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Originally published 5/19/2004 at http://www.billingsgazette.com/index.php?tts=1&display=rednews/2004/05/19/build/local/20-eda-deals.inc and reproduced here under the Fair Use Provisions of copyright law.
Copyright © The Billings Gazette, a division of Lee Enterprises.

Companies like a good deal, Big Sky EDA's hired gun says


by JAN FALSTAD
Of The Gazette Staff

North Dakota entrepreneur Mike Marcil catapulted to success by founding a high-tech Internet venture in Fargo during the wild dotcom days of the 1990s and watched his company implode just as fast.

When he had to lay off 100 people in his hometown, he moved to California where he now runs Spinout Ventures. The company is aimed at matching companies eager to leave California with communities in the Plains and Northern Rockies states eager for jobs.

The Billings-based Big Sky Economic Development Authority is one of his clients. Marcil said he knows what works in bringing jobs to rural states. During his one-year contract with Billings, Marcil said his goal is to bring a couple of California companies to town.

"I just talked to the company CEO, chief executive officer, in Los Angeles who may end up relocating to Billings," Marcil said.

He disagreed with Federal Reserve Board senior vice president Art Rolnick in Minneapolis that funding education makes more sense than spending public dollars on economic development.

"Education is the wrong argument," he said. "I know a lot of guys with a master's degree in computer programming. It hasn't helped them. The skills can be done anywhere."

Boom to bust

Marcil was richly rewarded for his knowledge of selling products with online electronic coupons until 2000 rolled around and the crash came.

"I am an Internet expert and six months later you are a loser for having those same skills," he said.

He turned his Internet and sales skills into drumming up financial support from North Dakota alumni. Four years ago, he branched into economic development by forming Spinout Ventures, with four employees.

The Burlingame, Calif., company lists 22 clients besides Billings on its Web site: Two in Nebraska, five each in New Mexico and North Dakota and 10 in South Dakota.

His two entrepreneurial adventures aren't that different, he said. Venture capitalism and economic development are kissing cousins, both gambling for a payoff.

In economic development, a city or county contracts with a non-profit like Big Sky EDA to attract jobs and wealth, he said. A for-profit venture capitalist invests directly in a company gambling on future profits.

"They are not that far apart, they just do it different ways," Marcil said.

Golden state tarnished

Companies in California wanting to expand are ripe for relocating, according to Marcil.

"We find that companies are interested in two things - reducing operating expenses and getting out of California," he said.

Land, labor and workers compensation are too expensive on the West Coast and have sapped the profits from some smaller companies, Marcil said.

To be successful at economic development, a community needs three things, he said. It must enthusiastically want new businesses, have strong leadership and money to persuade companies to move to out-of-the-way places like Billings.

"People like a deal, companies do, too," he said. "Also, we find that less than 10 percent of the developers in the country are good developers."

Marcil said he is paid $2,500 for completing an economic screening of a company that wants to move that matches Big Sky EDA's criteria for a good prospect. If one relocates to Billings, Spinout receives a $2,500 bonus for a total of $5,000.

He compared his job to a marriage broker screening mates.

"By the time the representatives get down to meet, we're already talking turkey," he said. "They are ready to deal."

Zero sum not true?

Marcil disagrees with the premise that paying companies to relocate is a zero-sum game, one state's gain being another state's loss.

Rather than outsource jobs to India, Marcil said, he tries to get California executives to consider the northern states.

"I'd rather see that company utilize Montana labor at 40 percent less (in wages) and create more jobs," he said. "If Montana becomes more competitive, meaning companies can make more money in Montana, that is the antidote to those zero-sum games."

A state by any other name

Marcil said it's easier recruiting companies to move to Montana than his home state.

"They love the idea of Montana. There's a huge perception problem with North Dakota and they don't even know that these two states are next to each other," he said.

He downplays geography, telling companies that there are great resources and opportunities in the upper Midwest. When the discussions reach the chief executive level, he'll mention North Dakota.

Last year, he was successful in luring two small companies to North Dakota. Direct Response Technology, a Pittsburgh company handling Internet ads, opened an office in Beulah, a small town in western North Dakota. A business in Beverly Hills, Calif., that sells motorcycle parts over the Internet opened shop in Devil's Lake. Both businesses employ five people.

Economies of scale

In economic development, the bigger the better rule really works, he said.

Pulling off a success is easier in a city than a small town, which is losing people to the farming or ranching crisis.

"Small towns are desperate," he said. "They are trying to use economic development as their savior and it isn't working because they are swimming upstream."

Marcil said the country's underground economy is growing quickly and that is why the jobless recovery hasn't cut into consumer spending.

He owns several properties in Beulah. Even in this small town, some people have figured out how to live off the Internet.

"There are three stores doing eBay power sales," he said. "They make a living selling on eBay."

Playing the economic development game requires patience, he said, a quality lacking in politicians. The deal to land the Bresnan Communications regional center in Billings took 18 months.

"This stuff is geology," Marcil said. "It takes a long time to get a community to transform itself while political cycles are only to two to four years."

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