The recent rift between the R.I. Economic Development Corporation and Slater Technology Fund over reporting requirements for up to $9 million in federal capital highlights the difficult balancing act in government job-creation efforts between public accountability and private enterprise.
Although both sides have declined to discuss any details of ongoing negotiations, differences over reporting requirements attached to potential investments are identified in EDC meeting minutes as apparent stumbling blocks that have caused Slater’s initial $1.2 million installment to be held up.
After facing questions in recent years about how it monitors the performance of companies it assists, the EDC made measuring the return on its public investments a new priority in 2011.
But in increasing the amount of information required from companies that receive assistance – be it equity infusions, debt or loan guarantees – the EDC and other public-development entities risk making their programs less attractive to the entrepreneurs they hope to help.
“There is a balancing act. On the one hand you want accountability, and there is a challenge to have transparency. And on the other you have technology, trade secrets and investments you are making in your strategic plan,” said Peter C. Dorsey Jr., president of the Business Development Company of Rhode Island and executive director of the Cherrystone Angel Group. “There is certainly an issue of having certain levels of confidentiality and strategy: put yourself in the shoes of a company.”
While the Business Development Company uses only private money, Cherrystone this year is working with Providence on a new program that potentially would offer $50,000 in convertible debt to companies the angel investor is putting money in.
So far, Cherrystone hasn’t had a candidate take advantage of the city money, so Dorsey said he doesn’t know whether reporting requirements will be a concern.
Among the things emerging businesses of all stripes may be wary of making public are their hiring plans, what private funding they are receiving and from whom, and what areas they are investing in.
While he has declined to discuss talks with Slater, EDC Executive Director Keith W. Stokes last week acknowledged that the agency’s efforts to measure performance and guarantee accountability require a careful touch.