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An influx of new tech companies setting up shop in the city means hundreds of jobs – and a place for Providence on the innovation map

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It took David Osborne, the CEO of corporate wellness giant Virgin Pulse, about a month to fall for Providence. Osborne says he wasn’t even considering keeping an office in the city when Virgin Pulse acquired local tech startup Shape Up in early 2016, but he knew he wanted to move away from the company’s headquarters in Framingham. Boston was the obvious choice.

Then he sat down with Governor Gina Raimondo. Osborne recalls being impressed by the due diligence the governor and her staff showed during their very first meeting. It was a sales pitch wrapped in statistics. They rattled off facts and figures about how affordable the state was compared to its peers and quickly arranged follow-up meetings with education and business leaders to make the case that Providence was more attractive than people thought.
Not long after those initial meetings, Osborne agreed to open a new office and create nearly 300 jobs in the city. That was just the start. In November, he announced that Virgin Pulse would move its global headquarters into two floors inside the Providence Journal building on Fountain Street. The company already has 145 employees working downtown, with the promise of reaching its hiring goal by 2021.

“I’ve called it Silicon Valley at 20-something dollars a square foot,” Osborne says.

Rhode Island is still a long way from finding itself on the same pedestal as the San Francisco area or Boston, but Virgin Pulse, GE Digital, and Johnson & Johnson are among nearly a dozen tech-centric companies that have been wooed to the state over the last three years thanks to a combination of Raimondo’s relentless advocacy, generous incentives, and the realization that Providence’s colleges and universities offer an abundance of talent that rivals nearly any city in the country.

Even as critics on both the left and right chastise her administration for being too willing to offer millions of dollars in tax credits to bring new companies to the state, Raimondo insists the results don’t lie. After the state was one of the first in and the last out of the Great Recession, she says the influx of new businesses has finally given it the economic spark that’s been missing.

So how has Rhode Island gone from being labeled the “country’s worst job market” by the website FiveThirtyEight the summer before Raimondo
took office to a state that has successfully recruited 11 tech companies to create more than 1,100 jobs in such a short period of time?

It started with a game plan. Even before she took office in 2015, Raimondo and Stefan Pryor, a fellow Yale Law graduate who she tapped to become the state’s first commerce secretary, had a hunch that tech ventures might be worth pursuing. With so many colleges in close proximity to downtown, they reasoned, companies would not have trouble finding talent.

But Pryor recalls being shocked to learn “Rhode Island was nowhere to be found” at the various conventions and trade shows that city and state officials from around the country attend to recruit companies. They weren’t starting with a long list of leads or a state with a strong reputation.

The two went to work lobbying state lawmakers to approve a suite of economic tools in Raimondo’s first budget, including the Rebuild Rhode Island tax credit for real estate development, the Qualified Jobs Incentive tax credit that provides a credit of up to $7,500 a year for each new job created in certain sectors, and a $25 million package for the I-195 Redevelopment District Commission to use to attract new businesses. Lawmakers also helped fund Pryor’s business development team, which includes five employees whose jobs largely focus on bringing new companies to the state.

Raimondo has also never been shy about digging into her thick rolodex to connect with friends she’s made over the years at Harvard, Oxford, and Yale as well as in the venture capital world. During a 25-minute interview on a Friday in January, she casually mentioned calling a friend from graduate school who now heads up North American sales at Apple as well as a recent dinner meeting with Osborne from Virgin Pulse before making a note to call a top official at health tech company Philips the following Monday.

Raimondo says she makes several calls to companies every week, often making the case that Boston and Cambridge are too expensive while trying to convince executives that Providence has more to offer than they think. Asked if her friend, Massachusetts governor Charlie Baker, ever objects to her taking swipes at his state, she says he understands she’s running the “scrappy up-and-coming state and they’re overflowing.”

“My basic theory is when you come here, you will fall in love,” she says. “I just have to get you here.”

So far, Raimondo appears to be onto something. She says heavy investments in education, from a plan to offer computer science courses in every public school to better training programs at the Community College of Rhode Island, have put the state in a position of strength when negotiations with new companies begin.

When eMoney Advisor announced plans to bring 100 jobs to Providence last August, the company’s CEO described being excited to tap into the state’s “extensive network of talent.” Ravi Kumar, the president of India-based Infosys, singled out CCRI as one of the top reasons he decided to create 500 jobs and build a design and innovation hub in Providence late last year.

Chris Drumgoole, the chief technology officer at GE, says he can feel the “excitement and energy” in Providence every time he visits the company’s downtown office. Eventually GE Digital will have 100 employees in the city. He says he’s heard nothing but rave reviews for Providence from his employees, saying they especially love the food scene.

Announcements that multiple tech companies were coming to the city following GE’s decision have only made him more bullish about Rhode Island, he says, and having a lot of software developers in the same area will create an ecosystem where people from different companies can learn from one another.

Osborne, from Virgin Pulse, says he enjoys being at the ground level of Rhode Island’s resurgence. He likes being able to check in directly with Raimondo or have a quick phone call with the presidents of Brown or RISD. “I would love to have 20 more companies come in,” he says.

Drumgoole and Osborne were also quick to point out that while the subsidies Raimondo offered played a role in their decisions to come to Providence, they were more interested in what the state was doing to build a qualified workforce.

“In a vacuum alone, incentives won’t do it,” Drumgoole says. “All the money in the world is not worth bad talent.”

As former governor Lincoln Chafee sees it, the subsidies awarded to new companies are too steep. GE Digital, for example, is eligible for $4.6 million in tax credits if it creates 100 jobs by next year. Virgin Pulse could qualify for more than $6 million in tax credits and job training incentives if it follows through on hiring 292 employees by 2021. And the Infosys deal could provide the company with $10 million in credits if it creates 500 jobs in the coming years.

Chafee, who has said he is considering challenging Raimondo in a Democratic primary later this year, frequently points to a 2012 New York Times report that was critical of cities and states awarding more than $80 billion a year in subsidies to companies. A follow-up editorial in the Times called the practice a “race to the bottom.”

Chafee says he supports helping companies with sewers or roads, but he believes that the subsidies undermine the stability of the tax base.
“The politician gets the so-called cranes in the air, but how is it going to benefit the community?” Chafee says. “It creates an unfairness to the companies that have been here, paying their taxes.”

Brandon Bell, the chairman of the state Republican Party, says he agrees with Chafee. Rhode Island should focus on lowering taxes, he says, suggesting that the state look to Massachusetts and New Hampshire as examples of better business climates.

“We support lower taxes for all, not special deals for some,” Bell said.

For her part, Raimondo acknowledges that the incentives aren’t ideal. But she views them as necessary to remain competitive. She says that Rhode Island’s economic tools are modeled off of similar programs in New York and Massachusetts.

“I hear the criticism and I get it,” Raimondo says. “Except every other state does it and if we don’t, like we hadn’t for so long, we just get left behind. And other people get the good jobs and we don’t and our people get nothing.”

For now, Raimondo maintains she’s comfortable doing whatever it takes to create jobs in the state. She points to the state’s unemployment rate, which peaked at 11.3 percent in 2010 and was 4.4 percent in December, as evidence that her strategy is working. But she and Pryor say they still see room for growth. They want to train more Rhode Islanders for tech jobs and they want more companies to take a chance on the state.

And the executives who Raimondo has already won over say Rhode Island is on the right track. Drumgoole, from GE, says that state officials should spend even more time exposing what they’ve already done so companies can learn about what Rhode Island has to offer.

“You’ve got a good momentum going,” Drumgoole says. “Don’t take it for granted.”

Dan McGowan covers Providence for WPRI.com. He can be reached at dmcgowan@wpri.com.