#StartupsEverywhere Profile: Jane Vancil, Founder and CEO, IncentiLock
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
Streamlining the incentive process through cloud-based software
All too often, startups and other companies across the country fail to take advantage of local, state, and federal business incentive programs that could help them grow. IncentiLock, a St. Louis County-based startup, is working to ease the incentive headache for startups and governments alike by offering software to automatically calculate tax credits and incentive benefits. We recently spoke with Jane Vancil, IncentiLock’s founder and CEO, to learn more about the company and Missouri’s startup ecosystem.
Can you tell us a little about yourself? What is your background?
I’m a former Fortune 500 tax director, and a former VP with an incentive consulting firm. I’d been working in incentive compliance for more than 15 years, and I saw some things that I thought could be much easier and more efficient. In all those years, I also saw a lot of things in the data that I wasn’t sure the state or federal governments were seeing.
One day, after my very complicated spreadsheet model blew up, I decided that I was going to develop software instead of recreating the data for the umpteeth time. We’ve created products that bring a little more transparency on both sides—public and private.
Tell us more about IncentiLock. What is the work you’re doing?
We’ve been around since 2015, and we have a suite of Cloud-based software products. One is geared toward companies that have been awarded incentives, and one is geared towards government awarding incentives. If you’re thinking about the IRS and filing taxes, you can use any type of methodology to prepare your income tax return. You can use a program like TurboTax or you can do it on paper. But no matter how you do it, you submit it to the IRS and they review it and then send you a refund.
Our flagship product is like TurboTax for companies, but you don’t have to use our software for a state to review it. Another product is designed for use by governments to accept compliance from companies--no matter how a company submits their data. Most states require a spreadsheet. That data can be automatically uploaded into our software which immediately spits out a metrics that can be used to determine the status and success of each incentivized economic development project. It will tell you exactly what your base job count is and if you’re continuing to pay those jobs at the same or greater compensation as prior to the incentive contract. This is important because taxpayers expect government taxes to remain whole before agencies pay out incentives for new jobs.
Incentives are geared to benefit companies who make the states better off after they add jobs and invest capital. We can prove that very simply, and then tell the company or the state exactly where that project stands. Is that company at risk of meeting their commitments? Are they at risk of meeting the average wage that’s required? We can also see trends in what’s happening. We can see by broad titles of jobs, what jobs might be going away, and we can tell when companies might be adding different types of jobs than in the past. We’re serious about helping with workforce development.
How has the 2017 Tax Cuts and Jobs Act impacted your business model?
Some of the states have been lowering their income tax rate, and that’s a great answer for most companies. But when incentive payments are based on the state withholding, we see that that’s now reducing those payments. To a startup or a young company that’s trying to get going, if they forecasted a certain benefit number because they thought their employees would be withholding at a certain rate, and now that rate’s been reduced, I think that’s been an unintended impact.
The theory, from my perspective, is that incentives are used to fund a financing gap. Let’s say a company decides it wants to build a plant, which would normally cost millions of dollars. But just for the sake of argument, let’s say they need $100 for the project and they only have $90. So they look at where they might put that money, and then they go to that state government and say: “Is there a way you can help us bridge this gap?” If a company needs $10 to make that plant happen, and for whatever reason they don’t get it—such as incentive benefits not coming through as forecasted or the loss of a major customer or a decline in industry economics—the project is at risk. We allow companies and governments to be proactive by identifying risk earlier.
Those are some of the things we’re seeing. Incentives can be great for business and communities but, until now, there hasn’t been good data to make or defend the argument. Another point about the impact of changes in tax rates is that it may become more difficult for companies to use the federal tax credits that they’ve earned, because now they aren’t paying as much (lower tax liabilities). Sometimes, tax credits can be carried forward and be applied to tax liabilities in later years. If there is no provision for a carryforward, the tax credits are essentially lost. This is another unintended consequences of tax rate reductions. It’s those companies with existing incentive contracts that, I think, have a little more exposure.
What makes Missouri’s startup ecosystem so unique?
Two organizations in St. Louis immediately come to mind because they continue to help us grow: Arch Grants and ITEN. Arch Grants awards $50K grants to 20 startups annually. ITEN is a technology-specific accelerator that charges startups nothing. It’s a great place for someone with an idea to go in and have it vetted, and to also have industry or product experts and experienced entrepreneurs give you feedback and get your venture going. There are so many other great organizations in Missouri but it all started in St. Louis. If ever in STL, stop into T-Rex on Washington Avenue. There is no shortage of startup activity, support and giving back in the entire city.
The other thing in Missouri is that the communities work really well together and support each other. I think people are generally are very free with advice and expertise, which is huge.
St. Louis is made up of a lot of people who generally want to see others succeed. That may be the case in other places, but when I talk to people who travel here, they’ll tell me that it’s not always the same in other cities. For the most part, established companies are great and are willing to do trials of technologies when they can. There’s an early adopter mentality in St. Louis, and a genuine hope of success.
What issues are Missouri entrepreneurs dealing with that should receive more attention from state and federal policymakers?
I think that anything insurance-wise is big for startups. Most of us are too small to get a group policy for health care, so you have to go out to the exchange. It would be nice to have something a little more formal, like a pool, that could potentially offer a suite of bundled benefits. That would be helpful because it takes so much time for each one of us to go and talk to insurance agents and figure out the types of coverage. You need health insurance, liability coverage, E&O insurance, workers comp, and you want life insurance for your employees.
When you’re small and finally get to that place, you just don’t have the time to do it. We should be thinking about that early and adopting it as soon as possible.
What is your goal for IncentiLock moving forward?
Five years from now we hope that we’re in all the states that offers incentives, providing the software that makes their incentive audits efficient, complete and less painful. We think that would be really helpful on all sides, because companies really struggle with this type of work and it’s expensive for them to do incentive compliance. If there were a tool the states could offer to make it easier for the companies, then the accountability and transparency would be available.
All state and local governments are required to include a footnote in their financial statements that includes the total amount of taxes given up each year through incentives. Right now, that’s a very difficult amount for governments to get to. We believe we can make that exercise very simple and make it possible for states to relieve liabilities for existing contracts that maybe aren’t going to be met. This may, in turn, raise a state’s bond rating and allow it to borrow money at a cheaper interest rate. We also think it can help them design new programs that might work differently and maybe better, or it could help them free up money that could be offered to startups or other programs that could benefit the public.
We just think there’s a lot of opportunities for us. Up until now, there hasn’t been a technology for companies or governments to use that makes it efficient enough for government workers to do a thorough review. So that’s where we’d like to be.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email edward@engine.is.
