August 12, 2010 | Print this page | Share This |
By Keith Stokes, RIEDC Executive Director
On July 26, the RI Economic Development Corporation board approved a $75-million loan guarantee to help Massachusetts-based 38 Studios relocate and expand its interactive entertainment business in Rhode Island. The state's backing will help the company obtain private financing to bring 450 high-wage, highly skilled jobs and millions of dollars in income tax revenue to the Ocean State.
Many community leaders, like you, have inquired about why the RIEDC would offer so much credit enhancement to one company. Simply put, our extensive due diligence revealed that while 38 Studios could raise venture equity and stay in their current location, its investors and management team are willing to relocate the company and the related opportunities for Rhode Island if we provide an alternative to their equity dilution.
38 Studios is a company that has already raised and invested tens of millions of dollars, acquired subsidiary operations that have already succeeded in this industry, currently employs nearly 200 people, has a signed publishing and distribution agreement with industry leader Electronic Arts and has secured a third-party completion bond for its product. This company is by no means a mere start-up. The RIEDC board determined that enhancing this company’s debt is a calculated risk well worth taking.
The RIEDC board is comprised of Rhode Island's top CEOs, university, hospital and industry executives, heads of small businesses and labor. Members used their considerable business expertise to thoroughly assess the opportunities and risks associated with this transaction. They asked all the hard questions the media and the public have asked, and more.
Independent industry and financial experts performed an extensive analysis of the interactive entertainment sector and 38 Studios. Based on months of due diligence, the board then crafted an agreement that includes strict performance milestones 38 Studios must meet and that goes to great lengths to safeguard taxpayers and ensure economic performance.
It was the right call at the right time, but the decision was never only about 38 Studios. It was about establishing the company as a catalyst for a broader digital media industry cluster in Rhode Island. As an "anchor tenant", 38 Studios will be a magnet for other related businesses that will set up shop here and generate thousands of additional jobs in our state.
This investment was also about providing jobs for local college graduates from URI, New England Tech, CCRI, RISD, Brown and other schools with highly regarded software, IT and arts programs. This is a chance for more of them to advance their career paths in Rhode Island instead of having to move out of state.
38 Studios was the first opportunity for the RIEDC to implement the Job Creation Guaranty Program. The program is a powerful new tool that will stimulate entrepreneurial activity and accelerate job growth by helping innovation and technology-driven companies gain access to private growth capital and credit.
The program authorizes the RIEDC to use up to $125 million in loan guarantees to facilitate critical economic development projects. The program is available to businesses with primarily “soft” assets - like patents, intellectual properties and licenses - that need help financing expansion proposals in Rhode Island. Priority is given to projects in knowledge-based industries that can quickly create permanent, full-time, high-wage jobs.
The program is one piece of a strategy to build Rhode Island into a leader of innovation, into a world-class incubator for 21st century growth industries, including renewable energy, life sciences, advanced manufacturing, information technology, defense, financial services and others. Later this month, the RIEDC will launch a statewide public information tour to present its new and comprehensive plan to grow the Rhode Island economy.
The RIEDC is ready to work with other companies to help them succeed. In addition to the Job Creation Guaranty Program, the RIEDC has a broad portfolio of financing programs and business services available to companies - big and small - looking to grow in Rhode Island.