ND investors foster growing tech sector

Tax credits, pro-business climate continue to attract new firms, investments

BY KRIS BEVILL

North Dakota may be best known for its agriculture and energy sectors, but there is a growing movement to establish technology as the third leg of the state’s powerhouse economy, particularly in the Red River Valley region. The number of technology-driven companies choosing to locate in the area continues to grow, due in no small part to the state’s business-friendly atmosphere and investors who are willing to foster the industry.

One of the most recent examples is Fixes 4 Kids Inc., a Utah-based company with Silicon Valley roots that has devised innovative products to address pediatric orthopedic fractures. The company recently relocated its manufacturing operations to Wahpeton, N.D., where it is working with ComDel Innovations to produce its first products, designed to treat broken elbows in children.

Kurt Vedder, company founder and CEO, says he had not considered moving the company to North Dakota until he was introduced to Dan Hodgson, founder of the Southern Valley Angel Fund, in 2011. But after making that connection, which led to a meeting with ComDel’s team and him learning about the state’s business climate, he happily made the move. “We continue to dig our roots into North Dakota and I couldn’t be more pleased,” he says. “It’s a fabulous place to do business. I think North Dakota is leading the country in terms of a strategy to retain and build business. The tax credits the state offers investors is a huge benefit for building businesses and to investments in general. Utah is way behind that and California … [is] the opposite extreme.”

Hodgson, who also serves on the board of directors for Fixes 4 Kids, says he was attracted to the company due to its philosophy that innovative products can be manufactured and brought to the market in a more cash-efficient fashion than is typically seen in large West Coast venture fund models. The Southern Valley Angel Fund, along with angel funds in Fargo-Moorhead and Fosston, Minn., individual investors and the North Dakota Development Fund, invested in Fixes for Kids during its first round of fundraising. Linn Grove Angel Fund, which was co-founded by Hodgson, is an investor in the Series B.

North Dakota’s willingness to invest in technology in particular has been helped greatly in recent years by the state’s decision to provide a 45 percent tax credit for equity investments in early-stage, high-risk companies, Hodgson says. “We have more companies and investors here that are learning that this can be done here rather than sending our money to the Coasts and letting them do it,” he says.

The tax credit North Dakota offers for those types of investments is one of the highest in the country. Kansas offers a 50 percent tax credit, capped at $50,000 per investment per company each year. Minnesota had a 25 percent tax credit program in place, and it was quite popular with the investment community, but the state legislature opted not to allocate funding for the program this year, leaving it unfunded as of May. Business investments in Minnesota will be hurt as a result, Hodgson says.

Fixes 4 Kids products have just recently been introduced to the market, but the company’s goal is to generate $2 million in revenue this year. By early June, it had already exceeded $800,000, according to Vedder. The company currently employs a staff of three in North Dakota, but plans to add personnel accordingly as the business grows. Despite the well-reported workforce shortages throughout the region, neither Vedder nor Hodgson believe recruitment will be a hurdle for Fixes 4 Kids, or for other technology companies in the area. “When it comes to building innovation companies, North Dakota has been shipping its talent out of the state for years, and we can attract them back when we have the kinds of opportunities that they left to seek elsewhere,” Hodgson says. “Any time, any day.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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