Colloquially known as “the last frontier,” Alaska has long been considered an adventurous destination for innovative businesspeople and travelers alike. In the U.S., it is the largest state by mass yet also the most sparsely populated, making it an option unlike any other when it comes to entrepreneurship.
It is also the third least populous state overall. More than half of Alaskan residents live in the Anchorage metropolitan area. Anchorage is Alaska’s largest city, with a population of about 300,000 people. It is located at Cook Inlet, along the coast of one of the more southern parts of the state. Alaska’s official capital, Juneau, is even further south and has around 33,000 residents, as does Fairbanks, the largest city in Alaska’s interior region. Though it is a large state, generally speaking, all of Alaska’s cities and towns have amazing opportunities for outdoor recreation. To be sure, Alaska is a scenic state where nature lovers can enjoy mountains, glaciers, lakes, and seas.
Britteny Cioni-Haywood, Economic Development Division Director for the State of Alaska’s Department of Commerce, Community, and Economic Development (DCCED), took the time to speak with Business in Focus about the department’s future business plans for the Land of the Midnight Sun.
“Our main industries are oil and gas, tourism, mining, and seafood,” she states.
Before North America’s largest oil field was discovered near Prudhoe Bay in the 1960s, the Alaska Humanities Forum notes that its economy—and population—was much smaller. Dependence on oil, which accounts for about one third of state jobs, makes the economy narrow, and its remote location, higher transportation costs, and small regional market have hindered Alaska with a competitive disadvantage in the past. Over the last couple of years with the fluctuation in oil prices, Cioni-Haywood mentions that there have been job losses and some out-migration.
Yet, “there are also great opportunities,” she adds. “We have a low tax environment. In fact, we don’t currently have either a broad-based income tax or sales tax at this point. There are some local taxes, but none at the state level currently.” State taxes are presently being considered, however, even if taxes are instituted, Alaska would remain one of the lowest tax environments in the U.S.
Alaska is the only state that does not collect state sales tax or individual income tax. Though businesses appreciate Alaska’s favorable tax policies, the state is also taking other measures to further attract newcomers and entrepreneurs.
In order to diversify the Alaskan economy and shift away from dependence on one specific sector, Alaska has commenced the Northern Opportunity Economic Development Strategy, its first comprehensive statewide strategy built on a foundation of past efforts and community input. The strategy has recently been finalized, and while it now awaits the seal of approval from the Federal Economic Development Administration, the DCCED is moving ahead with what it has identified as its top 10 priorities for the strategy’s first year.
The priorities are to create stronger alignment between workforce development and economic development programs and services; to strengthen existing resource extraction industries; to maximize opportunity in Alaska’s seafood industry; to encourage import substitution with the promotion of Alaska-made products; to maximize opportunities in all aspects of the Alaska maritime sector; to increase resources available to rural business owners; to expand use, availability, and knowledge of microfinance and crowdfunding; to strengthen and grow the existing arts industry in Alaska; and to reduce the energy cost burden on Alaska businesses.
“We are focusing not only on growing within our legacy industries—oil and gas, tourism, mining, and seafood—but also providing support for emerging sectors, which can be boat building, for example. We have an aging fleet within Alaska and we know there will need to be new boats,” Cioni-Haywood tells us, in reference to the strategy’s maritime sector priority.
“We are also currently working with the University of Alaska Center for Economic Development and doing some research on potential emerging sectors,” she adds.
The comprehensive strategy is very specific and detailed. For instance, to encourage the use of Alaska-made products over imports, the state will focus on three programs: Alaska Grown (a focus on Alaska agriculture); Made in Alaska (general manufacturing and handcrafts); and Silver Hand (Alaska Native-made art and goods).
The Alaska Grown challenge encourages every Alaskan to spend just five dollars on Alaskan produce a week between June and October, when produce is plentiful. Taking this small measure puts tens of millions of dollars back into the Alaskan economy. Meanwhile, according to the DCCED website, products must be at least 51 percent Alaska produced to be eligible to use the “Made in Alaska logo.” Permits authorizing logo use serve both producers and consumers by certifying product authenticity.
The Silver Hand program helps Alaska Native artists by enabling consumers to identify and purchase authentic Alaska Native art. The “Silver Hand” seal, which is only permitted for use on original contemporary and traditional Alaska Native artwork – not reproductions or manufactured work – indicates that the artwork was created by hand in Alaska by an individual Alaska Native artist. To ensure authenticity, the Silver Hand image is trademarked and may only be used by those granted permission by the Alaska State Council on the Arts.
Another important priority under the Northern Opportunity Economic Development Strategy is to encourage tourism via identification of key targets to meet, such as increasing statewide cruising guests by 10 percent, and by encouraging sustainable growth in emerging visitor industry segments. These can be cultural tourism, eco-tourism, geo-tourism, adventure tourism, or Arctic tourism. Tourism is much higher in the summer months, when the weather is surprisingly pleasant and visitors can capture awe-inspiring views of green mountains and cobalt lakes, though the winter also provides opportunities for skiing, sledding, or just watching the aurora borealis dance across the sky—nature’s own light show.
A popular destination for honeymooners and whale watchers, Alaska sees its share of tour boats. But although tourists come and go, Cioni-Haywood points out that the business community that stays in Alaska year-round is very well connected.
“Juneau is an interesting case in that in the summer, we see over a million tourists from cruise ships. But during the winter, it can get to be a very tight-knit community, and there is the mentality that you help your neighbor. I know many entrepreneurs who work with other businesses that on the front might seem like a competitor, but because they have that knowledge base, there is a lot of synergy.”
There is also a business accelerator in the state, Launch Alaska. Launch Alaska is a nonprofit founded with the recognition that a vibrant entrepreneurial ecosystem can play an important role in solving some of the state’s unique and intractable problems, ranging from food insecurity to high energy costs, climate change to unemployment. The accelerator helps startups to solve local (and ultimately global) problems, diversifying Alaska’s economy in the process. Mentors and board members of the accelerator include other entrepreneurs, economic development professionals, and angel investors.
“We’re looking for firms that solve problems with energy, water, transportation and food, with a priority on firms working on traditional energy issues like generation, transmission, storage and management (think 0s & 1s, electrons, hydrocarbons, BTUs and microgrids). We know this is broad, and that’s kind of the point. If your firm can help solve an Alaskan problem, and potentially scale to national or global markets, we should talk,” the Launch Alaska website states.
The accelerator, which has a broad focus on energy-related businesses, provides mentoring services to startups. It is a relatively new initiative, now in its second cohort. According to website, the program is “an intensive, 13-week process for companies to improve their operations, identify their market and product fit, learn how to innovate and iterate quickly, and become investment ready, scalable ventures. In the process, they form connections, get access to capital and mentors, and formulate and test their strategy in a supportive environment.”
Of course, when businesses first come to Alaska, whether energy-related or not, they have also come to rely on the services of the DCCED, a customer service-oriented and business-friendly state department. One of the first steps it helps newcomers with is obtaining business licenses using a streamlined process.
“Then within commerce, we have a number of regulatory divisions that bring a safe and stable environment to Alaska, such as the insurance division or banking and securities division. We also have the division of community and regional affairs, which works with local governments in support of them having different things so they can promote their communities and make them safer and stronger,” says Cioni-Haywood.
She mentions a new theme in the administration that carries over to all divisions of the DCCED, that of a ‘safer, stronger, smarter Alaska.’ “My division focuses on ‘stronger’—diversifying and supporting the local economies and business,” she says, as the Director of the Economic Development Division. More specifically, Cioni-Haywood points out that as conducting site selection in Alaska can be challenging, one of the Economic Development Division’s focuses has been on “growing its own.” As a result, Alaska has recently seen some of its existing businesses leave the startup phase and begin to take off, within the cities and Alaska’s rural community.
That being said, the results are not particularly surprising, as the entrepreneurial spirit of Alaska has always been enduring and resilient. “We have to innovate and come up with ways to resolve issues that are unique to the State of Alaska. We have very low daylight hours during the winter and harsh climates, both wet and cold.” Though this has typically been said of the Empire State of New York, Cioni-Haywood remarks that due to Alaska’s unusual weather and remote location, when it comes to research and development, “if you can make it work here, you can probably make it work anywhere else.”
As the world moves away from oil and gas as a sole energy source, Alaska has responded to the energy crisis with full force. While the State of Alaska actively pursues new opportunities, things are looking positive for the state with the commencement of its economic development strategy, Alaska-made initiatives, and business accelerator. For the businesses that choose to set up shop in Alaska, the state offers them a low tax rate, great testing grounds, and a business-friendly community.
“Alaska tends to rank very high in Kauffman Foundation indexes for entrepreneurship, and I think it’s borne out of necessity,” Cioni-Haywood concludes. “We’re the last frontier.”
Business owners considering locating to Alaska should contact the Department of Commerce, Community, and Economic Development at https://www.commerce.alaska.gov.