A year ago, no one could have possibly imagined the health and economic devastation of the novel coronavirus pandemic. On Aug. 25, Gov. Phil Murphy presented his budget proposal for the next nine months, which the Legislature is currently reviewing. Lost in much of the headlines about the need to make up for a short-term loss of billions of dollars in revenue is that it is critically important that we focus on long-term investment in people, small businesses and jobs.
As we prepare for the future, supporting New Jersey’s innovation economy must be a top priority. Not only are innovative companies developing treatments, equipment and applications that we can use to better understand and fight COVID-19, but they are also the companies that are best positioned for rapid, flexible growth, which will be vital to getting our neighbors back to work in good-paying jobs that last.
One of the most exciting of these ideas is the New Jersey Innovation Evergreen Fund (NJIEF). Initially proposed in 2018 as part of Gov. Murphy’s economic plan, the fund already has widespread support from leaders across New Jersey’s innovation ecosystem.
The NJIEF pairs the proceeds from the sale of future tax credits with private venture capital funds to create a self-sustaining investment fund without any budget appropriation or use of taxpayer dollars. To raise the initial pool of public funds, we will auction off tax credits to corporations registered to do business in New Jersey. In addition to the dollar amount of their bids, companies will be evaluated based on commitments they make to support other startups that receive funding through the program. This will ensure that companies launched in New Jersey have robust training and mentoring opportunities available to help them grow here in the Garden State.
The tax credit auction will raise roughly $50 million each year for a total of about $250 million over five years. At the same time, private venture capital investors will be able to join the fund by matching the public capital at least dollar for dollar. This matching program will bring the initial capital pool to $500 million.
A win-win for New Jersey
These private venture capital experts will also lead the investment of these funds into New Jersey companies. This is a win-win for our state because these investments will not only provide critical capital to companies that will create high-quality jobs, but the return on these investments will feed back into the fund, making it “evergreen,” or self-sustaining for future generations of startups. This will allow us to continue bolstering New Jersey’s innovation economy for years to come without an appropriation from the general fund.
According to a report from the New Jersey Business & Industry Association, this is more than a 60% increase in New Jersey’s investment in startup companies and a great start, but still well behind Massachusetts and New York.
Recovery will be a long process with its own challenges and frustrations. Planning now, and taking proactive steps to lay a strong foundation, will be crucial to making it as efficient and equitable as possible.
Novel problems require innovative solutions. It’s a good thing innovation is one of New Jersey’s greatest strengths.