VITAL STATISTICS

The New England advantage

SEACOAST VENTURES: The Northeast has its challenges for businesses of all sizes, such as energy costs. What are some of the reasons this region is home to entrepreneurs?

PETER FRANCESE: I think energy costs are far less important today for most employers since only a small percentage of them are in energy-intensive industries such as manufacturing. The main reason this region is so attractive to entrepreneurs is because we have had a better-educated work force. New Hampshire, Vermont, Connecticut and Massachusetts are among 10 states with the highest percentage of working people with a college degree. In today's global and information-rich economy, it is the ability to find and hire technically skilled people that will make the difference between success and failure.

SV: Venture capital in New Hampshire firms reached about $75 million last year, down from a peak of nearly $750 million in 2000. The high-tech market dropped after that year, but software and tech firms continue to attract investors. How does innovation fuel our economy?

FRANCESE: Regardless of the amount of venture capital that's available in any given year, it's the quality of the proposals that makes any venture fund take notice. Innovation is a key element in the quality of a funding proposal, but to obtain funds any innovation must also be operationally feasible as well as marketable. If we look at any of the more successful products or services in recent years "" from the Segway to the iPhone "" all of them required an extraordinarily high degree of innovation.

SV: The "New Hampshire Advantage" is often attributed to New Hampshire's lack of a state sales tax or income tax. For entrepreneurs, at least, how important is this in the overall scheme of taxation, from unemployment insurance to property taxes?

FRANCESE: For startups, the level of taxation is not material. Some of the most innovative and successful companies have started in places with very high levels of taxation such as California (Silicon Valley) and Massachusetts (Route 128). When starting a venture it's your ability to hire the smart people that's critical. Taxation may be a concern of bigger or more-established firms, but almost never for small startups.

SV: Entrepreneurs, who usually start out small or with a small number of employees, have access today to a tremendous array of public and private services in support of businesses. How are these agencies strengthening the economy?

FRANCESE: There is a reason why the United States, with less than 5 percent of the world's people, creates 27 percent of the world's Gross National Product. It's partly due to the high rate of business formation, which is aided and abetted by low government regulatory barriers and a highly integrated chain of supporting firms. Supplier firms can provide a startup with everything from marketing to accounting to shipping to fabrication "" whatever the entrepreneur needs to get going. They are essential to success and the grease that keeps our economy flowing smoothly.

SV: Much has been made about the "brain drain" in Maine and New Hampshire, the trend of college graduates leaving for jobs in other states. The past couple of years, however, have seen growth in established young professional networks. How do these help? Are demographic trends telling us anything new?

FRANCESE: That brain drain is not particularly new. Young people have been leaving northern New England for more than a decade. The reason: too many towns have made it abundantly clear that young people are not welcome. These new young professional associations starting up is an extremely encouraging development. Perhaps they will be the catalyst that causes communities to rethink their self-destructive policies of permitting only child-proof or prohibitively expensive housing. The demographic trends tell us quite clearly that if this region does not find a way to permit a lot more work force housing to be built our work force will decline and our economic future will be grim indeed.