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Putting angels in a position to better aid N.J. tech startups

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Entrepreneurs attempting to start a business, large or small, know that of all the myriad details that must be resolved before a single transaction occurs, obtaining funding is at the top of the list.

All else can be perfect, with a detailed format, goals, projections, realistic economic outlooks and demographic reports, but without money it all adds up to a business plan that can't be applied or take root. However, finding sources of startup money can be more than just a major headache; sometimes it seems that obtaining startup funding is all but impossible — at least, at reasonable rates and repayment conditions.

Gov. Chris Christie recently signed into law the Angel Investor Tax Credit program, which could be a boost for small business startups in the high-technology field. By enacting the program Christie is giving high-tech startups access to funding that may open the doors to financing their dreams, as well as providing much-needed jobs in a dismal economy.

Under the new law, investors including both corporations and individuals who invest in high-risk startups can receive a tax credit for as much as 10 percent of the cash they invest if they direct their funds to technology companies that are based in the state. To obtain the tax credits, the companies they invest in can employ no more than 225 workers, with at least 75 percent of those positions in New Jersey, and must be involved in manufacturing or selling technology in the state, in addition to performing research for future technological advances.

Tax credits are limited to $500,000 per investment, with an annual cap of $25 million statewide.

The program may help reduce the state's unemployment rate of 9.6 percent, which has been bleak for several years despite recently edging downward. Supporters are hopeful the tax credits will prompt an increase in investments that will ultimately help boost the state's employment rolls and significantly improve its dubious status of having an unemployment rate well above the national average of 7.8 percent.

The program also provides a pathway to new technology research that can lead to new businesses. The bill does not include new sources of funding or offsetting budget cuts that were issues in 2011 when the program was previously considered.

Unfortunately, New Jersey often is considered a less than desirable state in which to do business, with combined taxes and costs that consistently leave it at or near the bottom of national rankings. I hope this will change for the better with a continued focus on programs such as the Angel Investor Tax Credit, which can help new businesses get a foothold in the state and then not just survive, but thrive.

The U.S. population is growing steadily, and in a few very short years the baby boomer generation will begin to retire in record numbers, meaning that job openings will be available across the spectrum of business and industry. High technology is in huge demand and will be for long into the future, and affluent investors and established businesses with a ready supply of investment capital will be perfectly positioned to take advantage of the upcoming crop of educated, motivated technology workers.

New Jersey has taken a solid first step to improve its business climate. After all, there is plenty of room for upward mobility.

Scott Mahoney, senior vice president
Morgan Stanley Wealth Management
Morristown

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