"Kentucky Has to Become More Entrepreneurial"
For Doug Cobb, finding synergy is a way of life

Doug Cobb

Doug Cobb is the chairman of the board at Greater Louisville Inc., chairman and CEO of Interactive Systems, the parent company of the Vine Company, and one of the founders of bCatalyst, a new business accelerator.

Cobb, 41, grew up in Louisville, graduating from Atherton High School. After graduating from Williams College in Williamstown, Massachusetts, Cobb went on to earn a graduate degree in accounting from New York University. After moving to Cambridge, Massachusetts, Cobb worked with Lotus Development Corp., co-authoring Using 1-2-3, a manual for the industry-standard accounting software developed by the company. Following a stint with software publisher Que Corp., Cobb launched his first venture capital firm, The Cobb Group, which he sold in 1991.

Greater Louisville Inc. (GLI) recently announced that you would be stepping down as its president and CEO to become chairman of the board. How did you arrive at this decision?

From the beginning, my plan was to help create a new, unified development organization (Greater Louisville, Inc.) to launch new economic development initiatives and to make sure the new organization was capable of delivering the vision that Louisville’s community leaders had laid out. It never was my intention to make a career out of the CEO job. I am an entrepreneur and I like being in the entrepreneurial sector. Atthe end of last year, I felt I had accomplished most of the goals I had set and GLI had an excellent person – Steve Higdon – to be my successor. The end of the year was a good time for me to give a hand off and move back into a volunteer position as the chairman of GLI.

During your two and a half years as Greater Louisville CEO, what successes do you believe the organization achieved?

There are four or five things that immediately come to mind. First, we created Greater Louisville Incorporated. Before, there were three economic development entities in Louisville and now there is one lead organization. There are a number of other groups that focus on specific niche missions, but at the high level, now there is just one.

A business plan for GLI was developed that not only laid out the continuation of its existing strategies, but added to that a number of new things like the workforce services mission, Enterprise Corporation, and minority business development. These efforts have expanded the parameters of economic development for the Louisville area.

GLI raised almost $15 million for a five-year phase of economic development in Louisville and that is 50 percent more than previously committed.

And, we built a great team of people – Steve Higdon, Joe Reagan, Tracy Troutt, Michael Bateman, Eileen Pickett, Mark Crane, and Beth Niblock – who have the ability to execute on that mission.

Has the merger of Louisville’s economic development efforts proven to be a successful approach for the community?

So far so good. The results speak for themselves. There have been two consecutive years of record results, and the third year, 2000, is moving rapidly ahead …it looks good.

Would you recommend a similar approach to other communities in Kentucky?

I would, and here is why. The tendency is to think that economic development is nothing more than industrial development, but economic development is a much broader problem than that. It involves not only recruiting new businesses, but more importantly also recruiting talented people, building home-grown businesses, and helping existing companies grow. When you have multiple agencies, each focused on one particular part of the problem, the community has a lot of redundancy in the system and it doesn’t have a coordinated strategy that is necessary to be successful. Consolidation of economic development efforts makes a ton of sense. It has been good for Louisville.

You are active in a number of business areas – what will be your primary place of employment now?

I will serve as chairman and CEO of Interactive Systems, the parent company of the Vine Company, which provides victim notification services to state and local governments all over the country. My job is to take Interactive Systems’ existing technology and develop it for other applications in government and, even more importantly, in the commercial sector.

Without giving away trade secrets, what would be another general business area into which Vine might evolve?

Interactive Systems’ basic technology audits transaction-processing systems and sends an automatic notification to a client or its customers when a particular transaction occurs. For example, an airline could use this service to notify a priority passenger of a departure delay or of an upgrade availability.

What do you consider the highest priority for economic development in Louisville at this time?

In my judgment, the number one key to success … is whether Louisville can become competitive in the world market for talent. Louisville has to be the kind of place that is competitive and can attract a bright young graduate from MIT, Purdue, Cal-Tech, U of L, or UK, someone who could go and live anywhere in the world and do almost anything. Right now, I would say that Louisville is occasionally or moderately competitive but needs to be substantially competitive if we are going to be successful.

What do you believe would make Louisville a more desirable place to live?

People choose to live somewhere for many different reasons. Climate, family, lots of reasons. Ultimately, the most important reason that people choose a particular place is because it offers a lot of opportunity. If we can create more economic opportunity, we’ll be successful in attracting more talent.

Would you define opportunity as higher compensation levels for employees and a broad diversity of new economy jobs?

Yes, both of those things. By creating young, high-impact, fast-growth companies, a community has the ability to attract engineers, marketing people, and other professional talent. People are drawn to places like Silicon Valley because of a vigorous business climate. Louisville is beginning to get there, but we’re not there yet.

Jefferson County and the City of Louisville are working on a merger. How is that project coming along at this time?

My hope is that by the time your readers view this, the Kentucky Senate will have passed the House bill that will have given the citizens of Jefferson County the right to vote on a city/county merger plan. Basically, the plan that the mayor and county judge-executive proposed is an excellent plan. The next job is to build a case for why greater Louisville needs to do this as a community, and to sell the plan to the voters.

What are the major benefits of a merger?

In the long run, government efficiency will be improved. Second, it will increase the visibility of Louisville on the national scene, because the city will move up from being ranked around 60th in city population size to the top 25. And that is a big deal. Most importantly is the psychological benefit of tackling a hard thing, doing it, and then making progress as a community.

Since you’ve just recently worked on the merger of Louisville’s economic development agencies, will you be called in as a special consultant to the merged government?

As the chairman of GLI, I’ll have a major role in advocating for the merger, but I don’t think I’ll have an official one; my role will be as a concerned citizen.

How much has the expansion of the Louisville International Airport and United Parcel Service boosted the local economy?

Huge. UPS alone is in a process of expanding and adding 6,000 jobs! That is unbelievable growth. A lot of those jobs are highly paid airline pilots, mechanics and management people. But more importantly, the UPS hub makes Louisville extremely relevant to the world of e-commerce. Many packages that are going to be sold by e-retailers are going to move through Louisville on the way to their ultimate destination.

You recently founded a new company called bCatalyst, described as a business accelerator that assists high potential and new economy start-up businesses in the Louisville, Lexington, and Cincinnati areas. For the benefit of our readers, how would you define a "new economy start-up business"?

It’s any company that is using the Internet to reengineer a business process or opportunity. So it could be a business-to-business opportunity, or an industry specific portal on the Internet – anything that is using new technology to reengineer the economy. bCatalyst is also interested in companies that do not narrowly fit that definition – there are good ideas that do not involve the Internet.

Who are the founders of bCatalyst?

There are seven of us – David Jones, Jr., co-founder of Humana, Inc.; David Grissom, chairman of Mayfair Capital; Greg Fischer, founder of Iceberg Ventures; Kent Oyler, co-founder of High Speed Access; me; Robert Saunders and Keith Williams, most recently affiliated with Chrysalis Ventures, Inc., who will be our CEO.

Is bCatalyst a for-profit company?

It is.

Does that mean bCatalyst is a venture capital type of business?

We hope bCatalyst will make money two ways. First, when a company is accepted into the incubator, bCatalyst will receive equity in the company just for accepting it into the program. Secondly, bCatalyst has an affiliate $5 million seed capital fund. An investment from the seed fund will buy another piece of equity in the company. Companies will also pay their occupancy expenses at cost. The bCatalyst business model is entirely equity based. Effectively, bCatalyst will be successful if the founders of the companies it assists are successful in building their companies.

How do you intend to recruit candidates – by word of mouth, publicity, or do you have some other strategy for identifying start-up companies?

One of the reasons bCatalyst has seven partners is because the company wants to embrace folks who are at the center of the entrepreneurial community in Kentucky. These are the people who are constantly hearing about new business ideas. I’ve probably had half a dozen people come to me in the few weeks since we announced bCatalyst.

What is the benefit bCatalyst offers versus a venture capital company?

When bCatalyst sees a deal that is interesting, but immature, our directors will be able to bring a company to the point where a meaningful investment can be made. bCatalyst is a perfect place for a company to kind of grow up a little bit.

Governor Paul Patton’s plan to increase and/or create new taxes has not been well received by taxpayers or the Kentucky General Assembly. What advice would you give the governor on taxation?

You have to have a holistic view of where you want the Kentucky economy to go and then work towards that goal. The right tax strategy is one that moves Kentucky closer to being an effective competitor for new economy businesses. For instance, old economy companies are capital intensive, so low property taxes are good for old economy companies. Kentucky has low property taxes.

New economy companies tend to be very human capital intensive and that means that low income taxes are good for new economy companies. Kentucky has fairly high income taxes, and probably a part of a new tax strategy would be to look at the difference between property and income taxes. A tax strategy to move Kentucky into the new economy would equitably and appropriately shift the tax burden.

In your capacity as CEO of Greater Louisville Inc., you’ve worked with a number of companies that were considering moving business locations to Kentucky. How carefully did these companies evaluate the tax burden both on business and on employees?

Taxes are a small piece of the overall decision. What really hurts is when a particular tax is aimed right at the heart of a company’s business. That is fatal.

What strategy is required for Kentucky to continue its strong growth in job creation and per capita income?

Kentucky has to become more entrepreneurial, so bright people come here, stay, and do really exciting things that will drive the economy forward. Kentucky’s efforts should be aimed at the new economy and high value-added manufacturing jobs.

What advice would you give a college student or a recent graduate about where to start his or her business career?

I would say, "Come to Louisville and work for my company," because we’re going to need a lot of talent. There are perhaps 20 companies like Interactive Systems that are going to be big consumers of bright, young talent – there’s a lot of opportunity here in Louisville.

What mistakes do recent college graduates make in their career paths?

The main thing is to learn how to think and to find a job that you love enough that you’ll put a lot of effort into it. When you put a lot of effort into anything, you’ll discover opportunity and chances for innovation and advancement. There is opportunity everywhere. But finding something you love is really the key. Work hard to gain a knowledge advantage and use it to build a career.

Do you foresee any major change in the economy?

I am concerned about the valuation of some of the new economy companies. Some of the values are speculative and it concerns me a little bit that stock prices could come down. But ultimately, I am an optimist. The reengineering of business will make a big difference. The general business trend is going to be very positive.

Do you think a new and simplified tax system would benefit the U.S. economy and taxpayers?

I do. Why should taxpayers spend so much time and effort complying with a complicated tax code? Let’s set a flat tax rate and let everybody pay it simply, and move forward. Rather than paying tax experts to compile our taxes, we could invest the money in a productive way. The problem is that a lot of good people make a living preparing income taxes. The cost of my tax returns is income to someone else. You’ve got to look out for those folks too.

What is your outlook for the immediate future?

I’m really excited to be back in the entrepreneurial sector as a player rather than just a cheerleader. I am hopeful for great things from my new company during the coming year.

Ed G. Lane is chief executive of Lane Consultants, Inc. and publisher of The Lane Report

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