Investment in Growing Businesses Surged in 2004

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According to the CFED's Development Report Card for the States, more businesses opened, fewer closed, and the level of investment grew in 2004. The number of companies that shutdown fell to 13.2 percent from 13.7 percent in 2003. Venture capital activity stood at $10.34 billion by the end of the third quarter, 19 percent above the total amount invested in 2003, according to VentureOne, a unit of Dow Jones Newswire.

Though the CFED lauded these improvements, they offered a list of recommendations on how state policymakers could nurture this upward swing.

Scaling back on the use of tax incentives to attract "big-business" is atop the report's recommendation. Rather than chasing high-profile firms, states should redirect funds to homegrown enterprises, thus fostering "long-term entrepreneurial capacity and competitiveness in the communities."

Also, the report recommends that states provide entrepreneurs with greater access to information and capital, especially in rural and distressed areas.

On a state-by-state basis, Connecticut, receiving straight A's on the report card, inched out Massachusetts as the best place to do business. Delaware, Minnesota, New Hampshire, Oregon, and Virginia also made the honor roll, earning A's and B's in the report card's three graded indexes: performance, business vitality, development capacity.

Mississippi and West Virginia faired the worst, earning F's across the board.

Other notables include Nevada, ranked number one for employment growth over the last decade; Maryland, the most educated state, with 41 percent of household heads holding a college degree; Washington, where for every 1000 workers, 11.5 businesses are started; and finally, New Hampshire, where the 6 percent of the population lives below the national poverty line, low compared to last-ranking Mississippi at 19 percent.