In the June 8, 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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Quebec Commits $250 Million for Biotech
A new biotech-opolis in Quebec soon may serve as one of the best organized business centers for biotech, biopharmaceutical, and biocomputer companies in the world, government leaders hope. The Quebec government, Investissement Quebec, the City of Laval, Laval Technopole and Institut national de la recherche re scientifique (INRS), are investing $250 million over five years in cash, in-kind donations, and forgone tax revenues to support the massive cluster project. Additional partners include various academic, economic and scientific communities in metropolitan Montreal and Laval.

The City of Biotechnology and Human Health of Metropolitan Montreal, or Biotech City for short, will function as a business and science center, with more than $100 million alone coming from INRS to equip the city with major scientific facilities and to restructure the INRS’s Armand-Frappier campus. The INRS focuses on research and learning at the graduate school level while responding to the economic, social and cultural needs of Quebec.

Biotech City – being situated on almost 11 million sq. ft. in the Laval Science and High Technology Park – will house numerous centers for research, learning, commercial and new business development, and will accommodate biotech and biopharmaceutical companies. The centers will include:

More than 30 biotech firms already reside in the Biotech City. The Quebec government is offering several tax incentives to entice more companies to locate within the Laval Science and High Technology Park.

More information about the Biotech City at http://www.citebiotech.com

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 Proposed SBIR Policy Directive Warrants Close Examination
Editor's Note and Commentary: The changes proposed by the Small Business Administration for the policy directive governing the administration of the $1.2 billion federal Small Business Innovation Research (SBIR) program are substantial. Some of the controversial changes proposed include blending STTR and SBIR dollars during Phase II, allowing agencies greater flexibility in setting award sizes, and creating the opportunity for impropriety in award selection. Public comment on the draft changes will be accepted by the SBA until June 18, 2001.

SSTI would like to commend the SBA Office of Technology for its receptivity over the past several months to input on issues relating to the SBIR Program, including addressing nearly all concerns raised by state tech-based economic development practitioners in the design of the new Federal and State Technology Partnership Program (FAST). Those who have been involved even tangentially in the SBIR Program since the early 1980s should recognize the SBA SBIR Office's new openness is unprecedented and most likely reflects directly upon its current leadership, Mr. Maurice Swinton.

We are encouraged also to see that openness extended to offering the public a chance to comment on the new SBIR policy directive. We hope that upon review of the comments on the directive, once submitted, the SBA will demonstrate the same receptivity to incorporating constructive input that was shown during the FAST program design.

Because, in our opinion, the directive as proposed warrants considerable revision.

Due to the controversial nature of the changes proposed, SSTI diverged from regular editorial policy by asking three outside experts -- Chris Busch (MT), Bob Kispert (MA) and Patrick Brown (MS) -- if we could publish their comments on the policy directive for our readers to review. They agreed and their detailed comments can be found at http://www.ssti.org/Digest/Tables/060801t2.htm

SSTI strongly encourages all parties interested in receiving research funds through the program or individuals involved in SBIR outreach and assistance to review the draft (available at http://www.ssti.org/Digest/Tables/051801t2.htm ), consider the implications of the provisions included, and send your comments before June 18, 2001 to:

Maurice Swinton, Assistant Administrator for Technology, Office of Technology, Office of Policy, Planning, and Liaison, Office of Government Contracting/Business Development, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416 or via email to technology@sba.gov

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 Study Finds Diversity, Technology Go Hand-in-Hand
The leading indicator of a metropolitan area's high technology success is a large gay population, according to Technology and Tolerance: The Importance of Diversity to High-Technology Growth, a new study published by the Brookings Institution's Center on Urban & Metropolitan Policy. The study's authors are Richard Florida of Carnegie Mellon University and Gary Gates of the Urban Institute.

Nine of the top ten cities as ranked by a Gay Index developed by Florida and Gates were in the top 15 “Tech-Pole” Rankings conceived by Ross DeVol of the Milken Institute (see America's High Tech Economy). Florida and Gates conclude “[g]ays can be though of as canaries of the knowledge economy because they signal a diverse and progressive environment that fosters the creativity and innovation necessary for success in high-tech industries.”

Using four indices, 1990 census data, and the Milken Institute’s measures of high-tech concentration, the new analysis revealed other indications of diversity, such as a high concentration of artists or foreign-born residents, are additional significant indicators of successful technology centers. The overall social, cultural and ethnic diversity of a metropolitan area correlated well with its recognition as technology center.

“People in technology businesses are drawn to places known for diversity of thought and open-mindedness,” the report concludes.

Using a Talent Index, Florida and Gates also looked at the percentage of a metropolitan area’s population with at least a college degree and the area’s position in the Milken Tech-Pole rankings. They found, “not surprisingly," a strong correlation. The authors estimate that for every one percent increase in the percentage of college graduates in a metro area, the area’s Tech-Pole ranking would increase by nearly two places.

The full Technology and Tolerance: The Importance of Diversity to High-Technology Growth is available for download at http://www.brookings.edu/es/urban/techtol.pdf

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 When VC Inducements Pay Off
Encouraging local sources of capital is a common element of most tech-based economic development efforts. The broad strategies to accomplish this typically include forums, investor groups, tax credits, CAPCOs, and public seed capital to fuel fund development.

A different approach was made almost two years ago when Pennsylvania Governor Tom Ridge announced the state was giving a $200,000 grant to Redleaf Group, a West Coast venture capital group to open its Atlantic headquarters in Pittsburgh. (see the Pittsburgh story in the 7/23/99 issue of the SSTI Weekly Digest).

Besides the obvious advantage to the state's economic development strategy of increasing deal flow for local businesses by having venture capital nearby, that inducement grant appears to be producing more notable fruit for the state.

Redleaf Group is in the news again for its recently formed partnership with the University of Pittsburgh to launch a new business accelerator. In addition to traditional incubator services, the new Oak Leaf Networks will provide preseed financing ranging between $50,000 and $500,000. Information technology, and bioinformatics companies will be targeted for potential tenants and investees.

Through its Office of Technology Management, the University of Pittsburgh with Oak Leaf Networks will facilitate the formation of new ventures based on university technology. Permanent space for Oak Leaf Networks will be located near the Pitt campus.

Redleaf also operates a similar business accelerator at the University of Pennsylvania.

OTHER RECENT VC DEVELOPMENTS

Lexington, Kentucky
The Lexington Herald-Leader reported Thursday that Lexington will be home to a $15-25 million private venture capital fund that will focus on health care and high-tech start up companies throughout the Commonwealth. Partners in the fund include Village Ventures, a private VC group that targets its deal searches toward smaller communities overlooked by other, larger investment companies. According to the article, Massachusetts-based Village Ventures has participated in the establishment of a dozen early-stage funds in ten states. The state's recent tech-based initiatives, including Bucks for Brains and the $52 million Kentucky Innovation Act, were cited by the new fund's founders as reasons why they were attracted to Kentucky (see the 2/18/00 issue of the SSTI Weekly Digest for a related story)

Fresno, California
In an effort to keep more local investors' money in the community, Fresno State University is assisting in the development of a $10-20 million venture capital fund for the central San Joaquin valley, according to a recent article in the Fresno Bee. The new CEO say once fully capitalized, San Joaquin Venture Partners could become "the premier agricultural technology venture capital fund in the country."

Green Bay, Wisconsin
The Post-Crescent reports a new Green Bay angels network is forming called ValleyAngels Investment Group, the fifth angel group to be created in the state during the past twelve months. The article says with 13 members currently and the potential to accommodate up to 30 investors, ValleyAngels plans to focus on science, technology, processing and manufacturing deals.

Great Angel Investing Resource
The new book Angel Investing, written by Harvard Business School professor Robert J. Robinson and management consultant Mark Van Osnabrugge, is already touted as one of the best resources for understanding the angel investment phenomenon -- one of the oldest but least known forms of raising capital for entrepreneurship. Angel and informal investing is a particularly useful tool in small communities under-served by venture capitalists and dominated by risk -adverse financial institutions. A longer description and purchasing information for Angel Investing and other titles for accessing capital are available on SSTI's website at: http://www.ssti.org/Publications/capital.htm

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 Useful Stats: Gross State Product Figures for 1999
After adjustments for inflation, Gross State Product (GSP) for the nation grew at an average annual rate of 4.0 percent from 1992 to 1999, according to estimated just released by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce. GSP measures value added in production.

The fastest growth rates for 1992 through 1999 were experienced in Arizona (7.3%), Nevada (7.0%), Oregon (6.8%), Colorado (6.6%), Idaho (6.6%), New Hampshire (6.3%), Utah (6.3%), New Mexico (6.2%), Georgia (5.8%), Texas (5.4%), and North Carolina (5.1%). The BEA attributes the strong performance of these states partly to their strengths in business services and in high-tech manufacturing.

While real GSP grew in all major industries, it was notably strong in the areas of business services and high-tech manufacturing, trade, real estate, security trading, and communications.

The Bureau’s report includes tables presenting GSP statistics for all 50 states and the District of Columbia annually from 1992-1999 and by major industry group. BEA also revised estimates for 1993-1998 to incorporate the results of the most recent revisions of state personal income, of the national estimates of gross product by industry, and of the national income and product accounts.

To aid readers in comparing GSP figures across states and to present the data as it relates to population, SSTI has prepared the accompanying table which displays 1999 GSP for each state on a per capita basis using 1996 chained dollars. Topping the list is the District of Columbia at $99,852, the next four highest states and their per capita GSP figures are Massachusetts with $48,700; Connecticut with $44,263; Delaware with $42,306; and, Alaska with $41,860. Completing the top ten list are New York, New Jersey, Colorado, New Hampshire, and Wyoming.

These newly released estimates are available at http://www.bea.doc.gov/bea/regional/gsp/  GSP estimates for 63 industries for states, BEA regions, and the United States are available on BEA’s Web site: http://www.bea.doc.gov  as well as information on BEA’s major national, regional, international, and industry estimates.

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Tech Council News

New Mexico
The New Mexico Information Technology and Software Association (NMITSA) has hired its first staff: Randy Burge is the new president, Pete Inman is vice president of policy and development, and David Sahd is vice president of operations and marketing. According to the Council of Regional Information Technology Associations, NMITSA was the last such group to change from all-volunteer staffing.

New York
Joe Magno, former Executive Director of the New York State Science & Technology Foundation, is founder and chairman of the New York State Software Network (NYSSNET). Organized in November, NYSSNET's goal is to sustain, strengthen and grow the software industry of the state. The nonprofit has secured a $1.1 million information technology training grant from the Department of Labor and is holding a SmartStart Venture Forum this fall.

Ohio
Crain's Cleveland Business reports the Northeast Ohio Software Association, based in downtown Cleveland, is opening its first satellite office at the Great Lakes Incubator for Digital Enterprises. The incubator is located in a 250 acre technology park at Lorain County Community College.

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 People
Jim Tate has been named Science Advisor for the U.S. Department of Interior. Until his appointment, Dr. Tate served as Advisory Scientist for the Idaho National Engineering and Environmental Laboratory.

Julia Wilson is the new Executive Director of the San Diego Telecom Council. She formerly was director of corporate and foundation relations for San Diego State University.

The Maryland Department of Business & Economic Development has hired Lawrence C. Mahan to serve as the state's senior biotech executive.

Maria Estela de Rios has been named chairwoman of the New Mexico Manufacturing Extension Partnership Board of Directors. She is executive vice president of Orion International Technologies, which is based in Albuquerque.

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