success, The Oregonian reported, comes on top of what “has been an unusually strong year for venture capital in Oregon, which had its best first-half in four years.”

This news comes as no surprise to me and many of those who supported the tax measures last January. We continually pointed out that taxes play a very minor role in business location decisions. Much more important are factors such proximity to customers, the quality of the workforce, the quality of public structures and the quality of life in Oregon.

G5 Marketing CEO Dan Hobin alluded to the importance of these other factors:

Hobin . . . said he's able to find talented employees without paying Silicon Valley wages.

It's "geographic arbitrage," Hobin said, because tech workers can live better on less money than in California.

"Our plan is to stay here," he said. "We've been fortunate. We've found some really good employees in Central Oregon.

It’s also noteworthy that G5 Marketing plans to double its workforce, which means the venture capital investment will create more jobs in Central Oregon than the jobs lost by the departure of O’Keeffe’s Company, after founder Tara O’Keeffe sold her hand and foot creams business to a family-owned, Ohio-based company, Gorilla Glue.

As some of my BlueOregon colleagues observed last week (see here and here), some in the media once again fell for the spin of opponents of Measures 66 and 67, taking at face value the absurd claims of Tara O’Keeffe that her decision to sell the company and ship 20 jobs to Ohio were due to the tax measures.

Among the media outlets that swallowed O’Keeffe‘s bogus tale were The Bend Bulletin (see this PDF story and this PDF editorial) and OPB.

Is it too much to hope that, in view of the news of G5 Marketing’s success in attracting venture capital, The Bend Bulletin and OPB will set the record straight about Oregon’s business climate? Is it too much to hope that the editors at those outlets will explain that, despite all the heated rhetoric, the tax measures have not had an adverse impact on Oregon’s business climate?

Can’t they hear the venture capital speaking?


Oregon Center for Public PolicyChuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

Comments

  • (Show?)
    Is it too much to hope that, in view of the news of GS Marketing’s success in attracting venture capital, The Bend Bulletin and OPB will set the record straight about Oregon’s business climate?

    Yes.

  • (Show?)

    This is indeed great news. Now, how does it compare to the rest of the country. Is Oregon the only state seeing such a spike in funding? Or is Oregon seeing a spike that is lower than the rest of the country?

    Something to compare it to would be nice.

    • (Show?)

      Oregon is seeing a spike much higher than the rest of the country. 49% for Oregon, 13% for the rest of the rest of the country, according to Jeff Manning Oregon companies attracted $106 million in venture capital during ... first six months of 2010, up 49 percent from the same period of '09. ...

      techcrunch.com/2010/.../u-s-venture-capital-fundraising-up-13-percent-in-first-half-of-2010-to-7-5b/

    • (Show?)

      If Oregon's business climate was not good venture capitalists wouldn't be putting money into Oregon; they see a climate for growth/success in the Oregon businesses they are funding. Put another way, the opponents of the tax measures kept saying the measures would ruin our business climate and kill jobs, while the venture capitalists are creating jobs.

      Taxes are not a measure of a state's business climate, and the venture capital investments are anecdotal evidence of that.

  • (Show?)

    G5 is certainly poised to take advantage of the shift in advertising towards on-line publications from the print media. However, have they turned a profit yet or are they buring through capital and revenue like Sherman through Atlanta?

    As welsome as this budding success is, it is a niche market for highly skilled and technically adept workers who have moved to Bend and central Oregon for its wonderful outdoor activities and sports. The promised workforce increases do nothing for the thousands of tradespeople, forest products employees, and Cessna workers thrown out of work.

    Who knows, perhaps without the 2 measures, the investment would have been sooner, at a larger amount with G5 giving up leass autonomy.

    • (Show?)

      "The promised workforce increases do nothing for the thousands of tradespeople, forest products employees, and Cessna workers thrown out of work."

      Funny, because I could have sworn that even "highly skilled and technically adept workers" need homes built by tradespeople, out of wood produced by forest products employees. Some of them might even like to fly a Cessna.

      Or are we now to the point where we can pick and choose, not just family wage jobs, but what kind of family wage jobs we'd like here in Oregon. Wow. Our cup must runneth over much more than I had realized! :-p

    • (Show?)

      "The promised workforce increases do nothing for the thousands of tradespeople, forest products employees, and Cessna workers thrown out of work."

      Have you guys given up on trickle-down? Adding 100 jobs to a community -- especially relatively high-paying jobs as these are likely to be -- gives a shot in the arm to the whole local economy. Those G5 employees are going to be spending money on housing, clothes, cars, gas, restaurants, everything.

      "Who knows, perhaps without the 2 measures, the investment would have been sooner, at a larger amount with G5 giving up leass autonomy."

      This reminds me of Bob Dole's claim during the 1996 presidential campaign that without the Clinton tax increase, the economic boom of the '90s would have been even bigger.

      The beauty of claims like that is that it's impossible to disprove them. But in the absence of any evidence it's pointless to make them.

      • (Show?)

        Bruce you and Jay are correct. I was entirely too negative. Of course this is a very good chapter for the growing and evolving company. The investment would most likly occured even had the measures not passed (which I grudgingly voted for).

  • (Show?)

    Is it too much to ask for OPB and the Bend Bulletin to withdraw their misrepresented of the facts? Go ahead and ask them! Not a chance.

  • (Show?)

    Chuck,

    I wonder if the increase in Venture Capital has more to do with the current state of the banking system than anything else.

    It's more difficult to get a loan through a bank, and most institutions are very risk adverse right now. So it would seem only natural for entrepreneurs and businesses to shift to investors.

  • (Show?)

    Please read the real facts, not someone like Chuck, that's paid by the unions, whom constantly has misrepresent known facts.

    some quotes:

    “But regardless if these businesses move or not, it’s a sign that these types of taxes are further hurting Oregon’s perception as a place to do business.”

    and

    "Portland already has a reputation as being unfriendly to businesses...Tax increases only strengthened that notion."

    Please read http://djcoregon.com/news/2010/08/16/businesses-antsy-to-flee-oregon/

    • (Show?)

      Randy -- I am paid by OCPP, not unions, and I'd welcome the day that I could say unions are our main source of income, but they are not. OCPP is independent of unions.

      The DJC article notes that Vancouver has "more vacant space and cheaper rents" but fails to note that when companies move to Vancouver and continue to sell to Oregon customers, like Northwest Pipe and Farwest Steel, they will pay Oregon income taxes on those sales. And if those or other companies are Oregon corporate minimum taxpayers, the B&O tax in Washington will be a bit of sticker shock, as it is higher than Oregon's new corporate minimum tax.

      You can try to divert attention from the message of the post, but if Oregon's business climate were so horrible, why would VC entities be putting their money here? They wouldn't. If their money could talk it would say "Oregon is a great place to start and grow a company." No matter what people claim in DJC stories, the VC money speaks volumes about Oregon's business climate.

  • (Show?)

    Chuck,

    The investor in the G5 deal is not a venture capital firm, they're a growth capital firm. They only invest in businesses doing at least $5 million a year in revenue and they generally require the companies to be break-even or profitable. See http://www.volitioncapital.com/about/

    I suspect that G5 was able to fund its own growth to date with internally generated funds, and didn't need to go to the angel community for its early funding. Thus, Oregon's punitive capital gain rate, that is in fact driving angel investors from our state, didn't hurt G5, since they never needed angel investment.

    Your efforts to point to investments that have happened after M66/67 to show that the measures didn't hurt the business climate in Oregon is sort of like someone who tries to prove that a school funding cut and teacher layoffs didn't hurt education by interviewing a teacher who wasn't fired.

    Bob Wiggins

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