WebEquity proving its case

Doug McGregor was excited when he moved his computer software company from Glenwood, Iowa, to Omaha, expecting to hire talented engineers and programmers and to receive Nebraska tax incentives to help the small company grow.

He found people to join the staff of WebEquity Solutions. He opened a new headquarters in downtown Omaha and began rapidly expanding the company, only to get a nasty surprise:

The State Department of Revenue rejected WebEquity’s application under the Nebraska Advantage Act, saying the company didn’t ship its software on computer disks through the U.S. mail as required under the department’s interpretation of the incentive law.

“Being a little upset is putting it mildly,” McGregor said Monday in an hourlong briefing with Gov. Dave Heineman, who visited the company’s headquarters in the Omaha World-Herald Building to learn about WebEquity Solutions.

McGregor, the company’s president and CEO, even considered moving the company out of Nebraska to a state that would better appreciate the company’s “cloud computing” practices. Cloud computing refers to computer services available through the Internet, such as software, computing time and data storage.

Instead, WebEquity’s experience prompted a rewrite of the Nebraska Advantage Act.

Monday, Heineman said the state needs to upgrade its economic development incentives every year or two, given the rapid changes in technology.

“We need incentives not for the 19th century but for the 21st century,” the governor told a half-dozen WebEquity executives who took part in the briefing.

Without regular revisions, Heineman said, “you’re going to get behind.”

WebEquity’s history dates to 2008, when an investment fund named Rational Equity purchased a Glenwood company whose software allowed bankers to track lending risk. Renamed WebEquity Solutions, the company distributes its software to 622 banks and other lenders in the United States, Canada, Australia and England.

McGregor wanted to move the company to a larger city and considered San Francisco, Minneapolis and Boston, but he also talked with the Greater Omaha Chamber of Commerce. Part of the chamber’s pitch was the 2005 Nebraska Advantage Act, which provides tax incentives to businesses that invest in the state and create jobs, especially high-paying jobs.

WebEquity hoped to qualify for about $1.4 million in tax incentives over seven years.

“What eventually sold us were the state-sponsored financial incentives,” McGregor wrote in a letter earlier this year to State Sen. Abbie Cornett of Omaha, chairman of the Legislature’s Revenue Committee.

In January 2009, the company moved its 37 employees from a converted A&W Drive-in in Glenwood to its new headquarters at 14th and Douglas Streets.

Everything was going well until state officials told McGregor that the incentive law didn’t cover businesses that sent software over the Internet.

McGregor said he worked for nine “grueling and painful” months to reverse the decision, eventually inviting State Tax Commissioner Doug Ewald to Omaha to learn about advances in the software business.

Ewald eventually agreed that the state’s policy requiring use of the U.S. Postal Service was outdated, and he approved the company’s incentive application.

Working with state officials, McGregor helped draft new wording for the incentive law so that other software companies wouldn’t go through the same ordeal.

Last month, the Nebraska Legislature approved Legislative Bill 918 by a 49-0 vote, adding specific wording about software delivery. Heineman signed the bill, which was part of a package that updated the state’s business incentive laws.

“The postman does not need to deliver this anymore,” McGregor said Monday as he walked Heineman through a presentation on software products.

Within five years, McGregor said, WebEquity could grow from about 40 employees to between 200 and 300 employees, with a 30 percent to 35 percent share of the bank-lending software market.

Contact the writer:

444-1080, steve.jordon@owh.com

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