Hey Governor and Oregon Business Association, Read the Paper!

Chuck Sheketoff

Governor John Kitzhaber and Oregon Business Association leaders should have read last Friday's edition of the Portland Business Journal before claiming to the Senate Committee on Finance and Revenue this week that Oregon's income tax on investment gains — capital gains — discourages investment in Oregon.

Stories in the main stream press don't get much better. While The Oregonian subsequently reported on Oregon's strong investment performance, the Portland Business Journal article, "Companies head to Silicon valley in search of $" (PDF), contained some real gems.

Among the highlights are (emphasis added):

Over the past 18 months, Portland's startup ecosystem matured. The economic benefits of that development should snowball in the next two years as venture-fueled companies add thousands of workers and investors cash out and reinvest millions of dollars in profits in new startups.

"It's a massive change", said prominent investor and entrepreneur Nitin Khanna, one of the trip's organizers. "Portland has become an accepted technology hub." . . .

As a result, venture capital investments in Oregon companies are on pace to nearly double this year, according to data from PitchBook. Nationally, venture capital is on pace to decline.

"The Portland software community has come of age," said Nathan McDonald president of the Northwest Region of the Keiretsu Forum, a global network of angel investors.

The maturation of the startup scene is expected to have two significant consequences.

First, venture-backed Portland companies are no longer expected to become former-Portland companies. For years, successful Portland startups, such as Jive Software, relocated to Silicon Valley to be closer to new equity investors. That's no longer the case. . . .

As those talent networks build, Portland will continue to attract top engineers.

Second, the biggest names in venture capital have been operating in Portland for years. . . .

"You've got every major VC in tech somewhere here in Portland or the greater Portland area," Fraiman said. "Most people who aren't in this community actively are surprised. In some cases the old tapes are still playing."

The big change: The giant pool of venture capital flowing through Portland has gotten the attention of traditional asset managers. . . .

For one, the city's enviable quality-of-living has made it an attractive destination for risk-taking young entrepreneurs and top engineering talent.

"Portland is the last bastion of coolness on the West Coast," Fraiman said. "The rap on Portland five-plus years ago is you couldn't get the team. The reality is that is no longer true. You can."

It's also a relatively cheap place to start a business.

An entrepreneur can get a startup off the ground in Portland for $500,000. It would cost $4 million to launch the same idea in San Francisco and more than $2 million in Seattle because of higher rents, higher wages and a higher cost of living.

There's no correlation between economic growth and taxes on the rich.

Governor Kitzhaber and the Oregon Business Association would know that if they had read last week's Portland Business Journal story (PDF).



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.

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