Let’s Keep And Attract Entrepreneurs And Investors To NJ: Why NJ Needs To Recognize QSBS Like 45 Other States In The US
We all know New Jersey has a lot to offer: prime geographical location, good quality of life, nationally respected schools and universities, incredible talent and a strong and growing entrepreneurial community. However, the state’s current stance on Qualified Small Business Stock (QSBS) is a significant deterrent to entrepreneurs, angel and venture capital investors who are deeply invested in the future of entrepreneurship and innovation – not only discouraging new founders and investors from moving to New Jersey but actively driving current residents out of the state. To truly make New Jersey a leader in the global race to innovate, the State must reconsider its stance on QSBS.
QSBS refers to a federal tax incentive under Section 1202 of the Internal Revenue Code, designed to spur investment in small businesses. Those who hold qualified small business stock for more than five years can exclude up to 100% of their gains from federal income tax, subject to certain limits. This incentive is crucial for founding teams and investors as it encourages taking huge risks in investing and leading early-stage companies with the potential for significant growth.
New Jersey is one of just five states that doesn’t recognize QSBS. New Jersey’s decision to tax QSBS gains at the full state income tax rate without offering the same exclusion provided at the federal level places the state at a major competitive disadvantage.
In the 45 other states that conform to federal QSBS rules, the early risk takers benefit from the QSBS exclusion, making these states more attractive options to build and invest in new businesses. This also encourages investors to reinvest that capital into new, local ventures. Without the QSBS exclusion, we forfeit talent and capital that could have otherwise been reinvested into New Jersey’s economy, creating jobs, funding new businesses, and driving innovation.
It’s important to highlight that Pennsylvania is our only neighboring state that does not conform to this Federal policy. Massachusetts, New York, Connecticut, Delaware – are among the 45 states that recognize the QSBS exemption.
The current QSBS policy thwarts growth by discouraging entrepreneurs and investors from making New Jersey their home. Investors participate where they live. As investors grow out of NYC, NJ is off the table for most because of this policy. Entrepreneurs with companies in NJ are incentivized to leave. 80% of startups fail and executive team equity is often diluted down in the small cases where an acquisition does occur. Current NJ tax policy costs these entrepreneurs much more than it would to be in most other states. For the many entrepreneurs who might live in NJ and whose companies are based in NYC, they leave or won’t consider NJ as home because this policy is too much of a deterrent given the many risks that are already inherent to starting a new business.
Our current policy actively drives current investor and entrepreneur residents out of the state. Both are passing over or are leaving New Jersey for states like Florida and Texas. Florida, with its rapidly growing tech community and no state income tax, is particularly attractive. Texas, with no state income tax and a strong startup ecosystem, has also become a major hub for startups and investors alike.
Closer to New Jersey, Massachusetts has emerged as another attractive option for founders and investors. Massachusetts not only has a thriving biotech and technology sector but also recognizes the QSBS exclusion at the state level, making it an appealing option for investors seeking to maximize their returns. This state has successfully fostered an environment that supports innovation and investment, drawing both talent and capital from across the country.
And, of course, it’s important to highlight that New York, just across the river, is among the top three most active startup and investor markets in the country. By maintaining its current QSBS policy, New Jersey is not only failing to attract entrepreneurs and investors but is also discouraging them from moving to the state. This is a missed opportunity, especially given the proximity and potential for these investors to contribute to New Jersey’s growing entrepreneurial ecosystem.
New Jersey is at a pivotal moment, with real momentum to create more startup activity and foster a vibrant entrepreneurial ecosystem. Governor Murphy’s Administration has demonstrated its commitment to supporting innovation and the technologies of the future with the recent establishment of an Artificial Intelligence (AI) Hub in Princeton and a State Artificial Intelligence Task Force. New Jersey can continue to build on this progress by enacting policy changes that make it possible for the next generation of innovators to call New Jersey home.
We know from experience that investors often prefer to invest in their backyard. If New Jersey were to align its QSBS policies with federal standards, it could attract a wave of new residents—venture capitalists, angel investors, and entrepreneurs—who are eager to live in a state with incredible talent and resources that values and supports their contributions. These individuals would bring not only their wealth but also their knowledge, experience, and connections, which could be leveraged to foster local innovation and economic growth.
By aligning with federal standards, the state can create a more attractive environment for investors, drive new economic activity, and position itself as a leader in the innovation economy. This change wouldn’t just benefit risk-taking founders and investors; it would benefit all New Jersey residents by fostering a more robust, diverse, and dynamic economy.
By Aaron Price, CEO TechUnited:NJ
Signed by the following NJ innovators:
To add your signature go to: tech.asteamwork.com/qsbs
Aaron Fessler, CEO, TripWorks
Abi Odugbesan, Ceo, SplitEV / Ilera Principal
Adem Ogunc, Founder & CEO, Well Woven Inc
Alan N. Wink, Managing Director – Capital Markets, EisnerAmper
Alfons Musry, COO, Sion
Alfred Torres, Managing Partner, ThinkDigital Labs LLC
Ari Rabban, CEO, Phone.com, Inc.
Ari Sohn, Head – Greater NY Region, Jews in Tech
Audley Wilson, CEO, Roboburger Enterprises Inc
Benjamin Sesser, CEO, BrightHire
Benjamin Sun, Co-Founder and General Partner, Primary Venture Partners
Betty Chin, Self Employed, Early Stage Startup Investor
Breen Sullivan, CEO & Founder, The Fourth Effect
Bret Morgan, Founder, FRESH markets, BMG Group
Brian Chin, Self Employed, Early Stage Startup Investor
Brian Moran, CEO, FLX Networks
Brian Smiga, Co-founding Partner, AlphaPartners.com
Carl Mazzanti, President, eMazzanti Technologies
Carlos Gonzalez, Associate Director, Verizon
Cassie Young, General Partner, Primary Venture Partners
Charles Nebenzahl, CEO, Synergy Pet Group
Chisa Egbelu, CEO, PeduL
Chris Ackermann, Founder, Alidade Labs
Craig Dubitsky, Founder/CEO, We Are Happy LLC
Craig Limoli, CEO, Wellsheet Inc.
Daniel Gura, Director of Business Development, Hugo Neu Corporation
Daniel Herscovici, Partner, Edison Partners
Darrell Fertakos , Founder, Boundless-Innovations
Dennis Wall, CEO, BillingPlatform
Donnel Baird, CEO, BlocPower
Dorothy Chang, Co-Founder, Lynx Collective
Eileen Huang, Manager, Princeton University
Elizabeth J. Groo, Investor/Advisor, Independent
Eric Klei, President, Soul Tech Marketing Inc.
Evyatar Segal, Co founder / CTO, Moonshot AI
Frank Denbow, Founder, Paco’s Nails
Franklin Rimalovski, Early Stage Startup Investor, New York University
Frederick Callis, CEO, Cybervore, Inc.
Ganes Kesari Balakesari, Co-founder & Chief Decision Scientist, Gramener
Gary Millin, President, World Media Group, LLC
Gerald Gorman, CEO, World Media Group LLC.
Gil Eyal, Investor, Stardust Ventures
Giuseppe Incitti, CEO, Sitetracker, inc.
Glenn Handler, Co Founder/General Partner, Oceans Ventures
Gregory Rosoff, CFO, All Things Media, LLC
Guanghui Hu, Founding Partner, Westfield BioVentures, LLC
Harish Mukhami, CEO, GibsonAI
Imran haque, President, Sabii Digital
James Kocis, President, Hudson Street Ventures
Jason Shuman, General partner, Primary venture partners
Jay Bhatti, CEO, 49 Alpha
Jeff Frommer, CEO, OWM
Jennifer Abreu, Corp Communications & PR Executive, N/A
Jerry Neumann, Managing Director, Neu Venture Capital
Jim Gunton, Partner, Tech Council Ventures
Joe Maruschak, Managing Director, Aventurine Capital Group
John H. Martinson, Chair, Martinson Ventures
Justin Trugman, Cofounder & Head of Technology, BetterFutureLabs
Karen Cahn, Founder & President, IFundWomen, Inc.
Kathleen Vincent, Sr Process Engineer, The EVERY Company
Ken Colangelo, CEO, Bantr
Kenneth Goodwin Jr., Managing Partner and Founder, Jeanensis and Oqulus Tech
Kirthika Parmeswaran, CEO, Vital Start Health
Krishna Kumar, Managing Director, Quintrix Solutions, Inc
Krissy Cirello, Account Director, EMI
Kunal Sarda, Co-founder, CEO, Arya for Work, Inc.
Manny Padron, Founder, Be Well Greens
Marc Lore, Founder and CEO, Wonder
Marco DeMeireles, Co-Founder & Managing Partner, Ansa Capital
Mark Kolb, Partner, Tech Council Ventures
Mark Nelson, CEO, Pivot Fuel
Mark Yackanich, Partner, BetterFutureLabs
Mary Jane Durkin, Director, Entrepreneurship, NJII
Maureen Teyssier, SVP Head of Data, Link Logistics
Meghan McKenna, Founder and CEO, FIF COLLECTIVE LLC
Michael (Mickey) Bresman, CEO, Semperis
Michael Dwyer, Co-founder, Prompt Therapy Solutions
Michael Galkin, Founder, VoiceNEXT.com
Michael Johnson, President, New Jersey Innovation Institute
Michael Montero, Founder & CTO, Struck Studio
Michelle Conway, President and Business Coach, IC Solutions, Inc. dba FocalPoint Business Coaching
Minalkumar Patel, Founder and CEO, Abacus Insights
Nelly Tacheva, CEO, Tangra
Niraj Shah, CEO, Pandaflow
Ori Fruhauf, CEO, Agave Health
Phil Paolella, Senior Software Engineer, Phil Paolella Software LLC
Priya Prakash, Founder & CEO, WannaEat
Raghu Rao, Executive Chairman, ImageProVision Inc.
Rajesh Desai, Managing Partner, Systemart, LLC
Ramzi Faris, CEO, INDU5TRY
Rehan Khanzada, Founder & CEO, Let us Nudge
Richard E Riman, Distinguished Professor/Founder of 6 NJ Companies, Rutgers University
Ryan Bednar, CEO, RankScience
Ryan Hubbard, CTO, Updater
Saddiq, Head of Marketing, Funnder VC
Sam Gutmann, ceo, Own Company
Sam Toole, Partner, Primary Ventures
Scott Daniel, Co-Founder, Materium Technologies
Shashank Singh, CEO, Bakstage.AI
Shaun Keegan, Ceo, Solar landscape
Shaune Scutellaro, Partner, CohnReznick
Shawn Cantor, CEO Co-Founder, Certemy
Shawn Hamilton, CEO, Conduiit
Sohail Azad, Post Producer, McCann
Stephen Schum, Chairman, CEO, Global Rewards
Steve Cornwell, Founder/CEO, Northpass (Acq. by Gainsight)
Steven Cohn, Founder, Winware.ai
Steven Rosenblatt, Co-Founder & General Partner, Oceans
Subrat Nayak, Founder & Chairman, Vetty Inc.
Tahsin Koyuncu, Software development, Allstate
Thatcher Bell, Head of Programs, The Clean Fight
Theodore Chestnut, Co-founder and CRO, BrightHire
Thomas Capone, CEO, NYDLA.org
Thomas Janofsky, CTO, SpotHero
Thomas Wisniewski, Partner, NVP
Tim Fern, Chief Commercial Officer, Eyebot
Toby Dingemans, Operating Partner, BetterFutureLabs
Tom Mizzone, CEO, Sweet
Tom Sauer, Co-Founder, Head of Operations, Complete Sleep
Vallab Nayak, CEO, Aersys, Inc
Vikram Wadhawan, Founder, Vasitum Inc
Vineet, Co-Founder, COO, AlphaROC Inc
Vinit Bharara, Co-Founder and CEO, MOJO
Yoni Rubin, CEO, NAJ Innovations, Inc.
Zack Rosenberg, CEO, Qortex
Zoya Lehrer, Co-Founder & CEO, Orgo
To add your signature go to: tech.asteamwork.com/qsbs