A TREASURE TROVE
There’s no doubt that Montana has earned the name Treasure State by maximizing our natural resources. For generations, we’ve been building an economy from the ground up, extracting the minerals deep beneath our soil and using agriculture to maximize vast expanses of land. All the while, National Parks, blue ribbon trout streams, and majestic mountains have made Montana a top destination for tourism.
Though these industries remain economic staples for our state, high tech is gaining ground among them. This is a good thing and we need to encourage more of it! Tech-centric businesses generate revenues from outside local markets, and in turn, distribute it to Montanans through high paying jobs and economic growth. Montana needs to focus on becoming a truly sustainable economy by catching up with national trends of the 21st Century.
THE FUTURE IS TECH
Tech-leveraged businesses are growing faster than any other sector. The high tech industry in the US grew an average of 3% annually for 15 years, while other industries grew only one percent. Technology is the world’s number one contributor to economic growth and will continue expanding for decades to come. The Treasure State is no exception to this trend.
Montana’s tech sector is growing seven times faster than the rest of our economy, and providing high paying jobs for residents. While high tech companies represent only 4% of Montana businesses, they contribute nearly 6% of all payroll; employees in high tech are raking in 40% more than average Montana workers. Not only do Montana’s high tech businesses provide quality, high-paying jobs, but they are also paving a way for the future of our economy.
Yet, regardless of the positive trends, our state’s economy is significantly lagging compared to national statistics. From the 1990s to now, Montana is continually ranked among US states with the lowest rates for high tech job employment. Only 6% of Montana workers are considered high tech employees, while 15% of the nation’s total workforce are high tech workers.
Montana must bring more tech-leveraged products and services into the economic mix or we will fall further behind national norms. We live in the Treasure State because it’s home to some of the nation’s most precious resources and beautiful landscapes, but relying on traditional economic drivers to carry the future of our workforce is a grave mistake. Extraction, agriculture, and tourism are only part of the equation to economic stability—high tech endeavors promise a brighter future for Montana’s workforce, families, and way of life.
BARRIERS FOR MONTANA
So, if Montana is experiencing a “high tech boom,” why are we still so far behind the rest of our nation? High tech as a whole may be growing faster than any other industry, but tech companies themselves are experiencing roadblocks hindering faster growth. They face certain challenges doing business in Montana, especially when it comes to finding access to capital and obtaining expert-level mentorship relevant to their products and services.
Growth for high tech often requires large investments in new research and development, but startups and SMEs lack the funds. Lack of access to capital is one of the largest impediments to growth for high tech businesses. Without sufficient funding for innovation, small companies cannot compete with large corporations. Funding is a key to success in the ever-changing industry of high tech, but it’s a major obstacle for Montana’s businesses.
Most high tech products are capital intensive and a risky investment, so traditional financing from banks is limited without an entrepreneur’s personal collateral. Pharmaceutical and bioscience companies, for example, wait years before receiving payout for their products. Banks are not willing to take the risk on such unsecured endeavors.
Angel investment and venture capital is a solution for entrepreneurs who cannot get funding from personal wealth or banks, but this poses a problem for Montana’s high tech businesses too. Until recently, Montana has been largely underserved by angel investors and venture capital for that last 100 years. Large corporations in highly-funded metropolitan areas tend to have more access to funding through business collateral, venture capital, angel investment, and crowdfunding, while Montana’s high tech businesses have been left in the dust.
(Hint: Social Capital)
Montana might be at the tail end of high tech development in the US, but we are leading the way in entrepreneurship! Consistently ranked as one of the top five states in the US for entrepreneurial activity, we are a historical a “hot spot” for adventurous pioneers and hard-working homesteaders. Small business has always thrived in Montana’s micro economy, and now our modern-day founders are at the forefront of a new movement in local entrepreneurism—scalable, high tech products and services.
High-growth tech companies are an ideal scenario for economic prosperity and the key to a sustainable future for Montanans. While building a high-growth company in our rural state is rare, and it is entirely reliant upon entrepreneurial activity that these rarities occur. Entrepreneurship is an engine for job creation and economic growth. Economic development experts agree that promoting local entrepreneurship is the most effective strategy for enhancing rural economic prosperity. Plus, an environment encouraging local entrepreneurship is more likely to attract outside business. The founding of tech-based enterprises lends a significant hand to the state’s job creation, and has an even greater impact on innovation and social change.
Where Montana lacks in access to financial capital, it makes up for in social capital. Social capital is the collective knowledge and support that makes it easier to build a successful business. Social capital plays a critical role in Montana’s entrepreneurial spirit by leveraging assets existing in relationships and networks. Communal participation and like-mindedness impacts entrepreneurism because enterprise is often a consequence of individual interaction and social community. Startups gain traction and grow through networking and utilizing public resources. Emphasizing the need for communities to provide entrepreneurial educational and financial support to their risk-takers.
Living in Montana’s stunning landscape offers a sense of encouragement to conquer the hurdles high tech startups face, but entrepreneurs need more than a good view to stay in business—they need access to community support and the encouragement to plug in to their “neighbors” and seek mentorship.
A BRIGHT FUTURE FOR RESIDENTS
As entrepreneurial activity and social capital increase, access to funding is restricting growth for many Montana tech companies. We need to continue promoting our Montana way of life by providing entrepreneurs with resources to information, and enhancing social capital through public programs that connect tech businesses to industry experts. Yet, we must also work more diligently in offering finance options for promising innovations. The true measure of regional economic success is a high level of entrepreneurial activity coupled with an ease of access to capital.
This is where Early Stage MT enters the scene. Early Stage MT is a non-profit dedicated to accelerating the growth of emerging technology businesses in Montana by providing world-class training and mentoring, and quality connections that often lead to capital investment. Our programs leverage Montana’s statewide social capital to provide emerging companies access to the tools and resources they need to create more high tech jobs, and ultimately expand Montana’s economy, faster.
Founded in 2018, Early Stage MT is creating enormous impact across Montana and in local communities. Already, just 7 of the 80+ companies we’ve served have since created nearly 30 new high tech jobs in Montana and attracted over $9 million in investment.
Watch the below video for a brief about “Startup cultures.”
Barrington, Richard. (May 23, 2017). Best and worst states to make a living in. Money Rates. Retrieved from: https://www.money-rates.com/research-center/best-states-to-make-a-living/
Berry, Maureen. “Strategic planning in small high tech companies.” Long range planning 31, no. 3 (1998): 455-466.
Buchanan, Leigh. (May 2015). American entrepreneurship is actually vanishing. Here’s why. Inc Magazine. Retrieved from: https://www.inc.com/magazine/201505/leigh-buchanan/the-vanishing-startups-in-decline.html
CompTIA, The Computing Technology Industry Association. (March 2017). Cyberstates 2017. Retrieved from: http://www.cyberstates.org/pdf/CompTIA%20Cyberstates%202017.pdf
Fairlie, R. W., Morelix, A., Reedy, E. J., & Russell, J. (2015). The Kauffman Index 2015: Startup Activity| National Trends.
Markova, Sonja, and T. Perkovska-Mircevska. “Financing options for entrepreneurial ventures.” Economic Interferences 11, no. 26 (2009): 597-604.
McKeever, Edward, Alistair Anderson, and Sarah Jack. “Entrepreneurship and mutuality: social capital in processes and practices.” Entrepreneurship & Regional Development 26, no. 5-6 (2014): 453-477.
https://www.theverge.com/2017/5/16/15627198/tech-sector-stock-market-record-highPorter, Michael. January 1998. The Adam Smith Address: Location, Clusters, and the “New” Microeconomics of Competition.
UM-BBER, University of Montana Bureau of Business and Economic Research. (February 2017). A Profile of Montana’s High Tech Industries. Retrieved from: https://mthightech.org/wp-content/uploads/2017/03/2017-MHTBA-Survey-Summary-Report-final.pdf