In the May 25, 2001 Issue:

Copyright State Science & Technology Institute 2002. Information in this issue of the SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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LinkMichigan To Address State's Telecom Needs
The Michigan Economic Development Corporation (MEDC), in partnership with several public and private organizations, has outlined a plan to address telecommunications infrastructure needs across the state.

LinkMichigan, released last week, addresses several telecommunications infrastructure issues or concerns that were increasingly facing the public and private sector, including:

Four recommendations are outlined to construct a state-of-the-art telecommunications infrastructure throughout the state, including:

LinkMichigan, which also includes a brief appendix of different local and state approaches to telecom issues around the country, can be downloaded from the MEDC website: http://medc.michigan.org/

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Matching VC to Local ED Goals Expanding Rapidly
With so much attention given to increasing private seed and venture capital activity as a means of growing tech-based economies, one might expect that encouraging and attracting community development venture capital (CDVC) – that is, equity investments and entrepreneurial assistance to meet both profit targets and community development goals – would be a common element of a state or local community’s portfolio of economic development tools.

Increasingly it is, according to the first in-depth research on the state of the CDVC industry, released recently by the Community Development Venture Capital Alliance (CDVCA).

In fact, the study, prepared by Harvard Ph.D candidate Julia Sass Rubin, found more than 50 CDVC providers actively investing or in formation at the beginning of 2000 – up from a mere handful only five years ago. The combined capitalization of these providers at the end of 1999 was $300 million.

Community development venture capital providers make equity investments in businesses in distressed rural and urban areas. CDVC goals, in addition to receiving a positive return on their investment, are to promote economic growth by providing high-quality, higher-wage jobs for low-income people. As a result, CDVC investments are typically made in low- and moderate-income communities or rural areas, not Silicon Valley or Route 128.

CDVC differs from traditional venture capital in many other ways as well. CDVC deal sizes typically range from as low as $10,000 to $1,000,000, compared to the ever-increasing average VC deal (more than $13 million on average in 1999).

Eighty-six percent are willing to invest at any stage of a company’s growth, according to the study. The majority of CDVC providers also target manufacturing jobs; CDVCA reports 50 percent of all equity-focused investments were in manufacturing companies at the end of 1999.

While technology-related companies accounted for more than 90 percent of private venture capital activity according to groups like the National Venture Capital Alliance and PricewaterhouseCoopers, CDVC providers had placed only 34 percent of their investments in tech firms.

And, the report finds, CDVC funding creates jobs at a lower investment/per job than both traditional VC and Small Business Investment Corps. (SBICs). Three of the oldest CDVC funds reported creating more than 4,000 jobs at an average investment of less than $10,000 per job. The study indicates jobs created through SBICs, for comparison, cost an average of $35,000 per job.

In spite of the recent explosion of CDVC activity, the study indicates there are still 24 states with no access to community-based risk capital. Most CDVC providers work along the East or West Coast, or in Minnesota and Ohio.

Banks and financial institutions are increasingly important sources of capital for CDVCs, according to the report. Banks and financial institutions account for 34 percent of all domestic CDVC funding, yet they provided 58 percent of the capital for the newest funds. Foundations account for 22 percent of all CDVC funds, and the federal government has contributed 19 percent of the capitalization.

Community Development Venture Capital: A Report on the Industry can be purchased for $15 from CDVCA ($10 for multiple copies). More information on the Alliance can be found on the CDVCA website: http://www.cdvca.org

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Top Metro Performers in New Economy Ranked
San Jose, Austin, and San Francisco received top honors in the 3rd Annual Forbes-Milken Institute Best Places Ranking. San Jose and San Francisco raced to the top of the list from 29th and 42th place respectively in 1999. Completing the top ten metro areas in 2000 are: Boulder, CO; Dallas, TX; Santa Rosa, CA; Boise City, ID; San Diego, CA; Phoenix-Mesa, AZ; and Oakland, CA. The top metro area east of the Mississippi River, Raleigh-Durham-Chapel Hill, NC, came in 13th.

The Forbes-Milken Institute project ranked the top 200 large metro areas based on a weighted scoring of the eight data categories listed below.

This year, the project also reported separate rankings for 94 smaller metro areas. Greeley CO, Medford-Ashland, OR, and Rochester, MN, received the highest scores using the same criteria.

The entire lists of 200 large metro areas and 94 smaller areas, and links to additional information are available at: http://www.milkeninstitute.org/

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State & Local Tech-Based ED Round-Up

Colorado
The Governor’s Office of Innovation and Technology and the state’s Science and Technology Commission have teamed up to create the Colorado Technology Alliance to provide tech business recruitment information and assistance. According to a recent Pueblo Chieftain article, the Alliance will prepare a clearinghouse website and a 120-page resource magazine. Local and regional information for the website will be administered and maintained by local tech-based economic development officials.

Covington, Kentucky
The Cincinnati Enquirer reports the Madison Avenue Launch Team, a Covington non-profit organization, has signed a five-year lease to create a 21,000 sq. ft. technology accelerator to provide office space for up to 12 firms, mentoring services, and business assistance. So far, $200,000 in funding for the accelerator has been secured from the city of Covington, the Tricounty Economic Development Corp., and private investors. Additional funding is sought from the Kentucky Innovations Commission. More information about the accelerator and the team’s “New Economy Guerrila Warfare tactics” is available at: http://www.madisonavenuelaunch.com/

Maryland
The State feature of National Journal’s Tech Daily reported Governor Parris Glendening vetoed legislation (S. 455: http://mlis.state.md.us/2001rs/billfile/SB0455.htm ) last week that would have provided a maximum $1,500 tax credit for worker training and education expenses in occupations and skill areas deemed by the Maryland Higher Education Commission to be critical to the state’s economic development strategy.

In a press release explaining his reasoning behind the veto, Governor Glendening said the bill “overlaps and sometimes contradicts other initiatives that encourage job training, higher education, and economic development in Maryland. With a price tag that could potentially exceed $20 million, it could siphon off money from other programs with track records of success."

Missouri
The Missouri legislature adjourned last week without passing a bill to re-fund three angel and capital investment tax credit programs. The St. Louis Post-Dispatch reported Wednesday that for the second time in two years, popular bills to encourage entrepreneurship and investment have fallen victim in the final days of the session to having unrelated, controversial amendments attached that made the bills unpassable (anti-abortion and school vouchers).

As a result, the article states two tax credits for angel investments and venture capital are unavailable. The bill also would have put $4 million into the certified capital companies program.

Separately, the Post-Dispatch reported last week that the state-based seed capital fund is open for business after raising $21 million. The fund, managed privately, is expected to focus on medical technology investments.

Fargo, North Dakota
North Dakota State University officially opened its Research and Technology Park this month with the arrival of its first tenant, an electronics firm that will employ 300 people in a new 75,000 sq. ft. facility. An Associated Press wire story reports a 40,000 sq. ft. facility with wet and dry labs is under construction for NDSU researchers and a 25,000 sq. ft. technology business incubator is planned.

Columbus, Ohio
While technology and education budget battles rage in the state legislature, a group of Ohio State University students have taken their future in their own hands by creating the Business Builders’ Club. The new organization, launched this Spring, arose from entrepreneurial enthusiasm uncovered in a earlier failed, student-run consulting and incubator effort. OSU students interested in joining must complete a “personal business plan.” More information is available at: http://businessbuildersclub.org/home.htm

Virginia
Last week, Virginia's Center for Innovative Technology (CIT) announced an agreement with the Technology Commercialization Center (TeCC), NASA's Mid-Atlantic Region Technology Transfer Center (RTTC) to team CIT's nine regional offices with TeCC to provide Virginia businesses with access to NASA-developed technologies that have commercial potential. TeCC, the newest of NASA’s six RTTCs, recently received a five-year $6.8 million contract from NASA to help businesses find commercial uses for the technology developed at NASA's Langley Research Center., which is located in Hampton, Virginia. More information about CIT can be found at: http://www.cit.org

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NSF Inspector General Reviews EPSCoR
With an overall positive review, the Office of the Inspector General within the National Science Foundation (NSF) has made several recommendations for improving the performance of NSF's Experimental Program to Stimulate Competitive Research (EPSCoR). EPSCoR plays an important and strategic role in many states’ efforts to build a stronger research enterprise and tech-based economy. In FY 2000, the NSF EPSCoR program distributed $51.7 million to 19 states and Puerto Rico. The FY 2001 budget is $74.8 million.

Created in 1978, the NSF EPSCoR program has served as a model for other agencies’ efforts to increase the research culture of states that have historically received a small share of federal research dollars.

In addition to the EPSCoR program administration, the Inspector General’s office reviewed the EPSCoR programs in Maine and Mississippi. The two states were selected for attention because “they had undergone significant recent changes that were of particular interest to NSF program managers and because the states were substantially different in their demographics and research infrastructures.” General analysis of the other EPSCoR states is included throughout the report as well.

Seven recommendations are made to strengthen the NSF EPSCoR program and the individual state programs reviewed. Recommendations for the NSF program office include:

With the goal of building broader, sustainable partnerships for research-based economic development, the Inspector General’s office also encouraged states to “cultivate knowledgeable persons from outside higher education to play more prominent roles in EPSCoR.”

The full report can be found at http://www.nsf.gov/cgi-bin/getpub?oig012002

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FAST Deadline Extended
The Small Business Administration has extended the deadline for states to submit proposals in response to program announcement no. FAST-01-R-001 for the Federal and State Technology Partnership (FAST). FAST will support state efforts to foster economic development among small high technology businesses through federally funded innovation and research and development programs. According to the website for the SBA Office of Science & Technology, the deadline for proposals has been extended to June 28, 2001. See http://www.sba.gov/sbir/fastextension.html

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Search Capability Returns to SSTI Website
Ever wonder how many SSTI Weekly Digest articles have covered tax credits? (Answer is 47) strategic plans? (35), biotechnology? (80), workforce issues?(92), indicators? (14), telecommunications? (77), math & science? (50), capital, both seed and venture? (150)

To help make your research efforts easier, SSTI has restored the search feature for our website: http://ssti.org.master.com  Feedback from users would be appreciated.

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