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Interim Joint Committee on Economic Development & Workforce Investment (7-16-26) — Transcript

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0:00meeting of the interim joint committee
0:01on economic development and workforce
0:03investment. Uh this is our second
0:06meeting. Appreciate everybody being here
0:07today. Uh any member uh seeking
0:10recognition would like to recognize any
0:12guests before we get going.
0:17Okay. And just want to remind everyone
0:18if you could please silence your cell
0:19phones before we get rolling. Um any
0:23other member, anybody seeking
0:25recognition? If not, we'll call the
0:27role.
0:29Senator Boswell,
0:31Senator Clemens,
0:33Senator Funky from
0:36>> Senator Girdler, Senator Howell, Senator
0:39Maiden
0:40>> here,
0:41>> Senator Nun
0:42>> here,
0:42>> Senator Thomas, Senator Wilson
0:45>> here,
0:46>> Senator Weise, Representative Bowling,
0:49Representative Bray, Representative
0:52Callaway, Representative Dval
0:55>> here,
0:56>> Representative Elliott,
0:58Representative Presative Gentry
0:59>> here.
1:00>> Representative Griffy
1:01>> here.
1:02>> Representative Gracel.
1:04Representative Huff
1:05>> here.
1:06>> Representative Jackson.
1:08>> Representative King. Representative
1:11Kcarnney.
1:13Representative Lawrence.
1:15Representative Layman
1:16>> here.
1:17>> Representative Lockett
1:18>> present.
1:19>> Representative Payne.
1:21Representative Sharp
1:22>> present.
1:23>> Representative Tet Laughaferty.
1:26Representative Truit. Representative
1:28Williams,
1:30Co-chair Wheeler, Cochair Bransum
1:33>> here.
1:45>> All right, members, we'll skip over the
1:46approval of June minutes. See if we get
1:48a quorum here before we journ. If not,
1:51we'll we'll defer to that and we'll
1:53approve uh in the August meeting. But
1:55we'll go ahead and move on with the uh
1:57presentations. First we have uh Charles
1:59Charles all the Kentucky Chamber and
2:02members. Today we're going to be
2:03focusing on you know with economic
2:04development. A lot of times we focus on
2:06landing those big projects. You know
2:08that's the thing we talk about uh the
2:10most but um one component of that that a
2:13lot of times goes uh overlooked from the
2:15economic development standpoint is our
2:18entrepreneurs and the people who are uh
2:21starting those businesses. sometimes uh
2:23growing those businesses from uh you
2:25know one or two people into the big
2:28projects that we land and and we got uh
2:31two presentations today that really
2:32really going to be focusing on that
2:34because that's that's such a important
2:35component of it and what Kentucky can do
2:38to continue to track those individuals.
2:40So with that uh Charles if you could
2:43just state your name for the record.
2:44>> Sure. Charles all uh Kentucky Chamber of
2:47Commerce.
2:47>> All right, floor is yours.
2:48>> Thank you very much chairman. Thank you
2:49members of the committee. It's always a
2:51privilege to get an opportunity uh to
2:53get in front of this committee. Uh the
2:55work that you all you all do in this
2:56room I think is just deeply important.
2:58It's of course deeply important to the
2:59chamber. Um I know it's uh it's 9:00
3:01a.m. on a Thursday in the middle of
3:03summer. It's conference season. Um we're
3:05going to look at a range of data. Dave's
3:07going to show you even more data points.
3:09Uh but I do think this is a remarkably
3:11important topic and chairman, I think
3:13the framing that you laid out at the
3:15start of this is really a perfect way to
3:16think about this. Uh we you know when we
3:18think about economic development in
3:20Kentucky, we kind of have this notion of
3:22focusing on a lot of business
3:23attraction. How do we land a lot of
3:25those big fish? That's a good thing at
3:27the chamber. We love that stuff. We love
3:29those press releases, those jobs
3:31announcements, but entrepreneurship is a
3:33really really important part of economic
3:35development and that's that's what we're
3:36here to talk about. And we're going to
3:38be talking specifically about uh a new
3:40initiative uh that we're launching at
3:42the chamber and this is actually the the
3:44first public uh announcement for this
3:46project. And so I can't think of a
3:47better place to do it uh than this
3:49committee right here. Uh so when you
3:51think about the Kentucky Chamber of
3:52Commerce, we we tend to work on policy
3:56issues that support businesses of all
3:58different types, shapes, and sizes. So
4:00we we support small businesses, large
4:02businesses, medium-sized businesses,
4:04industries, all different types uh and
4:07all across the state. Um
4:09entrepreneurship, however, is an area
4:11that we have been leaning into more and
4:13more. And as with everything at the
4:14Chamber of Commerce, this is driven by
4:16our members. This is something that we
4:18have been hearing increasingly more and
4:20more about about different challenges
4:22that are in this area. But and I'm going
4:24to talk about those challenges
4:25throughout the day, but the way I really
4:26want you to think about these challenges
4:27is more in the sense of opportunity.
4:29There is a tremendous amount of
4:31opportunity in entrepreneurship in
4:33Kentucky. There's a lot of momentum
4:35there. There's a lot of good
4:36infrastructure there. But we need to
4:38figure out how we can ignite this and
4:40make Kentucky a stronger state and a
4:41stronger entrepreneurial economy. me and
4:43there's really good reasons for doing
4:44so. Um, so what I'm going to be talking
4:47about today mostly is the why of of our
4:51interest in this area and then the how.
4:54How we're going to go about learning
4:55more about it, how we're going to go
4:57about making some recommendations around
5:00public policy changes. This is largely
5:02uh a research initiative for us and a
5:04public policy development initiative,
5:06but as you can imagine, this is
5:08something that'll evolve into something
5:09we'll be advocating for more directly.
5:12But we're very much in learning mode
5:13right now. Um, and we've been hearing
5:15from entrepreneurs around the state and
5:17we're going to be continuing to be doing
5:19that. I'm going to talk with you quite a
5:20bit about how we're going to go about
5:21doing more of that over the next several
5:24months. Um, and in carrying forward,
5:27especially as we move into the 2027 2028
5:29legislative sessions. [snorts] Before I
5:32jump into some of the data around
5:34Kucky's entrepreneurial ecosystem, what
5:36the landscape looks like, some of the
5:38challenges that we see, I want to start
5:40with acknowledging a lot of the pro-ont
5:44entrepreneur policy and programming
5:46that's already happening in Kentucky.
5:47Because one of the last things I would
5:49want to do is come out of this this
5:50meeting today with any notion that we're
5:53not doing anything. That's not true.
5:54That's not true. There's a lot of great
5:56public policy that you all have already
5:58passed, that you're all already working
5:59on. There's programming in the state
6:01that is helping drive entrepreneurialism
6:03and entrepreneurship in Kentucky. Right
6:05now, if you think about tax reform, this
6:07has been a focal point of the chamber
6:09and it's been a focal point of this
6:11general assembly. If you go back to the
6:12reforms 2018, 2019, those were largecale
6:17business tax reform, watershed moment um
6:20in the way that Kentucky treats business
6:22taxation. Those were good things to
6:24support entrepreneurialism. If you think
6:25about reducing the individual income
6:27tax, 2022, 2023, 2025, we saw reductions
6:31to the income tax uh in those years,
6:33those are things that very much help
6:35entrepreneurs. These are often very cash
6:37wrapped. Uh every dollar counts for
6:40entrepreneurs. And so when you reduce
6:41that individual income tax load, that's
6:43a huge benefit to entrepreneurs. We've
6:45seen some program modernization.
6:47Chairman Branskim was a big leader on
6:49this uh in this past legislative session
6:51where we took a look at some of our
6:53older statutes, modernized them, cleaned
6:55them up a little bit, clarified things.
6:57That's really good progress on these
7:00types of issues. Also, in this previous
7:02session, we saw a tremendous amount of
7:04funding for entrepreneurial
7:05infrastructure. So, new new initiatives
7:08going up around the state, significant
7:10funding going into that. Regulatory
7:12reforms, another really really important
7:14area. You all have worked to streamline
7:16regulations, make them more predictable.
7:18A couple years ago, you also did
7:20something where you created what's
7:21called a regulatory sandbox. I believe
7:23this was representative uh Pratt who who
7:26passed out legislation. That's that's
7:28just tailor made for entrepreneurship
7:30and that's exciting public policy.
7:31Workforce solutions all important for
7:34for entrepreneurs trying to grow their
7:35businesses. But in terms of programming,
7:37we also have the Kentucky Innovation
7:38Hubs. You'll hear more about them here
7:40in a minute. We have great organizations
7:42like the Kentucky Science and Technology
7:43Corporation that are driving uh
7:46technology- based entrepreneurship and
7:47technology- based uh economic
7:50development. We have other groups like
7:51Endeavor Southeast uh that are that are
7:53working in places like Louisville and
7:55other places throughout the state to
7:56drive entrepreneurialism. So again, we
7:58have a lot going on, but the case I want
8:00to make here over the next few minutes
8:02is we have a lot lot of room for
8:03improvement and a lot of opportunity if
8:06we choose to lean into improving our
8:08entrepreneurial ecosystem. So, let's
8:11start a little bit about what we know.
8:13Um, and I'm going to caveat something um
8:15as I go into this. You know, I I have
8:17the pleasure of working with a lot of
8:19different data sets. Um, I look at a lot
8:20of different economic metrics. Um,
8:22that's that's my job. Uh, um, you know,
8:24running the Kentucky Chamber Center for
8:26Policy and Research. I'm most accustomed
8:28to working with things like Bureau of
8:29Labor Statistics. Um, that's that's sort
8:32of my comfort area. The data is really
8:33clear there. This is a space where the
8:35data is just not as clear. There's a lot
8:37of different ways you can slice and dice
8:39this stuff when you're trying to
8:40understand entrepreneurship.
8:42There's also a lot of slippery
8:44definitions. So, for example, I think if
8:46I was to ask everybody in this room what
8:48an entrepreneur is, I would imagine we
8:50would all have slightly different
8:51definitions of that. And so, it's a
8:52tricky thing. So, I want I want to make
8:54sure that caveat is out there as we go
8:56through this and we can try to uh
8:57address some of this in in questions.
8:59What you're looking at right here is a
9:01set of data compiled by an organization
9:03called the Economic Innovation Group um
9:05through a thing called the Index of
9:06State Dynamism, which I'll I'll talk
9:08more about later in this presentation.
9:10The key thing to take away from this
9:11though is that if you compare Kentucky
9:13to the nation, compare us to other
9:15states, new firms, so entrepreneurial
9:18firms, they tend to make up a smaller
9:20share of our business and employment mix
9:22than in most other states. So if you're
9:24looking broadly at all the business
9:26types where people work and compare that
9:29in Kentucky to other places, we just
9:31kind of have a little bit entrepre
9:33little bit less entrepreneurialism in
9:35Kentucky than you might see elsewhere.
9:36So if you look at something like the
9:37core startup rate um so this is looking
9:40at the median share of new firms as a
9:44share of broader industries, broader
9:47different types of businesses. Comparing
9:49us regionally with most of the southeast
9:50we come in at about 13th, but across the
9:53nation, it's about 45th. And so what
9:54that means is we have kind of a
9:56relatively small share of our economy
9:58that is taken up by entrepreneurialism
10:00in comparison to other states. Growth in
10:02total firms, the way that we primarily
10:04get new firms, new businesses into the
10:07state, that happens through
10:08entrepreneurialism. We we're not seeing
10:10a tremendous amount of growth in those
10:12areas. A little bit better here about
10:1439th nationally, 11th regionally. And if
10:17you take a look at the share of workers
10:19who are at younger firms, so firms that
10:21have been started with say in the past
10:22year or so, it's a little less than 9%.
10:26Um, and that's dwarfed by you, you can
10:28see by states like Florida and Georgia
10:30where they have a larger share of
10:32workers who working at these young
10:34firms. And again, this isn't all
10:36inherently bad, but if you're trying to
10:38get a sense of how much
10:39entrepreneurialism do we have in the
10:41state, how much of that activity do we
10:43have comparatively,
10:44what you see in data like this is we
10:46have just a little bit less of it. And I
10:48will talk about here in a minute why I
10:50think that's a problem and something
10:51that we should pay attention to. Now,
10:54with all that being said, if you look at
10:56other sets of data, what we find is that
10:59Kuckians are very entrepreneurial. We
11:02actually do as a population. We like to
11:05start new businesses and you can see
11:07that in something like the rate of
11:08entrepreneurship. So this is a metric
11:10that's compiled by an organization
11:12called the Kaufman Foundation. They have
11:14this thing called the indicators of
11:16entrepreneurship. This is a again a
11:18slippery term. The definition for this
11:19is about 11 pages long. Um but what what
11:22you're looking at with rate of
11:23entrepreneurship is the share of the
11:25population that's actively starting new
11:27businesses. Here we we do fairly well.
11:30um we're we're pretty entrepreneurial as
11:32a state. Our population likes to start
11:33new businesses. But one of the things
11:35we'll note here is that a lot of those
11:37entrepreneurs that are starting new
11:38businesses, this isn't necessarily
11:40translating into new direct jobs in
11:44comparison to other states. So if you
11:46think about folks that go out there and
11:47start a new business, we ideally would
11:49like to see that lead to more job
11:51creation. If you look at startup early
11:53job creation, um so this this metric
11:56here in the middle, this is generally
11:58the average number of employees that we
12:00see from a new startup within roughly
12:02their first year. It's around 4.31. Uh
12:05again, a lot less than a state like
12:07Florida or Georgia, uh where they're
12:08they're they're getting a lot more
12:10employees in in the door faster. the
12:12rate of new employer business
12:14actualization. Here's one uh where
12:16you're looking at the share of new
12:18businesses that have someone on payroll
12:21within the first eight quarters. Uh here
12:23again, we're trailing states um in in
12:27our general area and throughout the
12:28nation. We come in about 37th on that
12:30metric. Now, you'll note that I put the
12:32word direct jobs in italics. So, I'm
12:34going to talk about that for for just a
12:36quick second because I think this is an
12:37important point. Direct jobs, that's
12:39what we want. If you look at a lot of
12:42our um uh economic development
12:46incentives in Kentucky, we do try to
12:48create incentives that in incentivize
12:51businesses to have direct jobs. So those
12:53those actual employers receiving the
12:55incentives are the ones creating the
12:56actual jobs. We do need to be sensitive
12:58though to indirect job creation because
13:01even if you have an entrepreneur that
13:03starts a firm, they might not
13:05necessarily
13:07directly employ a lot of people but they
13:09might create a lot of economic activity
13:11in the form of things like suppliers
13:13being a really really good example of
13:15that where you they might have these
13:17indirect effects. You also have to think
13:19about things like the wealth creation
13:20they create within the community and
13:22then also just innovation. And so when
13:24we think about entrepreneurship, that's
13:25going to be something that's really
13:26really important to keep in mind. And I
13:28wanted to make sure we we talk about
13:29that a little bit because the creation
13:31of direct jobs, that's good. We want
13:34that, but it's not necessarily
13:35everything. Those indirect jobs, that
13:37innovation that comes with
13:38entrepreneurship, that's an added
13:40benefit. It's just a lot harder to
13:42measure. And that's that's a tricky
13:43thing here. But again, what you're
13:44looking at here with this chart is is
13:46more focused on that direct job
13:48creation.
13:50Shifting gears a little bit too. Um, one
13:53of the things that is most important
13:54about entrepreneurialism is that there's
13:58a certain subset of entrepreneurs that
14:01we like to call high growth firms. And
14:03this is where an enormous amount of
14:05annual job creation comes from. So you
14:08have these certain types of businesses
14:09that kind of just catch fire at some
14:11point and they start growing very very
14:13quickly. Sometimes that's measured in
14:15the form of how much revenue they
14:17generate. In this particular instance,
14:19we're actually looking at how much their
14:20employment growth kicks in. And this is
14:22a Census Bureau metric. It's relatively
14:24new. It's something Census started doing
14:25in the past couple of years. But what
14:27you can look at here, and this is from
14:29the University of Kucky's 2026 annual
14:31economic report, is that you got three
14:34lines on there. That solid black line is
14:37the share of total firms that are that
14:40meet this high growth definition uh from
14:42the Census Bureau. Uh then you have a
14:44red line, which is competitor states.
14:46That's that's essentially most of the
14:48Southeast with the exception of Florida.
14:50uh they they don't include Florida in
14:52that metric. And then that dotted blue
14:53line, that's Kentucky. And the trend
14:56line there is pretty clear. Uh
14:58nationally, we're seeing a smaller and
14:59smaller share of businesses that meet
15:01the definition of high growth firms.
15:03Kucky's followed that trend. But I think
15:05the important thing here is that that
15:07delta between not only Kentucky and our
15:10competitor states, but Kentucky and the
15:12United States. We just have a smaller
15:13share of our our business mix of
15:17businesses that meet that high growth
15:19definition. So folks that are growing
15:21annually, growing more and more
15:22employment, and that's that's
15:23problematic because again, that's where
15:26a lot of our net job creation comes from
15:28every year is when we get these high
15:29growth firms. So that's another warning
15:31sign when we're trying to understand
15:33what our entrepreneurial ecosystem looks
15:34like. It's another point to keep in
15:37mind. Finally, I want to I want to talk
15:39a little bit about venture capital. Um,
15:41venture capital is not always um I think
15:44sometimes it gets a little bit
15:45overstated in in in what I've learned
15:47around entrepreneurialism so far.
15:49There's some really good research out
15:51there talking about the different ways
15:52that entrepreneurs fund raise. Um they
15:55they raise capital in all sorts of
15:57different ways. Venture capital is one
15:59of them. It's an really important one,
16:01but it's not necessarily everything, but
16:03nonetheless, it is important. What you
16:05see here on this chart is, again, this
16:07is coming from the University of Kucky's
16:092026 annual economic report. Uh they're
16:11pulling this information from the
16:13National Science Board. It's a pretty
16:15interesting chart where again you got
16:17that solid black line. Um, so that is
16:19your venture capital investments. And
16:22the way that this is expressed is that
16:24it's venture capital investments per $1
16:26million of state GDP or in that that
16:28black line there, national GDP. And this
16:30is a way we can kind of normalize
16:31things. So if you think about Texas,
16:34Texas obviously is going to have a lot
16:35more venture capital than Kentucky. It's
16:37really big. It's just a much larger
16:38place. It's a larger economy. It's going
16:40to have more. So how do we figure out a
16:41way to compare those things evenly? And
16:43this is a way that you can go about
16:44doing that. United States. Um,
16:47significant delta between Kentucky and
16:49the United States as a whole. We also
16:51have a significant delta in venture
16:53capital as measured this way between
16:54Kentucky and our competitor states. But
16:56the one of the things that really caught
16:57my attention when I was looking at this
16:59chart a few days ago is um 2021 was this
17:04huge surge in venture capital activity.
17:06And a lot of this came down to things
17:08like interest rates, pandemic era
17:10stimulus funding. a lot of that came in
17:13uh and that that stirred up all this
17:15this really rapid venture capital
17:17activity and then there was immediately
17:18the next year a market correction.
17:20Kentucky didn't really participate in
17:22any of that. And again, I think that's
17:23that's another warning sign that even in
17:26these periods of enormous venture
17:28capital activity, a lot of it just
17:30didn't come to Kentucky if you compare
17:32us to other states. And it's just
17:33another one of those things where you're
17:35kind of putting the pieces together and
17:37noting that I I think if you're if
17:39you're trying to assess our
17:40entrepreneurial ecosystem, there's
17:42there's there's a lot of weaknesses
17:44within that part of our economy. We
17:46compare that to other states in the
17:47nation as a whole. Okay. So why why
17:50should we care about this? Right? At the
17:52end of the day, what we're ultimately
17:53all after here is more opportunities for
17:56Kuckians, more jobs, higher wage growth.
18:00Why does it matter if we're trying to
18:02get that through a more traditional
18:03approach to economic development of
18:04business attraction and expansion versus
18:07entrepreneurialism? Why should we try to
18:09elevate this part of our economic policy
18:12within our approach to economic
18:13development? I'm going to give you three
18:14quick reasons, and there's probably a
18:16multitude of reasons, but I'm going to
18:18give you three. First of all,
18:20entrepreneurship is an absolutely
18:22remarkable engine for job growth and
18:24punches far above its economic weight.
18:27If you were to look at, let's say I had
18:29a pie chart where we broke down uh the
18:32share of
18:33um
18:35jobs that are held by firms that have
18:38been around for say 10 years or more
18:40versus firms that have been around less
18:42than that. Um the majority of employment
18:45is going to fall within those older
18:46firms. That's what that's what holds the
18:48majority of our employment. In terms of
18:51annual growth though, that comes not
18:54quite exclusively but predominantly from
18:57new firms forming. And so when you think
19:00about new jobs that we get added every
19:02month or new jobs that we get added
19:04every year, some of that's coming from
19:07older businesses, older firms that have
19:09been around for a while, but on net, not
19:12a lot of it is because those older
19:13firms, they're expanding. They're all
19:15contracting. It kind of washes out at
19:18net. And you see a little bit of this on
19:19that chart. Uh but if you think about
19:21the new jobs that get added on net, so
19:24when you factor in job loss and job
19:26gains, the vast majority of that is
19:29coming from very new firms. And so this
19:31is a quick glimpse in time from the US
19:33Bureau of Labor Statist Statistics of
19:35just 2019 where you can actually kind of
19:37see this in action. Uh in that year,
19:40about 1.6 million of the jobs that were
19:43created that year on net that came from
19:45firms that were less than a year old.
19:47And you compare that to some of these
19:48other age groups, 1 to four year old
19:50firms, little bit more there. 5 to nine
19:52year old firms, a little bit more there.
19:54For 10-y old firms, it and on net
19:56actually turned out negative. Um, and so
19:58this is a really important point is that
20:00if we're trying to grow more jobs in the
20:02state, a lot of that's going to come in
20:04the form of entrepreneurialism. Now
20:06again, business expansion, business
20:08attraction, that's good stuff. At no
20:10point am I discrediting that. Uh but if
20:12if you really want to get that net gain
20:14uh year-to-year, entrepreneurship is a
20:16really key component on it. Second thing
20:18I want to point out why we should think
20:20about fixing this entrepreneurial um
20:22challenge that I've been trying to lay
20:24out here is if you take a look at this
20:27chart and this is from uh Blueprint
20:29Kentucky. They did a phenomenal report
20:31um on Kucky's rural economy that came
20:34out last year. If you haven't had a
20:36chance to read this thing, uh Blueprint
20:37Kucky's um an initiative out of the
20:39University of Kentucky. This is a really
20:41good report. Really, really good report.
20:42I think one of the best things I've seen
20:44that helps us understand Kucky's rural
20:46economy. And one of the things I see on
20:49here or a couple of things is um a lot
20:53of new business applications. So, folks
20:55that are starting new firms, come up
20:56with new ideas, want to do new things.
20:58It's it's going to be more concentrated
20:59in your urban areas. And and that just
21:02makes sense, right? There's more people.
21:04So, the chances are you're going to have
21:05more. What catches my attention here
21:07though is that trend line in both urban
21:09and rural Kentucky where you're seeing a
21:11growing interest in both urban Kentucky
21:13and rural Kentucky and starting new
21:15businesses. We should capitalize on
21:17that. That is a huge opportunity right
21:19there where you have a bunch of people,
21:21a lot of rural Kuckians that are
21:22interested in starting new businesses
21:25and we should figure out ways to support
21:27those folks because that's a really
21:28great way to bring job growth into those
21:30areas where traditional economic
21:32development is just more complicated.
21:35Um, and so there's a lot of opportunity
21:37there. Another thing I point out is
21:38innovation in these areas. And I I
21:41should have included a map on here. Um,
21:43but there's another map uh from this
21:45same report that looks at patent
21:47activity um by county in Kentucky. And
21:50again, it's heavily concentrated in FET
21:53and Jefferson and Northern Kentucky as
21:55you'd expect it to be. There's more
21:56people in those areas. But there's also
21:58a lot of patent activity happening in
22:00rural Kentucky. You look at places like
22:02Pike County for example, there's a lot
22:05of patent activity happening in Pike
22:06County, more than you might think. And
22:08so you see a couple of things. You see
22:10this growing interest in
22:12entrepreneurship. And I say growing as
22:14measured by the chart here where we're
22:15looking at business applications per
22:1710,00 residents. You're just seeing more
22:19and more of that. Uh but that there's
22:20also a lot of innovation, a lot of
22:22interest in innovation in those areas.
22:24And so how do we capitalize that as an
22:26approach to economic development in
22:28rural Kentucky? Lot of opportunity here.
22:31And finally, I want to bring up uh the
22:34the concept of business dynamism. So
22:37business dynamism is a is a clunky term.
22:39Um it's a slippery term. This is a way
22:42of describing um the sort of how our
22:45economy evolves. It's a way of
22:47describing new firms coming onto the
22:48market, old firms leaving the market,
22:51businesses growing, shrinking. Business
22:53dynamism has been one of these things
22:55that has animated the American economy
22:57for years. And it's one of those
22:59features of our economy that
23:00differentiates us from more stagnant
23:02economies that you see in places like
23:04Europe, for example, where those
23:06economies don't change very much.
23:08They're very stagnant. The American
23:10economy has always been dynamic. It's
23:13one of the hallmarks of what makes the
23:14American economy the most powerful um
23:18largest and impressive economy in the
23:20history of the world. It's that
23:21dynamism.
23:22Kentucky has not participated in that
23:25dynamism in the same way that most other
23:29states have. There's an index here I
23:31mentioned earlier on called the index of
23:32state dynamism produced by the economic
23:34innovation group uh where they came up
23:36with a way of comparing all the states
23:37the the dynamism of the states um and
23:40seeing how how they compare to each
23:41other. And what they found is Kentucky
23:42ranks 48th 48th for business dynamism
23:46across the across the entire country.
23:47And so what that means is we we from
23:49their perspective we have an economy
23:52that changes less that has less churn
23:55less movement in it in comparison to
23:59other state economies. And we see this
24:02there's a handful of states kind of like
24:04us in this area. West Virginia not a
24:06dynamic economy. Mississippi not
24:08dynamic. But look at states like
24:10Florida, North Carolina. Those are very
24:12dynamic economies. uh in this index
24:14what's considered the most dynamic
24:16economy in the country is Utah where
24:18they're just seeing sort of constant
24:20renewal recreation of that economy and
24:23there's so much good stuff that comes
24:25from having a lot of business dynamism
24:27you get more jobs that way you get more
24:28innovation you also get more economic
24:30resiliency and the reason you get more
24:31economic resiliency is you have a more
24:34diversified economy more industries and
24:36so that way when you have one industry
24:37take a hit you have other industries
24:39around that can help weather those
24:40storms so it's a good thing and I think
24:42it's somethingly something um certainly
24:45worth thinking about as we think about
24:46entrepreneurship. So this is ultimately
24:48what's led us to this new initiative uh
24:50that we're we're titling start here grow
24:52here. This is a research and policy
24:54development initiative that the chamber
24:55is going to be working on over the
24:57course of the next year. Um and and
24:59we're really excited to to move into
25:01this area and do a lot of work in this
25:03space. We're going to be looking at a
25:05lot of data uh that's going to be a big
25:07part of this. But another really
25:08important component of this project is
25:11we'll be having a lot of conversations.
25:12And this is this is the part of the
25:13project I think I'm most excited about
25:15and one that I wanted to call your
25:16attention to. One of the things Chamber
25:18has gotten really good at over the past
25:20several years is community engagement
25:21sessions. And these are essentially
25:22listening sessions that we we do on
25:24various topics. So we've done this on
25:25tax reform. We've done this on second
25:28chance employment, substance use
25:29disorder. Uh we've been doing this on
25:31housing. We did we did a series of
25:32housing listening sessions in 2023 and
25:342024. We're doing more uh right now. But
25:37essentially the way these things work is
25:38we go to individual communities. Uh we
25:40try to keep these these groups kind of
25:42small, you know, 30 40 folks and we just
25:44have these big conversations where we
25:46learn as much as we can. And this is one
25:48of the ways that we can capture some of
25:49that regionality in Kentucky because I
25:51I'm certain that what we're going to
25:52find is entrepreneurialism looks
25:54different in every corner of this state.
25:56So October and November of this year, uh
25:59we're going to be doing a series of
26:00community engagement sessions on
26:01entrepreneurship in partnership with JP
26:03Morgan Chase. We've great partners to do
26:05this work on and we're thrilled to have
26:06them on board with us. But what we'll do
26:08is we'll go to these individual
26:10communities, talk a little bit about the
26:11data that we've seen and then we're just
26:13going to listen. We're going to bring
26:14together as many entrepreneurs, small
26:16business owners, community leaders as we
26:18can and we want to hear from them,
26:20understand what does this look like in
26:22your region, what are some of the
26:23challenges that you see? And so we're
26:24looking forward to announcing these. Uh
26:26oftentimes we do these everybody wants
26:28to, you know, we like to hit as many
26:30communities as we can. Uh so we haven't
26:32announced the exact communities we'll be
26:34in yet. Uh but we'll be announcing that
26:36and I'll make sure that you all are
26:37aware of where we're going to be when
26:39they're happening so that hopefully you
26:40can participate in those. Some of the
26:42questions though that I think we're most
26:43interested in throughout the course of
26:45this work is again trying to drill in a
26:47little further to the status of our
26:48entrepreneur ecosystem. We always want
26:50to know how we compare to other states.
26:52That's a really easy straightforward way
26:53to understand where we stand. We don't
26:55understand those barriers though. That's
26:56really what we're after more than
26:58anything is what's standing in your way.
26:59Why is it that we have a smaller share
27:02of our business and employment mix
27:03that's uh dominated by
27:05entrepreneurialism? Why aren't we seeing
27:07more of that job creation through
27:08entrepreneurialism in comparison other
27:10states? What are the needs and
27:11challenges facing rural entrepreneurs?
27:13Going back to that slide I pointed out a
27:15few minutes ago, we really want to
27:16understand rural entrepreneurship
27:18because we think that is a huge
27:20opportunity for rural economic
27:22development that we just have not tapped
27:23into as much. We want to look at the
27:25policy landscape, how we compare, then
27:28to start looking into those those policy
27:30reforms. What do we need? Uh what types
27:32of legislation do we want to bring
27:34forward suggest? But then on top of
27:36that, government is certainly never the
27:39solution to everything. Um what can the
27:41private sector uh what can the
27:43philanthropic community be doing? Uh and
27:45so those are some of the key questions
27:47that we want to be asking. In terms of
27:49focus areas, uh we really want to hit on
27:52all industries. Um, you know, there's
27:54there's all sorts of entrepreneurial
27:55entrepreneurialism happening in
27:57different industries and so we want to
27:58cast a really wide net. We're very
28:00interested in these early stage
28:02entrepreneurs, those folks that are
28:03filing those business applications,
28:04getting things going and then those high
28:06growth firms. We really want to
28:08understand what's going on in that
28:09space. So folks that have failed in that
28:11area, folks that have been successful
28:13and again we're going to be looking at
28:14those direct and indirect employment
28:16impacts. So not just how many jobs are
28:17you creating, but how much innovation
28:18are you creating, how many indirect jobs
28:20are you creating. Finally, and I know
28:22this is something Dave's going to hit on
28:24uh in his presentation, and when he gets
28:25to that part, I really encourage you to
28:27to really perk up and and and pay
28:30attention to that section because I
28:31think it's incredibly important, which
28:32is this concept of entrepreneurship
28:34through acquisition. Uh what you'll hear
28:36Dave talk a little bit about is this
28:38silver tsunami. Sorry, I'm stealing your
28:39thunder, Dave. Uh but this silver
28:41tsunami where you hear about this in the
28:43labor market a lot, right? Where we have
28:45workers that are getting older and older
28:46and older. Uh and that's affecting labor
28:49force participation. That same thing is
28:51happening with business owners. So,
28:53think about a lot of your locallyowned,
28:54privately owned businesses in your
28:56communities, those ones that are
28:57sponsoring little league teams,
28:59sponsoring Rotary Club meetings,
29:00sponsoring your local chambers. A lot of
29:03those owners are aging and what's their
29:05plan? What's their plan for
29:07transitioning their businesses? And um
29:10we're at a point now where about 50 more
29:13than 50% of owner employers um are are
29:17more than 55 years old. And that's going
29:19to continue that that number is going to
29:20grow and that share is going to grow and
29:22grow and grow. And what happens to those
29:24businesses when that individual retires
29:26or they die or whatever might happen? Um
29:29does it pass on to an immediate
29:31successor? Does it get sold out? Maybe
29:32private equity or does it just go away
29:34entirely? And there's a tremendous
29:37amount of opportunity in encouraging
29:39more entrepreneurs to acquire some of
29:40these firms. So someone like me, the
29:42idea of starting a business, absolutely
29:45terrifying. Absolutely terrifying
29:47prospect. Maybe someday owning someone
29:49else's business that they built also
29:52terrifying um but maybe a little bit
29:54more approachable for a lot of folks.
29:56But then think about the community
29:57benefit from that. So really really
29:59important topic. July, September this
30:01year, this is where we're really focused
30:03on doing that that data analysis,
30:05beating more people, um learning more.
30:07October to November is when we'll be um
30:09engaged in that community engagement
30:11sessions. December through May, that's
30:13where we'll be doing a lot of that
30:14follow-up work and the synthesis work.
30:16And then we hope to have a final report
30:19uh in June of next year. So, we look
30:20forward to the possibility of coming
30:22back before this committee to really uh
30:24dive into our our our recommendations in
30:26this in terms of how you all can help us
30:28with this. Um first of all, love to have
30:31your participation in these community
30:32engagement sessions. We'll be sure to
30:34announce those and make sure you're
30:35aware of them. But more than anything
30:36though, and the conversations I've had
30:38with legislators is um you y'all y'all
30:40tend to be very entrepreneurial. A lot
30:42of you are entrepreneurs. A lot of you
30:44own your own businesses. And so we
30:46really just want to hear from you in
30:48your own experiences, but also what
30:50you're seeing in your communities
30:51because you all you all have that pulse
30:53of your communities uh in a very rare
30:55way. And so we we really want to have
30:58those conversations and learn more from
30:59you. With that, chairman, I think I went
31:01over a little longer than I planned.
31:02I'll be happy to um
31:06turn turn things back over to you.
31:07>> Yeah. And so members, here's what we're
31:09going to do. Um because I think a lot of
31:11your questions could be answered by
31:13Dave's presentation. Um so if you do
31:17have a question for Charles, kind of
31:18keep that in your queue and let us know
31:20also that you want to ask a question. Uh
31:23but I think maybe Dave's presentation
31:25could answer a lot of your questions.
31:27And so I'm gonna have Dave come up and
31:29then at the end of his presentation,
31:31we'll have both of them at the table to
31:34to kind of answer questions.
31:43>> Chairman, thank you for having me. It's
31:45great to see so many familiar faces. I
31:47had the privilege to be in front of this
31:48committee last June uh when we were up
31:50at Northern Kentucky United. And this is
31:52meant to be a continuation uh
31:54continuation of this amazing discussion
31:56we're having about what entrepreneurship
31:58can really mean to the Commonwealth and
32:00where do we think about its role going
32:02forward for economic development.
32:06So first for those that I didn't have a
32:08chance to meet last year um so my name
32:10is Dave Knox. I'm the executive director
32:12of Blue North. Blue North is one of the
32:14six innovation hubs that is funded by
32:16the cabinet for economic development to
32:19be the front door for entrepreneurs.
32:21Most importantly, when we define what
32:23that means, it's for those high growth
32:25entrepreneurs that Charles just talked
32:26about. Uh those companies that have
32:28aspirations to build not just a
32:31sevenfigure business, but an eight
32:33figure, nine figure, or maybe even
32:35something more that will be those great
32:37job creators for the next generation of
32:40Kuckians. Uh I've been fortunate to be
32:42in this role uh coming up on four years
32:44now after a career spent in the private
32:47sector around being a venture
32:48capitalist, an entrepreneur myself, an
32:51ETA practitioner. You know, I've been
32:53fortunate to kind of live at every side
32:54of the table of the things that we're
32:56going to be discussing a lot today. So I
32:59want to start with defining this term
33:01that's called entrepreneurled economic
33:03development. uh in last year, House Bill
33:06577, this was a term that we introduced
33:09around thinking about entrepreneurship
33:11and economic development as two sides of
33:14the same coin, but an approach that
33:17comes down to how do we change what it
33:19means to focus on this? When you think
33:22about traditional economic development,
33:23a lot of the conversations that take
33:25place in this room, it's a process of
33:28RFIs, site selections, looking at the
33:30infrastructure that exists and it's a
33:33very structured approach that goes in
33:35where oftent times we find ourselves
33:37maybe competing against other states,
33:40counties within our own state to figure
33:42out what that right fit is.
33:44Entrepreneurled economic development is
33:46a little bit different. It's really
33:48about the expertise that you can lend to
33:50help entrepreneurs along the way. How do
33:53they think about their financials and
33:55what that looks like? How do they figure
33:57out what the right investment looks
33:59like? Whether that is bank financing,
34:01venture capital, other means that come
34:03into it. It's how do they get the
34:05expertise of what they need for their
34:07growth structure. You know, that right
34:09advice, that guidance, that right
34:10professional support. So it's a much
34:13more consultative need that comes in of
34:16rolling up your sleeves and helping
34:17these entrepreneurs. The point I want to
34:20make with this is this is not a either
34:22option or an or option probably better
34:24said this is we need traditional
34:26economic development but we need to
34:28think about the role that
34:29entrepreneurled economic development has
34:32and how can it be a new driver to
34:34correct a lot of those stats that
34:35Charles just shared with us.
34:38One of the ways to look at this is some
34:40new data that's been coming out and I
34:41think this might be one of the first
34:42times this has been kind of structured
34:44this way that we have an amazing
34:46resource with the Secretary of State for
34:48the bulk data service that exists in
34:50Kentucky that you're able to get this
34:52great reports on new companies created
34:54officers etc. It's a tool that I've had
34:57access for about two years now but
35:00honestly it's been very tough to figure
35:01it out. uh you get this big Excel sheet,
35:04you have to comb through it, figure out
35:06what do these company names, etc. But
35:08thanks for some of the advances in AI,
35:10I've been able to kind of look at this
35:12in a different way. And the story tells
35:14some really interesting things for the
35:16state right now. Uh the first is if you
35:18look at last year, we actually saw a 27%
35:22increase in new companies that were
35:24created. That's one of the highest
35:26growth rates we've seen since the COVID
35:27bump that experienced um back in 2021.
35:31But what we've also seen is a rise of
35:34the number of those companies that are
35:36LLC's, you know, being single companies
35:39that are being created. That's a good
35:41and a bad thing because the other thing
35:43you're watching is looking at the
35:44Delaware registrations that the
35:47percentage of those for us are shrinking
35:50when you look at the new company
35:51creation. The reason that's important is
35:54a lot of times the new the Delaware
35:56corporations are going to be your large
35:58companies and they're going to be your
36:00ventureback startups. So we're watching
36:03a path that we are seeing a shrinking
36:05percentage of the companies that are
36:08going to be those future drivers for us
36:10as a percentage of the new companies. So
36:12while we have Kuckians creating
36:14companies at a record pace, we're
36:16actually seeing what possibly could be a
36:18slippage on the potential for those high
36:20growth companies that are going to be
36:22the ones that really matter for us in
36:24the next decade. So this is something we
36:26have to think about. How do we address
36:28this? How do we support it? And how do
36:30we help those entrepreneurs become those
36:33high growth companies if we're not
36:35having the maybe the wind at our sales,
36:37if you will?
36:39So when you look at that, we've had an
36:42amazing foundation that this group has
36:44helped us create over the last few
36:46years. Um it's come in a lot of
36:49different ways. So first let's start
36:50about infrastructure investment. We have
36:53had an investment in what the
36:54infrastructure of supporting these high
36:56growth entrepreneurs can look like from
36:58a very physical standpoint. Uh here in
37:01Northern Kentucky, it's been things like
37:02the life KY lab to invest in life
37:05sciences. It's been things like Spark
37:07House that is an entrepreneurial hub for
37:09the community and it's been other
37:10investments across the state, but we've
37:13also done it from a statutory and
37:14financial support standpoint. Charles
37:16talked about the amazing effort from
37:18this body uh last legislative session
37:20from the financial support for
37:22innovation and entrepreneurship. you
37:24know, things like renewed interest in
37:27our venture capital efforts with the
37:28Kentucky Enterprise Fund, things like
37:30House Bill of 900 that really put a
37:33renewed focus of what support could look
37:35like for our entrepreneurial hubs, and
37:38then things that have changed the
37:39regulatory environment that we needed to
37:41address. 577 that was a partnership with
37:44Representative Bransum was an amazing
37:47effort to correct the things that we
37:48needed to modernize to give us this
37:51foundation for where we go as a
37:53community and also addressing things
37:55like Senate Bill 139 that was fixing the
37:58registered investment advisor of how do
38:00we attract the venture capitalists. You
38:02know, one of the reasons we didn't
38:04witness that bump in 2021 that Charles
38:07mentioned was actually because we
38:09weren't friendly to outside VCs having a
38:12presence in Kentucky because of that.
38:14We've now addressed it and now we have
38:16to lead and do something about it.
38:19So, one of the things we have to
38:20consider is how are other states looking
38:22at this? And this is going to be a
38:24structure throughout this presentation
38:26of what I want to do is look at how are
38:28our competitive states thinking about
38:30this support and what are the questions
38:32we should be asking. This isn't about
38:34having the answers for this but looking
38:37at what's going on there and how should
38:39we think about it? How should we address
38:40it? So first is call to some of our
38:43competitive states. All of them have
38:46unified statewide entrepreneurship
38:48organizations that are exclusively
38:50focused on supporting the needs of those
38:53high- growth entrepreneurs and those
38:55startups. It gives an identity to this
38:57entrepreneur that is on a lonely journey
39:00of trying to create and build something
39:02from nothing to know that they have this
39:04group behind them that's supporting
39:06them, connecting them and really being a
39:09champion for them. You have things like
39:11Launch Tennessee that has been really
39:13I'd call it the driver for that economic
39:16dynism
39:17that you see coming out of that state
39:20that was established in 2010 as a
39:22partnership to really think about being
39:24a convenor on a statewide level but
39:27partnering with the regional federation
39:29that could be the heart and soul of each
39:32of their communities. They operate a lot
39:34of statewide efforts that are things I'm
39:36going to talk about later on throughout
39:37this and it brings that really vocal of
39:40why Tennessee is an amazing place to
39:42build your business business. Then we
39:45also see some newer efforts emerging.
39:46So, Innovate Alabama uh came out just in
39:492021 and you are seeing some amazing
39:52changes taking place of how they're
39:54approaching and how they're looking that
39:56really should be an inspiration for us
39:58as we think about this and where we go
39:59with it. And then you have a new change
40:01that's recently happened in Louisiana
40:03that they've traditionally had an
40:05organization called Nexus that was
40:06focused really on a physical
40:08placemaking. They have actually changed
40:10that recently now to be the statewide
40:12organization and brought in an
40:14entrepreneur to help lead it that is
40:16going to become that champion for where
40:18it looks and what this organization can
40:20do across the lake the wide range. The
40:23point to take away from this is that the
40:25states that are really leading charge in
40:27this have these unified approaches.
40:29what's that mean for us and where do we
40:31go with it? So I'd kind of ask three
40:33things that we should be considering as
40:35we look at this. So first is the point I
40:37just made of how does a unified
40:39statewide brand really bring
40:41entrepreneurs together and impact the
40:43community. You know, this is something
40:45that we had a brand called KY Innovation
40:48that was one of this rallying cry, not
40:50nearly to the level of the formality
40:52that those other organizations have, but
40:55it's one that we were asked to change
40:56that and the brand is now under team
40:58Kentucky and the cabinet. Is that a good
41:01thing or is that a bad thing? We need to
41:03look at this and think about for our
41:04entrepreneurs what we should do. The
41:06second is I think we need to consider
41:08how do the needs differ between research
41:09and commercialization versus launching
41:12and scaling company. when you're doing
41:14hard research for some of these big
41:16things, it takes a long, long time to do
41:19it. You're not going to see those
41:21immediate job creations come out of it,
41:23but you're going to see bets that pay
41:25off massively in the long term. When you
41:27look and if you study, for instance, the
41:29history of AI, the efforts that were
41:31done from things like Google over the
41:33years, open AI didn't emerge
41:36immediately. Anthropic didn't emerge
41:38immediately. it was 10 to 15 years of
41:41research that led up to that explosive
41:43growth. That's going to be very diff
41:45different than the needs of the
41:46entrepreneur that has quit their job and
41:49is trying to figure out how to make the
41:50payroll every month. So, we have to have
41:52a structure that supports both of those
41:54because they're different, unique, and
41:57they can't be lumped together uh with
41:59what we do. And then the final is what
42:01are those distinct lanes for the support
42:03of small growth or small business and
42:06high growth companies. Their needs are
42:08going to be different. their aspirations
42:09are different and we need to think about
42:11that support. As Charles started off, if
42:13you ask everybody what an entrepreneur
42:15is, they're going to have a different
42:16take on it and thus are the needs that
42:18we have to support in a different way.
42:21Second area I'd love to focus on is this
42:23concept of entrepreneurship through
42:25acquisition. So entrepreneurship through
42:27acquisition is a new term for an old
42:30concept, buying a small business. What's
42:33different about ETA is the aspirations
42:36of what the acquirer wants to do with
42:38the business. What they want to do is
42:40take a business that has been a great
42:42business and turn it into a high growth
42:45company. Something that can really make
42:47a game change in a community in terms of
42:49job creation, growth, etc. You know, the
42:53reason this matters so much when you
42:54look at Kentucky in particular, we have
42:57190,000 business owners that are going
42:59to be retiring in around the next 10
43:01years.
43:02No matter what we do with all of our
43:04efforts, if we have a leaky bucket where
43:06we're losing 190,000 businesses, we're
43:09not going to recover from that. No
43:10effort is going to be able to solve
43:12that. So, we have to think about how can
43:14we come pick a state that really
43:17supports this and engages. And we have
43:19to intervene because 79% of those
43:21business owners don't have a transition
43:23plan. They don't know who they're going
43:25to pass it on to. They don't know who
43:27they're going to sell it to. or the
43:29worst case is they actually might not
43:30think they have something that they can
43:32pass on and we need to help that and
43:34support that and figure it out and drive
43:36that activity.
43:39So what could that look like? So this is
43:41probably the concept that is the newest
43:43across the entire United States that no
43:46one else is doing in a meaningful way.
43:48Uh the first effort was in Colorado.
43:51They opened up an office of the employee
43:53ownership. They're not taking the full
43:55gamut of ETA but instead doing efforts
43:58about how do we do transition of a
44:00business to the employees that currently
44:02work at that company and what are
44:04different ways you can create tax
44:06incentives or other structures for that.
44:08The second effort is one that I think we
44:10do need to be paying attention to
44:12specifically is Indiana's government has
44:14put a major focus in the last 12 months
44:17on ETA being a big thing not only to
44:20support their companies currently in
44:22Indiana but actually to attract
44:25companies to move to Indiana and to
44:27relocate companies to play that game.
44:31That is something that is definitely a
44:32danger for us and we have to figure out
44:34what that support and where we can do
44:36with it. Most interesting with it is one
44:38of the companies they've engaged to
44:40actually do their work is a Kentucky
44:42startup called smb.co
44:44uh that actually calls Spark House home.
44:47So we have other states turning to our
44:49own companies to be their infrastructure
44:51and their foundation. How do we take
44:54that same effort and think about what we
44:55can do from ETA and where it goes? You
44:58know, there's going to be a lot of ways
44:59we can do this. You know, first is we
45:01really need to establish what an ETA
45:04foundation can look like in the same way
45:06that we support high growth startups
45:08across the country through the
45:10innovation hubs. Can we launch something
45:13similar or adjacent that does this
45:16effort? In Northern Kentucky, we had
45:18through Blue North, we incubated
45:20something called Cincy ETA. Cincya is
45:23the first effort to do a regional
45:25focused ETA group that brings together
45:28this community. The result that we've
45:30had in just three years, that group has
45:32actually grown to over 400 people that
45:34are raising their hands saying they want
45:36to learn about ETA. They want to buy a
45:39company. They want help running those
45:40companies. How is the Commonwealth can
45:43we really get behind those efforts and
45:45create that regional support that does
45:47this across the board? The second is can
45:50we think about launching an annual ETA
45:52conference? Things that bring this
45:54community together to really drive it.
45:56In the same way we have so many efforts
45:58from the Kentucky Chamber and others
46:01that bring different communities
46:02together. Can we do that the same thing
46:04with ETA entrepreneurs? How do we
46:07attract then also the best ETA searchers
46:10to come to our state? So, one of the
46:13stats I had on the previous slide was
46:15that we had one ETA search fund in the
46:17state of Kentucky. What that means is in
46:20the ETA world, there are great talent
46:23that graduate from their MBA program,
46:26their undergraduate, and they raise
46:28what's called a search fund. It is a
46:30pool of dollars specifically to go find
46:32a business that they want to buy and
46:34run. Last year, we only had one single
46:37entrepreneur raise their hand and move
46:39to Kentucky for that effort. If you look
46:42at our competitive states, that's
46:43measured in the dozens, if not the
46:45hundreds. How do we become a state that
46:47gets those best and the brightest from
46:49across the entire United States to move
46:52to Kentucky and say this is where they
46:54want to buy and grow these companies?
46:58How do we also think about our
46:59universities being a backbone? When you
47:01look at ETA across the country, it's
47:04universities that are oftentimes
47:06driving. My first personal experience in
47:082018 was going up to University of
47:11Chicago and Northwestern for an ETA
47:13conference that they run every year
47:15talking about this very subject. We
47:18don't have one of those taking place in
47:20Kentucky right now and we don't have any
47:22of our universities doing a truly
47:24concentrated effort around ETA. That is
47:27something we need to change and evolve
47:29because that's where it starts. And then
47:31we need to think about other things that
47:33could incentivize. I mentioned with
47:34Colorado's efforts, they've created a
47:37business tax credit and a capital tax
47:39gain that can go into doing an employee
47:42transition. We already have an amazing
47:45infrastructure with our selling farmer
47:47tax credit. Could something like that be
47:49something that's evolved to be a support
47:51to ETA to really think about a different
47:53type of entrepreneurship?
47:56The next area is how do we think about
47:58entrepreneurial workforce? It's great to
48:01talk about the jobs that can create it,
48:02how you do it, but how do you train this
48:05generation of entrepreneurs and
48:07encourage this participation because
48:10it's not just about being founders, but
48:12it's about joining these entrepreneurial
48:13companies. There was a uh study that was
48:16done by Harvard that looked at what was
48:18the number one predictor of success for
48:20a new entrepreneur. And what they found
48:23was have they experienced and worked at
48:25a high growth company before? It means
48:28that apprenticeship matters a lot in the
48:31world of entrepreneurship. Seeing what
48:33it means to actually keep those wheels
48:34on when you have a company that is
48:36doubling every year. You don't get that
48:38in a textbook. You get that from
48:40firstirhand experience. So, we need to
48:42incentivize different ways to do that.
48:44If you look at the our competitive
48:46states, they have efforts occurring
48:48through those unified statewide
48:50organizations that are doing this exact
48:53support. Launch Tennessee has a summer
48:55internship where they will fund
48:58different uh some of the cost for these
49:00interns to go work with these high
49:02growth companies to work at the venture
49:04capital firms and to get that firsthand
49:07experience. 25% of those internships
49:10have actually turned into full-time jobs
49:12at the companies that they interned at.
49:14That is a great investment into the job
49:16growth and keeping the talent and
49:18attracting the talent.
49:20Ohio just recently launched a new
49:22program where they're doing an incentive
49:24that for every outofstate employee that
49:28has moved to Ohio working for one of
49:30these startups, the startup itself gets
49:32a $15,000 incentive uh to attract that
49:35STEM talent. It's one that they've
49:38already seen great interest and I've
49:40watched even some of our startups decide
49:42to place jobs in Ohio instead of
49:44Kentucky because of that exact program.
49:47And then finally, you have programs like
49:48what Indiana is doing, similar with an
49:51internship program that is really
49:53getting that immersive talent to go see
49:56what it looks like. And they're starting
49:58as early as high school to get this
49:59immersion and get this experience across
50:02the board. So, how do we exp think about
50:05that for us? Well, one, we need to think
50:07about what funding of workforce
50:09development at the high school and the
50:11collegiate level looks like from an
50:13entrepreneurship internship standpoint.
50:15Can we specifically incentivize this
50:18participation to engage day in and see
50:21what this life of an entrepreneur looks
50:22like? Second is how do we make AI
50:25training universally accessible? This is
50:27transforming so much when you look at
50:29some of these stats that we need to be
50:31thinking about an approach because a lot
50:33of these entrepreneurial ventures, it's
50:35unlocking what you can do. You know, for
50:38instance, we have a great story that
50:39recently came out of Owensboro of a
50:42trained electrician that was frustrated
50:44with what he was seeing in terms of some
50:46of his peers um let's just say taking
50:49advantage of electrical panels for
50:51electric cars and upselling when
50:53somebody didn't need something. He was
50:56able to, as somebody that had never gone
50:57to college or even had any training in
51:00this, turn to AI and actually build a
51:02mobile app that was able to allow a
51:05consumer to be able to see what
51:06electrical needs they might have. He
51:08recently was covered by Mark Cuban about
51:10what he was doing and how he was really
51:13thinking about this as something new. We
51:15need to support that. We can't trust
51:17that it's just going to happen. We need
51:19to find that. We need to support it. We
51:21need to activate our innovation hubs as
51:23training venues to really do a lot of
51:25this work. And then most importantly, we
51:27need to think about how do we get our
51:29talent back. We have some amazing
51:32boomerang talent that has gone on to be
51:34some of the most impactful across the
51:36country. They have a love for Kentucky,
51:39but we've lost touch with them. We don't
51:41have any way to know where our native
51:43sons and daughters have gone, where
51:45they're engaging with entrepreneurship,
51:46where they're engaging with innovation.
51:48And we have an opportunity to think
51:49about that as a structured effort to
51:52hopefully get them back to building in
51:54our state, but at minimum get them to be
51:56allies that we can engage. You think
51:58about that stat that Charles showed of
52:00we didn't participate in 2021 with that
52:03spike of venture capital. The reason
52:05that matters is those VC dollars weren't
52:07spent in 2021. They were invested and
52:10then they've been spent over the last
52:12four years. So every dollar we didn't
52:15attract to the state is a dollar of a
52:17job creation that we lost. If we'd
52:19thought about a concentrated effort to
52:21have those connections, those
52:22relationships, might that have been
52:25something a different story that we
52:26could have told? It's possible and it's
52:28something we didn't think about.
52:31The the bonus before I get to our kind
52:33of wrap-up is the thing I also want you
52:36to frame is that not only can startups
52:39be
52:40solutions, but they can also be
52:42inspirations and they can be inspiration
52:44for the policy that this group can look
52:47at. So this day, you know, today as I
52:49was driving down, I was listening to a
52:51podcast by our friends at MiddleTech and
52:53they were covering a doctor from Hazard
52:55Kentucky that's created a company called
52:57uh Toothshure and Toothshure is looking
52:59about how oral health is actually a
53:02cause of a lot of issues that we aren't
53:05addressing. We all know that KY is not
53:07in the best place when it comes to our
53:09healthcare. So can startups like that
53:11actually be an inspiration of how we
53:13solve things around healthcare. A
53:16similar is there's been a lot of
53:17discussions in this body around things
53:18like data centers or things like our
53:20water quality because of the bourbon
53:22industry and everything else. Well, in
53:24Northern Kentucky, we have a company
53:26that is one of the leading experts of
53:28what UV filtration looks like and their
53:32whole inspiration for doing this is a
53:34worldwide issue with mercury that's
53:36coming around and how people need
53:38different solutions for this. That's an
53:40inspiration that we could be taking. And
53:42the reason it could be an inspiration is
53:44their technology for instance is being
53:46used by Google in a data center in Las
53:48Vegas because of the w water quality
53:50issues there. It's being used by uh a
53:53large beverage alcohol beverage
53:55manufacturer in Phoenix because they
53:57were concerned about the water quality
53:58quality there. How do we take
54:00inspiration from the problems that our
54:03in startups were inspired to solve and
54:05use that to inspire the policy in our
54:07backyard? It's not about doing business
54:10necessarily with our companies, which
54:11obviously would be great, but it's about
54:14how does it inspire problems that we
54:16should be solving and looking at in a
54:18different way. So, I'll conclude before
54:20we move over to Q&A is a kind of a
54:23summary of the path forward when we
54:25think about what this looks like. First
54:28and foremost, can we adopt
54:30entrepreneur-led economic development as
54:32a policy that we truly believe in and
54:35we're devoting the resources to support
54:37in a meaningful way? Can we continue to
54:40build on the foundation that this group
54:42has been the one that has created for us
54:44both from an infrastructure standpoint,
54:46a financial standpoint, and a statutory
54:49standpoint to really take the momentum
54:52and change the stats that we saw that
54:54began this presentation. Can we explore
54:57these unified statewide brand and these
54:59statewide efforts and programs that can
55:02bring the same success that things like
55:04Keyhorse Capital has brought to us and
55:06bring those to the forefront to really
55:08drive the mission forward? Can we
55:10establish a statewide ETA
55:12infrastructure? Take these pilots and
55:14these programs that we've had
55:16inspiration to really make Kentucky the
55:19most friendly state for entrepreneurship
55:20through acquisition and lead the effort
55:23of what that can look like and what that
55:25support can be. And then can we build
55:27Kucky's startup talent pipeline to
55:29really fund and support the next
55:32generation of our citizens and our
55:34residents that are going to be the
55:35building blocks for the years to come.
55:37So, with that, thank you for allowing me
55:39the opportunity to join this committee
55:41once again, and I think we'll have
55:43Charles come up for uh some Q&A.
55:45>> Yeah, Charles, if you could come on up.
55:46And Dave, appreciate uh um your insight
55:51on this as well as Charles, you two are
55:53right there on kind of the front lines
55:54of this and what you're seeing out
55:56there. and um we appreciate you uh
55:59recognizing the steps that we've taken
56:01and the work that we've done, but also
56:03kind of raising the raising the flag and
56:06kind of ringing the bell of hey, there's
56:07some things that we need to really need
56:09to focus on. Um I have one question here
56:12and I think I know some members had some
56:14questions too, but um and you may know
56:16this, may not. If you don't, that's
56:18completely fine. But when other states
56:21are looking at these programs, whether
56:23that's an ETA program or whether that's,
56:25you know, some type of uh
56:27entrepreneurship program, and are you
56:30all seeing that they are taking funds
56:33from some of the more legacy economic
56:36development um programs and just kind of
56:39reshuffling the dollars or are they
56:41creating new programs that are se you
56:44know, separately funded? You may not
56:46know that answer. If you don't that is
56:48completely fine. It's just something
56:49that you know we may have to look at.
56:52>> Yeah. Do you know?
56:53>> Uh so the only example I know of well is
56:56what Ohio has done. Um so Ohio they
56:59created the Ohio third frontier is where
57:01most of their efforts around this has
57:03come from. Uh and they as a control
57:06state for liquor. Uh they actually used
57:08the liquor tax for that. What I don't
57:10know is what that liquor tax funded
57:12before 2010. Uh but that's how they've
57:14funded it largely.
57:16>> Yeah. Chairman. I mean, you you usually
57:18see a lot of individualized funds, but
57:21whether or not that was reallocated at
57:24some point from somewhere else, that
57:26part is a little bit less clear to me. I
57:28can't think of a ton of examples where
57:30you see more just very broad funds that
57:33get utilized for both your more
57:35traditional economic development and
57:37entrepreneurial development. I don't
57:39know if I've seen a lot of examples of
57:40that that type of funding structure.
57:43>> Okay, I appreciate that. All right. Um,
57:47I think we have some members with
57:48questions. Uh, Senator Funky From.
57:53>> Yeah, thank you gentlemen for being here
57:55and Chair Branscom, I I really applaud
57:57you for so much great work that you've
57:59been doing to recognize that this is uh
58:02such starter juice uh for Kentucky. We
58:05we need more juice in this area and and
58:07you juiced it with your legislation
58:09these last couple years. I think that
58:11matters. So, um, and I'm also super
58:15blessed to have Dave Knox in my Senate
58:17district, but, uh, really inspiring so
58:21much work in this area. So, talk to me a
58:24little bit about our Governor's School
58:25for Entrepreneurs. Um, one of the first
58:28times I met Dave, we were at Northern
58:29Kentucky University and we had a day
58:32full of young children somewhere between
58:34the age of 17 and maybe even 16 and 18
58:38with ideas that um, where did they go
58:42from there? And I don't think that was
58:44the only one of these throughout the
58:46state. I think this was hosted at a few
58:48other universities. So I I really would
58:51love to tie in to your thoughts around
58:53how do we create more innovation hubs in
58:56our universities that start at such a
58:59young age.
59:00>> Yeah. Um so talking specifically
59:02Governor School for Entrepreneurs is an
59:04amazing program. Um I believe it was
59:07officially piloted around 2014.
59:10Um I had an opportunity to actually be
59:12an entrepreneur in residence in 2019 uh
59:15when it was at um Northern Kentucky
59:18University. it since now occurs once a
59:21year at University of Kentucky. Um, that
59:23one is I think an example of the
59:25questions we need to ask. We've got this
59:27amazing program that exists, but it
59:30actually exists with no connection to
59:32any of our high growth entrepreneurship.
59:35Um, it's not through the cabinet for
59:37economic development. It's not connected
59:38with the innovation hubs. Uh I'm not
59:41exactly sure which cabinet it's funded
59:43from, but it's an example of supporting
59:46this amazing amazing program for
59:48entrepreneurs, but we're actually not
59:50doing the linkage between how does it go
59:52with our other university efforts and
59:55also how does it go with our broader
59:56economic development efforts. And I
59:59think that's a common theme that you'll
1:00:00see. We have a lot of the pieces, but
1:00:04the pieces aren't actually put together
1:00:06in a wall together. They're kind of
1:00:07scattered throughout the schoolyard.
1:00:11Yes, you can follow up.
1:00:13>> Yeah, that's helpful to understand that
1:00:15there is such a significant disconnect.
1:00:17That's very surprising to me with the um
1:00:22young man who uh Ezra I'm coming up with
1:00:25his name was in the Senate floor as an
1:00:29intern and um learned about a meeting
1:00:33you were hosting at Blue North um
1:00:38to invite the um alum yeah
1:00:42>> if you will you know such a young 18
1:00:4419year-old an alum from the entrepreneur
1:00:47program. What results did you see from
1:00:50that hosting hosting that?
1:00:52>> Yeah, so um what Senator is referring to
1:00:55is three years ago uh Blue North started
1:00:57something um we put a lot of effort
1:00:59around how do we think about a talent
1:01:02pipeline and one of the things that
1:01:04we've I don't want to say tried to
1:01:06overcome but we wanted to change is a
1:01:09lot of entrepreneurship programs at
1:01:11colleges focus on being the founder.
1:01:1595% of the jobs in entrepreneurship
1:01:17aren't actually being the founder. It's
1:01:19joining and being part of that team that
1:01:21helps grow. And so we started two
1:01:24different efforts. One called the
1:01:25collegiate entrepreneur summit. The
1:01:27second called the student venture
1:01:29capital summit where it's about
1:01:31broadening that understanding of what do
1:01:33those roles look like in joining
1:01:36startups or joining entrepreneurs or
1:01:38joining venture capital beyond just
1:01:41being the person that creates the idea.
1:01:43Uh last year the student VC summit for
1:01:45instance we actually had uh participants
1:01:48from 16 different universities as far
1:01:51north as Purdue as far south as uh I
1:01:55think it was University of Tennessee and
1:01:57then all the ways over to Marshall. And
1:02:00the goal we're trying to get is making
1:02:02these students when they think about
1:02:04graduation make Kentucky be the place
1:02:06they want to come for their
1:02:07entrepreneurial journey. So that's our
1:02:09effort. Um we're very early on in it. Um
1:02:12but a lot of exciting momentum across
1:02:14the board.
1:02:16>> Representative Lockett.
1:02:18>> Thank you, Mr. Chairman. Um and thank
1:02:21you to both of you. This is really good
1:02:23information. Really, really good. Uh
1:02:24Charles, you you actually had a map up
1:02:27there and I think you were I think the
1:02:30map was uh dynamism. Is that the right
1:02:33word? Okay. Y
1:02:34>> um and it struck me as I looked at that
1:02:37that map, that map correlates a lot also
1:02:41with education rankings in the nation.
1:02:44>> Um where you've got Kentucky, West
1:02:47Virginia, and Mississippi very close to
1:02:49the bottom.
1:02:51>> Do you see this is kind of a two-prong
1:02:53question. Um do you see education
1:02:56playing any role in this space? uh
1:02:59whether it's high, whether it's low, how
1:03:01does education influence
1:03:04uh our entrepreneurship here in the
1:03:07state. And then the second question kind
1:03:10of along with that as well is I couldn't
1:03:12help but notice too that a lot of those
1:03:15states including Florida, Utah, uh that
1:03:17you mentioned have very high tourism
1:03:21dollars flowing in as well. And so what
1:03:24role does tourism play in that uh too in
1:03:28terms of of attracting those
1:03:31entrepreneurs here? So education and
1:03:33tourism.
1:03:35>> I haven't seen the research on the
1:03:38connections between education and
1:03:41entrepreneurship. I'd be surprised if
1:03:43there wasn't a connection. So I think
1:03:45you're probably on to something and and
1:03:47noticing those types of trends on the
1:03:49map. Obviously, um there's a lot of
1:03:52innovation involved in
1:03:54entrepreneurialism. There's a lot of
1:03:55business skills that come involved with
1:03:57that. All of that is certainly going to
1:03:59require
1:04:00um
1:04:02a strong education system to to build
1:04:04that type of ecosystem. Your comments
1:04:06also did just sort of jog my memory of
1:04:10something else that um I think is
1:04:11relevant to your question, relevant to
1:04:13the conversation. some legislation that
1:04:15was also passed in this past session
1:04:18didn't get a lot of fanfare, but I
1:04:19thought it was a really good bill.
1:04:20Chamber supported it. It was from your
1:04:22all's colleague, Representative Pollock.
1:04:24um that related to some um business
1:04:29skills training in our K- through2
1:04:31system where there were students in his
1:04:35neck of the woods that uh were involved
1:04:38with um having um businesses on on site
1:04:43of the actual uh on on the school
1:04:45campuses that the students could be
1:04:47directly involved with learning how to
1:04:49run those businesses. So, he learned how
1:04:50to run the books, learning how to, you
1:04:53know, hire hire other students to work
1:04:55there. Um, and he passed a bill that
1:04:58expanded that program. Um, it made it a
1:05:01little more added more clarity for
1:05:03superintendents to create those in their
1:05:05own districts. But that's another thing
1:05:06we should think about, not just
1:05:08necessarily the strength of the
1:05:09education system, but what type of
1:05:11entrepreneurial programming do we have
1:05:12at the K through2 level? You know, I
1:05:15grew up um
1:05:18you know, I I I I was raised by a
1:05:21father. He he he worked at a hardware
1:05:22store. Um and um being a W2 worker was
1:05:26kind of just all I knew. I never thought
1:05:28about um doing anything like what Dave
1:05:30has done. And so when I talked about
1:05:32that being a terrifying world to me, I'm
1:05:34not kidding. Um it's something I just
1:05:36can't grasp. I've always been more
1:05:37comfortable being a W2 worker. Um and so
1:05:41there's something to that, I think. So
1:05:42not just the strength of the education
1:05:44system but installing entrepreneurialism
1:05:46into uh early education just so so
1:05:49students start thinking about that as
1:05:50career paths. Um your second question on
1:05:52tourism is another really interesting
1:05:54one. Um I think you're you're probably
1:05:55right there. Um I think the way I would
1:05:58look at that is tourism just brings a
1:05:59lot of economic opportunity and when you
1:06:01have economic opportunity there's just
1:06:02gaps to fill, right? So there's more
1:06:04opportunities for different types of
1:06:06businesses that that you can kind of
1:06:08step in and create. The other thing
1:06:09though that I noticed when I look at
1:06:10that map, you think about like Florida
1:06:12for example, um Utah being another
1:06:15example, those are really strong
1:06:17regulatory states as well. They have
1:06:18really good regulatory environments.
1:06:20Now, if you look at business dynamism
1:06:21and across that whole map, that's not
1:06:23always the case. There are other states
1:06:25that I think we generally associate with
1:06:27not ideal regulatory structures, but
1:06:29still have dynamic economies, but they
1:06:31might have dynamic economies despite
1:06:33their regulatory infrastructure. So,
1:06:35there's there's a lot to learn from that
1:06:36map. Um, I think there's a lot to learn
1:06:38from this concept of business dynamism
1:06:40because again, when I first looked at
1:06:42that index and saw Kucky's raking, u, a
1:06:45lot of alarm bells went off because
1:06:46having a really dynamic economy is one
1:06:49of those things that helps us weather
1:06:51storms. But again, it's it's also the
1:06:53the the secret sauce behind high levels
1:06:57of job growth. So, great questions. Um,
1:07:00I think those are both both topics that
1:07:01I'd want to research a little bit more.
1:07:03>> Yeah, thank you. And and I would just
1:07:04point out too, I believe that I'm
1:07:06correct in this, the states that you
1:07:08mentioned, Florida, Tennessee, Utah, no
1:07:10income tax.
1:07:12>> Utah has one Utah, but yeah, relatively
1:07:15low though, but phenomenal business tax
1:07:17structure. [snorts]
1:07:19>> Senator Thomas,
1:07:22>> thank you, Representative Brasam. And
1:07:24and and
1:07:26my question is very timely because I
1:07:28want to build on Representative
1:07:29Lockett's question and and I want to
1:07:32talk to you, Charles. My question is
1:07:34directly directed to you. I do think
1:07:36representative Bras I mean
1:07:38Representative Lockett is right. Um I
1:07:41think tourism plays a key role in terms
1:07:45of bringing entrepreneurship
1:07:47uh into a state uh because it brings
1:07:50traffic. Um, and to me when you look at
1:07:54your map, I I know Florida's obviously
1:07:57at the top. Um, but you had
1:08:03North Carolina,
1:08:05South Carolina, and Georgia all in
1:08:08green, which means they're they're
1:08:09trending upward. Uh, and I would submit
1:08:13a lot of that has to do with the fact
1:08:15that those states, obviously Florida,
1:08:18spend a significant amount of their
1:08:20budget on tourism. Okay? Kentucky only
1:08:24spends $19 million. That's all we spend
1:08:27on tourism. Look at our 26 to 28 budget.
1:08:30We need to be spending about 50. Okay?
1:08:33Because what tourism brings in is
1:08:35traffic. People come to your state, they
1:08:38see it, they like it, you know, they
1:08:40want to come back, they want to stay. I
1:08:42I want to tell you yesterday, my wife
1:08:44and I decided after SLC that we were
1:08:46going to go to Woodford Reserve and just
1:08:48have an outing there. While I was at
1:08:51Woodford Reserve, I want to tell
1:08:52committee members I ran into
1:08:54representatives from representative
1:08:56senators from Florida, me Florida, from
1:08:58Louisiana, Mississippi, and Tennessee.
1:09:02and they spent an extra day here in
1:09:05Kentucky, know seeing some of the the
1:09:07sites of our bourbon trail. Okay, we
1:09:09need to number one, we need to spend
1:09:11more money on tourism in the state and a
1:09:12lot more money on tourism. That's number
1:09:14one. But also, when you look at that
1:09:16map, you know, and I'm a I I talk about
1:09:20this a lot, air traffic. We need to do
1:09:23more in air traffic expansion.
1:09:25Lexington, I'm proud to say, is getting
1:09:27ready to spend a half a billion dollars
1:09:30on expanding their airport. thing
1:09:32because of my lifestyle. I'm in in
1:09:33Atlanta a lot visiting my wife. You
1:09:36know, I go to Charlotte. Those two those
1:09:39two cities are hubs. They bring in a lot
1:09:41of traffic every day through their
1:09:43airports into Charlotte, into Atlanta,
1:09:45and those cities are just expanding
1:09:47immensely. Okay. South Carolina is doing
1:09:51a great job of expanding their airports.
1:09:53Myrtle Beach, Charleston. Okay. We need
1:09:56to do more with our airports. We've got
1:09:58some great airports here. Louisville,
1:10:00Cincinnati, which is in Northern
1:10:02Kentucky. I have to remind my friends
1:10:04all the time outside the state that the
1:10:05Cincinnati Cincinnati airport is in
1:10:07Northern Kentucky. Lexington, we need to
1:10:10do more to expand our airports and bring
1:10:13in more airport traffic. Okay. Uh and
1:10:16then again, I think going back to repres
1:10:19represent Lockett's point, you can't
1:10:21ignore education. You look at our four
1:10:24top think about our four top technology
1:10:26centers Charles across this country
1:10:29route 128 the research triangle Austin
1:10:34Texas Silicon Valley all of them are in
1:10:39the center of high ranking academic
1:10:42research institutions okay we need to
1:10:45invest more money in higher education in
1:10:48the state we don't do a good job of that
1:10:50either
1:10:51So I I want to your thoughts on what
1:10:54I've just said in terms of how we can in
1:10:57increase entrepreneurism because I think
1:10:59entrepreneurism is increased by
1:11:00urbanization. Charles really you know
1:11:03these young people want to come and you
1:11:05know have a place not only where they
1:11:06can work where they can play where they
1:11:08can live where they can you know have
1:11:10camaraderie with others just like them
1:11:12and feed off of that you know that kind
1:11:14of symbiotic relationship. So those are
1:11:17my thoughts. I'm interested in your your
1:11:19point of view. I'm sure Dave probably
1:11:21has some perspective on on on on these
1:11:24questions as well. I I mean I think I
1:11:26think you're pointing to three three
1:11:28different things that all absolutely
1:11:29relate to this space. You know, as we
1:11:31were just talking about, when you have
1:11:33an influx of tourism, that's going to
1:11:35create more opportunities to kind of
1:11:37fill these different gaps because
1:11:39tourists have all sorts of different
1:11:40needs. You can offer them new different
1:11:41types of services. You kind of have you
1:11:44have that captive audience kind of
1:11:46coming in and out. And so if you have if
1:11:48if you're the type of entrepreneur that
1:11:49wants to create any sort of public
1:11:51facing service, public facing goods that
1:11:54you want to sell, you you have that
1:11:56audience coming in. And so I think it
1:11:57facilitates it in a lot of ways. Um
1:12:01similarly, you higher education, you're
1:12:02absolutely right about that. I mean that
1:12:04that could be an absolute driver for um
1:12:07increased levels of entrepreneurship. I
1:12:09do think it's important that we not lose
1:12:10sight though of the intentionality
1:12:12behind doing this. And that's where I
1:12:14think a lot of the points that Dave made
1:12:16are really important where you can kind
1:12:18of create an environment where
1:12:21entrepreneurialism might be more
1:12:23accessible, more likely to succeed. But
1:12:26what we're seeing in some of these other
1:12:27states that seem to be more successful
1:12:30than us is some of that intentionality
1:12:32that that and that might be another
1:12:33place where Kucky's lacking. And so if
1:12:35you think about that connection between
1:12:39um um with with high growth firms that
1:12:42that Dave was just talking about a few
1:12:44minutes ago and some of this the steps
1:12:46we're seeing in other states, there's
1:12:47intentionality about making sure that
1:12:49we're connecting, you know, interns, for
1:12:51example, to these high growth firms that
1:12:53we know are going to need a lot of
1:12:54different types of talent. And so I
1:12:56think I think the the things that you're
1:12:57pointing out I think create that
1:12:59environment where entrepreneurialism is
1:13:02maybe more likely to take off but we
1:13:04still need that intentionality to really
1:13:08turn to to move the needle on this. I
1:13:11think that's the way that I would kind
1:13:12of conceptualize a lot of those points.
1:13:16>> Okay. Representative Dubal.
1:13:20>> Thank you Chair Branskum. Also, uh
1:13:22Charles and Dave, thank you for your
1:13:23presentation. fantastic today. Uh so
1:13:25there is nothing any more important than
1:13:27we can do than to invest in the next
1:13:29generation and one of the best ways is
1:13:32to make sure we have strong mentors. And
1:13:35uh Dave, I saw that you were 2024 mentor
1:13:37of the year uh in Kentucky. Um so tell
1:13:41me a little bit more about um how what
1:13:43we can do to recruit more mentors
1:13:46because we need to invest there in this
1:13:48next generation. And I do have a
1:13:50follow-up question.
1:13:50>> Yeah, thank you for that. Um so I think
1:13:53it actually ladders on the the last two
1:13:54questions uh going back to it that one
1:13:57of the fallacies of mentorship is when
1:14:00you only rely on those in your backyard.
1:14:02Um so back in 2010 I started something
1:14:05called the brand which was one of the
1:14:07top startup accelerators in the country
1:14:09and when we built our mentor pool which
1:14:11was about 70 different entrepreneurs,
1:14:14investors etc. S probably 60 of those 70
1:14:19were outside of greater Cincinnati. Um,
1:14:22and the reason for that is mentorship is
1:14:25not just about the advice that you give,
1:14:27but the networks that your mentors
1:14:28bring. And if you have a closed loop
1:14:31system instead of an openloop system,
1:14:33you're just going to get the same thing
1:14:35again. We used it as an intent of let's
1:14:38bring in all those nationwide
1:14:39connections and create this flywheel for
1:14:41us through that mentorship. So that goes
1:14:44back to I think one of the things I
1:14:46mentioned in my presentation. We need to
1:14:49know who loves Kentucky across the sta
1:14:51the entire United States that we can use
1:14:54as our mentor pool. Um we don't have
1:14:56enough mentors in this state that have
1:14:59experienced startups, high growth
1:15:01entrepreneurship and venture capital,
1:15:04but we do have enough people with
1:15:06Kentucky ties that love the Commonwealth
1:15:09that we can engage in mentorship. So a
1:15:11structured program that really looks at
1:15:13mentorship gets the right mentor. And
1:15:16it's important to know that one of our
1:15:19my challenges, I'll just say it
1:15:20politely, that we had was we had a lot
1:15:23of people that wanted to give opinions
1:15:25to entrepreneurs that had worked 30
1:15:27years at Proctor and Gamble or Kroger or
1:15:30some other place, but they only had
1:15:32opinions to give, not advice to give. So
1:15:34the other important thing is mentors
1:15:36have to be true experts that they can
1:15:39bring the not just an opinion, but
1:15:41advice that's super valuable. So we need
1:15:44an effort to do that. Ironically, I'd
1:15:46say tourism is actually one of the ways
1:15:47to do that as well. So, if you look at
1:15:50there was a shortcut people thought you
1:15:53could achieve in entrepreneurial
1:15:54ecosystems around throwing a big
1:15:56festival at one point and it was
1:15:58inspired because of South by Southwest
1:16:00in Austin, Texas that really started as
1:16:03a tourism effort and became a lynchpin
1:16:06of the startup community. It's where
1:16:08Twitter was first created. so many
1:16:10different startups really came about and
1:16:12you saw other communities try to invest
1:16:15millions of dollars creating their
1:16:16version of South by Southwest.
1:16:19They missed kind of the point of it that
1:16:22it's not just about throwing the party
1:16:24but it's creating that reason for that
1:16:26engagement and that frequent visits
1:16:30because every time we can create not
1:16:31just quality of life experience it
1:16:34creates the collisions the discovery and
1:16:36everything else. So what I'd actually
1:16:39frame is I think we need to find more
1:16:40ways to get people to spend time in our
1:16:43state and tourism is the first starting
1:16:46point of that but it's also about how do
1:16:48we get more business activity coming
1:16:50through and being part of it. How do we
1:16:52get that just engagement in those
1:16:54different exposures? We're trying in a
1:16:57small way uh that last the last two
1:16:59years I've partnered with my peers in
1:17:01Ohio called Centrafuse and we've just
1:17:05asked a simple question to the venture
1:17:06capital community. Do you want to come
1:17:08spend 48 hours drinking bourbon like a
1:17:10local and we had 20 invites that went
1:17:13out and 20 yeses that happened within
1:17:16that same day. Uh that was a long game
1:17:19because I want those people that
1:17:21collectively they represented over two
1:17:23billion dollars of venture capital to
1:17:26think about this is a place I could see
1:17:28myself coming three times a year for a
1:17:30board meeting because it's going to be a
1:17:32great space to p spend my time not a
1:17:36place I you know not too excited about
1:17:38going when I'm a going there for a board
1:17:40meeting. So, we need more efforts to get
1:17:42more feet experiencing how amazing the
1:17:45state is because that's going to drive
1:17:47collisions and that flywheel for us.
1:17:50>> And chairman, if I could if I could add
1:17:52real quick.
1:17:52>> I've got two more members. What
1:17:53question? So,
1:17:54>> I'll be very fast on this one. I would
1:17:56just say representative in preliminary
1:17:58conversations that we've been having
1:17:59with entrepreneurs, this is this is one
1:18:02this is a very common theme, the issue
1:18:04of mentorship, the the importance. So,
1:18:06so folks that have been successful in
1:18:07it, they bring this up very very
1:18:10frequently. Um, same with folks that are
1:18:12kind of new to that world. They've
1:18:14talked about challenges finding good
1:18:16mentors, but mentors that that has
1:18:17certainly been a common theme that we've
1:18:18already noticed in sort of early phase
1:18:20research.
1:18:20>> Y
1:18:23have that one followup brief.
1:18:25>> Um, so that goes along with this. Um, I
1:18:28think one of the biggest waste of our
1:18:30tax dollars sometimes is when we have a
1:18:33student that goes through our university
1:18:35system and then they graduate and they
1:18:37leave the state. And so, uh, so I had,
1:18:40uh, House Bill 576 last session that has
1:18:43a small piece that focuses on retaining
1:18:46those students in Kentucky when they
1:18:48graduate. And, and I would imagine that
1:18:51we're losing a lot of entrepreneurs as
1:18:53well. And so, how do what are some best
1:18:56practices of of trying to keep those
1:18:59students in Kentucky?
1:19:01>> Yep. Well, first off, thank you for
1:19:03House Bill 576. I think that is going to
1:19:05be an amazing program with the talent
1:19:06recruitment grant to tackle that. I'll
1:19:10share in a small example that we're
1:19:12experimenting with right now. So, one of
1:19:14the things that came about this last
1:19:16spring was some stats around one that
1:19:20only was projected at the time only 30%
1:19:22of college graduates were actually going
1:19:24to get a job in their field of study and
1:19:26that the average starting salary because
1:19:29of everything going on in the economy
1:19:31had actually gone down about 10,000 to
1:19:33$15,000 since 2022. So we were having a
1:19:36lot of discussions with these amazing
1:19:39collegiate entrepreneurs from our local
1:19:41universities that
1:19:43just were going to sacrifice and go to
1:19:45something they weren't super excited
1:19:47about because they had debt to pay and
1:19:49everything else. Uh so we created
1:19:51something called the Shinkkel Fellow
1:19:52program and it was this idea of let's
1:19:55give them a postgraduation internship
1:19:58where the opportunity was for them to
1:20:00work on their business that they want to
1:20:02work on and it was a very simple
1:20:03concept. We were going to pay them a
1:20:05$10,000 stipend just like an internship
1:20:07stipen would be, but they would have
1:20:10three months to work on their idea and
1:20:12see if they could turn it into
1:20:14something. Uh we also gave them housing
1:20:16to be able to do that, etc. We had one
1:20:19of our participants is exactly what you
1:20:21described. He was a student that went to
1:20:23University of Louisville. Uh he actually
1:20:25was uh born and raised in Myrtle Beach,
1:20:27South Carolina. So we had attracted him.
1:20:30The university had done their job.
1:20:32they'd gotten an amazing talent to come
1:20:33to the state, but he didn't know if he
1:20:37was going to stay. Um, that was
1:20:38something he was debating. The
1:20:40Shinklefellow program was our way that
1:20:42we got his roots to roots to be planted
1:20:45and not be attracted to maybe say,
1:20:47"Well, I think I should go to San
1:20:49Francisco. I should go else." We were
1:20:51able to bring him in and keep them here
1:20:52and take that four-year investment we
1:20:54made with public dollars from the
1:20:56university and start converting. That's
1:20:58the exact type of programs I think we
1:21:00have an opportunity to expand statewide
1:21:02through 576 with your support.
1:21:05>> Thank you.
1:21:07>> All right, we got about seven minutes
1:21:08here for two questions. So, let's make
1:21:10it happen. Senator Nun,
1:21:13>> thank you, Mr. Chairman. I have one
1:21:14question, but it has two parts if you
1:21:16don't. [laughter]
1:21:18>> Thank you both for being here. Just
1:21:20absolutely brilliant minds. Always enjoy
1:21:22hearing from the two of you. Um, I'm a
1:21:24as an entrepreneur myself. I'm
1:21:26entrepreneur myself. I'm a big fan of
1:21:29entrepreneurship. I see how it changes
1:21:31communities. You look at Scott County,
1:21:33vibrant entrepreneurship.
1:21:35The the the boards that are comprised
1:21:36there, the nonprofits, the chamber, just
1:21:39creative problem solvers littered
1:21:40throughout those boards. It changes
1:21:42community. And then I see how my
1:21:43children approach problems and view the
1:21:44world versus the way that I did as a
1:21:46young man night and day. So, it they're
1:21:48great for communities. Um, Dr. My
1:21:51question is for you trying to understand
1:21:54a chart that you had earlier and making
1:21:56sure I'm not drawing a false correlation
1:21:57between the data points. Um you talked
1:22:00about um the high rate of
1:22:03entrepreneurship in Kentucky, but the
1:22:05relatively small number of jobs that
1:22:07come from from those from those
1:22:09startups. Is that because
1:22:12our startups, our entrepreneur pursuits
1:22:15are typically in the service sector?
1:22:17restaurants, shops, maybe mom and pop
1:22:20plumbers, that sort of thing versus, you
1:22:22know, manufacturing or techreated
1:22:24startups.
1:22:25>> That is a really fascinating question.
1:22:27Um,
1:22:28>> thank you. [laughter]
1:22:29>> That'd require a lot more digging for me
1:22:31to be able to answer that one. Uh,
1:22:33because that's true. We could look at
1:22:34the industry mix a little bit more
1:22:37closely. Now, I would say though, if you
1:22:38know, if they're moving into the service
1:22:39sector, th those those still tend to be
1:22:42pretty laborheavy
1:22:44uh places. And so I think even if they
1:22:47were more in those spaces, we would
1:22:49still expect to see a degree of
1:22:52employment growth. Um, so I'm not sure
1:22:56on that one. The one thing I would, you
1:22:58know, I brought this up in in those
1:23:00remarks is that that direct job
1:23:02creation. We want that. It is really
1:23:04important. But then there are all these
1:23:05other benefits that kind of come with
1:23:07entrepreneurialism. I think Dave
1:23:09provided that really great example
1:23:11that's hard to quantify where you you
1:23:14create a lot of problem solvers that
1:23:16kind of come through that. But I mean
1:23:17the job creation part that that's that's
1:23:19obviously critically important. So I so
1:23:21I'm not going to say no that I think
1:23:22that's a false a false correlation, but
1:23:25I I want to spend more time looking at
1:23:26the industry mix and try to figure that
1:23:29out. If
1:23:29>> if you would do that, I'd be very
1:23:31interested and appreciative of what you
1:23:33find. I mean, I look in my community, my
1:23:35my wife and I an Irish theme pub in
1:23:38Georgetown. only employ about 30 people,
1:23:40>> but there's a manufacturing related
1:23:42small business there and they have about
1:23:43100
1:23:44>> and so I think that that might explain
1:23:46the offset a little bit there. Um, can I
1:23:48have ask the second part of my question,
1:23:50Mr. Chairman? Um, and I think this might
1:23:52be for Dave. And so if we look at that
1:23:54disparity in the in the industries, is
1:23:57that venture capital related? And if so,
1:24:00is that market driven? you know, is
1:24:02Kucky's tourism market driving those
1:24:05service sector startups versus the
1:24:07manufacturing or tech, or is it because
1:24:10there's just a lack of venture capital
1:24:11in our Commonwealth and why we're not
1:24:13seeing what's the is it a chicken and
1:24:14egg type thing there, I guess.
1:24:16>> Yeah, it's both, I think, is the the
1:24:18short answer. One is we do have a
1:24:21shortage of VC for everything that
1:24:23Charles walked us through. But even even
1:24:26further, there was a great report that
1:24:27just came out talking about local
1:24:29investor participation and Kentucky was
1:24:32number one in that ranking which is
1:24:34actually not a good thing. Uh it means
1:24:37we weren't attracting enough outofstate
1:24:39investors to come in. We were incredibly
1:24:42fortunate that, you know, the highlight
1:24:43of that was talking about how much
1:24:45keyhorse capital does for us and if you
1:24:47had pulled Keyhorse out of it, I don't
1:24:50want to think how bad our rankings would
1:24:52be when you look at that support. Um, so
1:24:55we're lacking the VC and we need more
1:24:57efforts to attract more dollars in. But
1:24:59the second part I'd add, we're at a
1:25:02really weird pivot point as a society
1:25:05right now when it comes to job creation.
1:25:07Um, so there was a report that came out
1:25:09that Stripe, the payment processor, uh,
1:25:12did an analysis looking at some of the
1:25:15census data around are you creating
1:25:18companies that create multiple jobs, but
1:25:21what does the revenue look like
1:25:23associated with it? Because it used to
1:25:25be as you grew your revenue, you had it
1:25:27added employees to do that. But we are
1:25:30seeing some things happen in
1:25:32productivity where revenue does not
1:25:35directly correlate to the jobs that are
1:25:37being hired with it. Um that creates
1:25:39some really interesting challenges
1:25:41across the board if you measure success
1:25:44of entrepreneurship just by jobs.
1:25:47You know we just had there was a profile
1:25:48the other day of the first company that
1:25:51was a billion dollars in revenue by a
1:25:53single person. So, we would be happy to
1:25:56have that billion dollar revenue company
1:25:57here and the taxes we make out of it,
1:25:59but if we judged that they didn't hire
1:26:02any jobs. So, we have to change how we
1:26:05think about it and recognize that it's
1:26:07not going to be a one-sizefits-all,
1:26:08we're actually going to have to have
1:26:09nuance measures that can vary a lot and
1:26:13probably aren't going to fall during the
1:26:15along those traditional lines we might
1:26:16have looked at.
1:26:19>> All right. Uh, Representative Layman.
1:26:23Well, uh, thank you, Mr. Chair. Maybe
1:26:25just a a few comments, um, more than a
1:26:28question, and I, you know, I'm very
1:26:30interested in again a lot of what we
1:26:32were talking about, the high growth
1:26:33business, startup, entrepreneurship. Um,
1:26:37and this is something I have a lot of
1:26:38firsthand experience in. I've worked in
1:26:40the life sciences my entire career. I
1:26:42started a high growth life sciences
1:26:44business in Louisville. Um, you know, so
1:26:46I I as you and and I appreciate the work
1:26:49you're doing, Charles and Dave both, and
1:26:51as you go through this fall and maybe
1:26:52for the committee members here, I just a
1:26:54few things I'd like you to start asking
1:26:57people and maybe report back on. Um, one
1:27:01is the access to affordable quality
1:27:03health care is one of the biggest
1:27:06obstacles to entrepreneurship. I don't
1:27:09know why it never gets talked about, but
1:27:10if you actually ask entrepreneurs or
1:27:12people consider entrepreneurship, why
1:27:15won't they leave their W2 job? It's
1:27:17because they're afraid of losing health
1:27:18insurance. Two is relatively small, but
1:27:22it makes a big difference. I believe
1:27:24we're the only one of our surrounding
1:27:26states um that charges sales tax on R&D,
1:27:30supplies, and equipment. We we don't
1:27:32charge sales tax on manufacturing
1:27:34equipment, but we do on R&D um
1:27:37equipment. And again, if we're trying to
1:27:39incentivize R&D work, that is meaningful
1:27:42dollars. um talk a lot about the access
1:27:45to capital um you know and we do very
1:27:49very poorly on venture capital and and
1:27:51you know the I do have to point out and
1:27:54when you talked about in 2021 where we
1:27:56didn't get the bump up um that's about
1:27:59the same time we I mean our our income
1:28:01tax was reduced and the main incentive
1:28:04we've had in Kentucky to incentivize
1:28:06venture investment has been our angel
1:28:08investment tax credit and we can talk
1:28:11about you know decreasing ing the income
1:28:14tax is great, but it actually reduces
1:28:16the value of the primary incentive to
1:28:18invest in ventures um in this state. And
1:28:20we haven't really had anything to to
1:28:22back that up. There's no real good
1:28:24incentive for investors from out of
1:28:26state or instate to invest in our
1:28:28venture capital um or venture capital
1:28:30backed startups. And you know the last
1:28:33thing I'll just mention um you know we
1:28:37we are near dead last if not dead last
1:28:40in both private and um public sector R&D
1:28:44investments.
1:28:46You know I we have to be very realistic
1:28:49about you know we can I'm you know
1:28:51there's a lot of great work that happens
1:28:52at UK and UL. There are two R quote
1:28:55unquote R1 universities.
1:28:58We are no we only beat one surrounding
1:29:01state in academic research and
1:29:03development investment and that's West
1:29:05Virginia. Okay. If you look at every
1:29:07other I mean look Ohio State al just to
1:29:09give you UK spends 500 I think it's 540
1:29:12million a year in research. Uh UL I
1:29:15think it's about 200 million. Um you
1:29:18know Ohio State alone is 1.5 billion.
1:29:22And again, maybe that's but that doesn't
1:29:24include University of Cincinnati, Case
1:29:26Western, a lot of other major uh
1:29:27universities in Ohio. You know,
1:29:30Illinois, I mean, Tennessee is about the
1:29:32same as UK, but they also have
1:29:33Vanderbilt spending another $1.3
1:29:35billion. You could look at Missouri. So,
1:29:37University of Missouri is very
1:29:38comparable to UK, but they also have
1:29:40Washington University spending over a
1:29:42billion dollars. I mean, we are not even
1:29:44remotely in the universe with our
1:29:48surrounding states, our kind of our peer
1:29:50competitors. Um and I'll just leave it
1:29:52with that. So one I think was very
1:29:53interest Indiana University is an
1:29:55interesting story. So about I don't
1:29:57remember 12 2012 2013
1:30:00Indiana University was actually spending
1:30:02about 23 as much as UK. So UK was
1:30:06beating Indiana University.
1:30:09Last year Indiana University spent over
1:30:11a billion. So about a 10 15 year period
1:30:15there's been a lot of concerted effort
1:30:16with um engaging a lot of it's Eli Liy
1:30:20but some other corporate citizens in
1:30:21Indiana as well as the state to really
1:30:24endow research and you know I do want to
1:30:26acknowledge my senator and her
1:30:28co-sponsorship of President Styver's
1:30:30bill. You know I it didn't quite get
1:30:32through. I think there was a compromise
1:30:33instead of spending $150 million I think
1:30:36it was 30 something million. I I hope
1:30:38that is also something that can be
1:30:40looked at and and addressed. And I'm
1:30:41happy if you have any comments, but
1:30:42again, I just wanted to put these things
1:30:44out there as maybe things that weren't
1:30:46presented, but I think this committee
1:30:48needs to really uh consider as we go
1:30:50forward. So, thank you, Mr. Chair.
1:30:51>> I make two very quick quick comments in
1:30:54response. Thank you for those comments,
1:30:55Representative. Um you on on the angel
1:30:58investor tax credit, you know, I think
1:30:59important to keep in mind that bump we
1:31:00talk about 2021. um the individual
1:31:04income tax reduction, the vote took
1:31:05place 2022. That reduction didn't take
1:31:07place until 2023. So I probably don't
1:31:09see a connection there. But AITC that is
1:31:12a really important program to your point
1:31:14and it's a small program and so I do
1:31:16think that's that is one of those levers
1:31:18that we kind of have out there that we
1:31:20could improve and make that a stronger
1:31:21lever. So I think it's an important
1:31:23point to bring up. Um, but you also
1:31:25bring up the issue of of sales and use
1:31:27tax and how that does fall on business
1:31:29inputs. And I think that that is
1:31:30something it's a good example of one of
1:31:33those sort of nitty-gritty details
1:31:34that's super easy to overlook, but when
1:31:37you're dealing with these really tight
1:31:38margins, that 6% on a business input,
1:31:40that can really make a big difference.
1:31:42Um, and there's multiple reasons to have
1:31:44problems with with taxing business
1:31:45inputs, but this is another good example
1:31:47of them. So, I'm glad you you brought up
1:31:50that particular point. Thank you for
1:31:51that.
1:31:53>> All right, members. Thank you all so
1:31:54much for your uh your questions. Very
1:31:56good questions, very good insight. Uh
1:31:59Dave, Charles, thank you all again.
1:32:00Every time you come here, you kind of
1:32:02leave us thinking more of, you know,
1:32:03what we need to do. And uh I think
1:32:05you've, like I said, you've you've
1:32:06acknowledged some of the success we've
1:32:08had, but also laid out some places that
1:32:10we need to really start focusing in on.
1:32:12So, thank you guys. Again, members,
1:32:14there being no further

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