In the August 17, 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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Oregon Charts Course for Tech-Based ED
Economic development in Oregon recently has been given new life, thanks to the approval of $222 million in bills by Governor John Kitzhaber. The legislation, including $72 million for high-tech infrastructure and research over the next two years, is expected to increase public investment in biotechnology, engineering and other research.

On August 8, the Governor signed Senate Bill (SB) 832 to dedicate approximately $32 million per biennium of National Tobacco Settlement funding for the construction of facilities such as research labs, which will take advantage of information generated by Human Genome Project. Gov. Kitzhaber also approved $20 million to improve engineering education and increase the number of engineering graduates and another $20 million for construction of a new building for engineering education, signing SB 5524 and SB 5525 — the appropriations bill for the Oregon University System and the Oregon University System Capital Construction Budget, respectively. Additional bills receiving the Governor's signature are below:

Gov. Kitzhaber also signed House Bill (HB) 2275, authorizing the sale of bonds backed by Oregon Lottery proceeds and targeting the bonds at economic and community development projects in rural Oregon The bill designates $150 million to create a sustainable, revolving loan fund, which will allow for up to $50 million per biennium in grants and loans into perpetuity.

Supporters expect the $72 million in high-tech research funding to help prevent a brain drain of researchers in Oregon, according to the Associated Press. The Oregon Health & Science University, where the funding was signed into law by the Governor, reportedly is 34th in the U.S. in funding received from the National Institutes of Health. The State of Oregon presently has 75 biotech companies. To obtain more information on any of the bills mentioned above, visit the Oregon State Legislature at http://www.leg.state.or.us/

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 Cincinnati Rolls Out "100-Day" Plan
The Greater Cincinnati Regional Technology Initiative has released revving up the tech engine, a strategic plan with more than 30 recommendations to improve Cincinnati's position in a tech-based economy. Giving themselves just 100 days to complete the plan when they started in Spring, the project was developed through six "Accelerator Teams" involving more than 200 volunteers from the three-state metro area. The teams looked at: start-up capital and resources; research and commercialization; workforce development; e-commerce readiness; Greater Cincinnati’s image as a high-tech player; and public policy.

The Accelerator Teams also drew on a regional "Angel Board" made up of seasoned community business leaders for resources and guidance.

Major recommendations include:

A new Technology Growth Accelerator is being established to implement the plan; a 15-member Leadership Council chaired by Cincinnati Bell will guide the process. The Accelerator will have a staff of five people when fully operational. Seed funding of $1.4 million has been provided by state, local and private sources.

To download revving up the tech engine and to learn more information on the initiative, visit http://www.cincytechusa.com

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Conference Sponsor Profile
The Advanced Technology Program
The Advanced Technology Program (ATP) bridges the gap between the research lab and the marketplace, stimulating prosperity through innovation. Through partnerships with the private sector, ATP's early stage investment is accelerating the development of innovative technologies that promise significant commercial payoffs. ATP exhibits four primary strengths:

Early Financial Support. ATP provides cost-share funding in the critical early stages of R&D, including a maximum of $2 million for up to three years in direct costs for a single company and up to half of the total project costs for a maximum of five years for joint ventures.

Research Support. ATP encourages R&D partnerships and consortia and provides guidance in putting together a joint research venture.

Recognition. ATP’s rigorous peer-review system provides an independent, objective, and confidential evaluation of the strength of your R&D and business plans. Many firms have reported that ATP support was an important factor in securing additional funding.

Independence. Companies control and retain the intellectual property rights to the results of their research.

Being administered by the Department of Commerce's National Institute of Standards and Technology (NIST), ATP provides a mechanism for industry to extend its technological reach and explore possibilities. Several features, however, distinguish ATP from other government R&D programs:

ATP Headlines...
As part of its 2001 competition, ATP recently announced six new awards totaling more than $11 million, bringing this year's count to 16 new ATP awards.

To date, more than half of the more than 460 projects selected by the ATP since its inception have gone to individual small businesses or to joint ventures led by a small business. However, well over half of these projects include one or more universities as either subcontractors or joint-venture members; more than 140 individual universities participate in ATP projects. Funding for these projects is possible due to the ATP's partnership with industry, universities and non-profits to help advance research and development projects with the potential of having important, broad-based economic or social benefits. ATP will continue to accept proposals for the 2001 competition until September 30, 2001.

ATP is a gold sponsor of SSTI's annual conference, Creating Opportunity: Tools for Building Tech-Based Economies, on September 20-21, 2001. To learn more about ATP, visit its exhibit and attend its session at the conference or check out its website http://www.atp.nist.gov/

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 Useful Stats I: 2nd Quarter VC by State, Region
No matter which source one uses, venture capital investments continued their decline during the second quarter of 2001. The Moneytree™ survey, released this week by PricewaterhouseCoopers and Venture One, Inc., found a 21 percent decline from the previous quarter. Second quarter investments fell to $8.2 billion from $10.4 billion in the first three months of the year. Only 669 companies received funding, down 11 percent from the 752 firms funded during the first quarter.

While the decline in venture capital funding has captured all the headlines, PricewaterhouseCoopers points out the most recent Moneytree™ survey revealed outside participation from non-traditional investors, such as corporations, angels and other private equity entities, is at its lowest level in three years. Venture capitalists provided 90 percent of the equity investment in venture-backed companies during the second quarter. For comparison, during the first quarter of 2000, venture capital only represented 76 percent of equity investments in venture-based companies.

PricewaterhouseCoopers elaborates, "corporations are investing less than one-tenth the amount they contributed last year, with investment declining from $3.8 billion in the first half of 2000 to $353 million in first half of 2001. Likewise, private placements of equity in the first half of 2001 are at one-third of last year's levels."

The Moneytree™ survey for the second quarter found deals for early, seed capital funding continued their plummet, comprising only 15 percent of venture investments. Mid-round funding also declined, while later-stage, more mature companies actually saw venture capital deals increase eight percent over the previous quarter.

SSTI has prepared the accompanying table presenting the Moneytree™ survey findings by state. For the first time, average deal size for each state is included in the table to highlight the idea that the total amount of funding secured may not be the best indicator of the amount of venture activity occurring in a state or region.

The Growthink Reports
SSTI also has become aware recently of another detailed report examining quarterly venture capital activity in a format that may be useful to state and local tech-based economic development groups. Total U.S. Private Equity Funding Report: Organized by Market Sector and Geography, prepared by Growthink, Inc., analyzes and profiles 921 companies funded in the second quarter of 2001 and the top investors that backed those deals. Growthink surveyed 2000 venture capitalists, angel groups and corporate investors to find deals totaling $10.8 billion for the second quarter. The California-based consulting group also interviewed more than 1,000 companies to verify information collected.

Detailed information for each company and each source of funding is provided in four market sector reports or individual reports for seven geographic regions: Bay Area, New England, the Central United States, Southeast, Northeast, Southern California and the Pacific Northwest. The geographic reports further define equity activity by state and/or metropolitan region.

More information about Growthink, the Total U.S. Private Equity Funding Report, and the individual market sector and geographic reports can be obtained at http://www.growthink.com

Michigan Makes Pre-Emptive Strike for Fuel Cell Commercialization, Manufacturing 
What are you doing to protect your state or local economy from technological advances that will completely overturn an industry 10, 20, 30 years from now? 

With the prospect of someday losing 27,000 high-paying tech jobs at 15 automotive engine and powertrain plants, Michigan has unveiled a plan to position the state as a leader when automotive applications of fuel cell technology make the internal combustion engine obsolete. 

Commissioned by the Michigan Economic Development Corporation and the Michigan Automotive Partnership, the strategic plan and market study call for the state and automotive industry to jointly: 

The study, prepared for MEDC by the Center for Automotive Research (CAR) within the Environmental Research Institute of Michigan (ERIM) in Ann Arbor, is available online at http://medc.michigan.org 

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Useful Stats II: Educational Attainment Rankings by State 
Last week, the U.S. Census Bureau released the Census 2000 Supplementary Survey Data (C2SS), compiled from 700,000 test households prior to the full census. C2SS provides a preliminary look at data similar to those that will be available next year from the Census 2000 long form. Several summary state tables are provided with the announcement that can be used by states as indicators of economic progress, including educational attainment, median household income, median value of owner-occupied housing, and percent of people below the poverty level. 

Using the 1991 and 2000 educational attainment data from the Census Bureau, SSTI has prepared the accompanying table revealing each state's relative rank for the percentage of its population over 25 years of age that had obtained at least a Bachelor's Degree in 1991and 2000. The table also presents rankings for the percentage change between the two figures for each state. 

For both 1991 and 2000, the District of Columbia had the highest percentage of its population attain a Bachelor's degree or more, with 34.4 and 41.1 percent respectively. Massachusetts moved ahead of Colorado during the period to claim second place in 2000 with 34.5 percent. 

Indiana showed the most improvement during the decade with the percentage of college graduates in the state increasing by 35.4 percent from 1991 to 2000. The Hoosier state's overall ranking for 2000 was 45th, up from 48th in 1991. Delaware, second in overall change with 32.6 percent, jumped 14 places in the state rankings from 33rd in 1991 to 19th in 2000. 

The Census Bureau also has released 44 of 52 state profiles from the 2000 Census, including the District of Columbia and Puerto Rico. The final eight web-based profiles are scheduled to be completed by the end of this month. 

The C2SS tables can be found at: http://www.census.gov/Press-Release/www/2001/C2SS/presskit7_31_01.html 

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To IP or Not to IP?  
Is the current concentration of effort toward the identification and licensing of intellectual property (IP) the best method to stimulate innovation? In a period seeing increased pressures on public research universities to identify alternate sources of funding, IP opponents may find economic considerations obfuscating the innovation argument: 

Professors Nancy Gallini of University of Toronto and Suzanne Scotchmer of the University of California, Berkeley, however, argue in Intellectual Property: When is it the best incentive system? that alternative mechanisms for rewarding innovation may be superior to intellectual property in certain situations. 

For example, the authors say "when both the costs and values of innovation are publicly observable to both firms and a public sponsor, intellectual property is not the best incentive scheme...To justify intellectual property, there must be some type of asymmetrical information about the costs and benefits of research programs." 

The use of prizes, stipends or other one-time payments may be more fruitful with innovations whose value is most apparent to the sponsoring government entity, such as military procurements. Gallini and Scotchmer, then, consider the use of alternate incentives to intellectual property to encourage the development of vaccines to avoid monopoly pricing and stimulate further innovation. Exclusive licensing and patents, they argue, can be particularly debilitating to future innovation in areas where advancements are cumulative (e.g., an AIDS vaccine). Could a prize or one-time reimbursement/fee be more beneficial? 

They conclude: 

Intellectual Property: When is it the best incentive system? will be a chapter in the second volume of Innovation Policy and the Economy (forthcoming). The working paper of the chapter, updated May 6, 2001, is available for download at http://www.nber.org/books/innovation2/gallini5-14-01.pdf 

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Conference Profile 
Federal Laboratory Consortium 
The Federal Laboratory Consortium for Technology Transfer (FLC) is the nationwide network of federal laboratories that provides the forum to develop strategies and opportunities for linking the laboratory mission technologies and expertise with the marketplace. More than 700 major federal laboratories and centers and their parent departments and agencies are FLC members. 

The approach of the FLC is to use a coordinated program that meets the technology transfer support needs of FLC member laboratories, agencies, and their potential partners in the transfer process. While its mission is to promote and facilitate the rapid movement of federal laboratory research results and technologies into the mainstream of the U.S. economy, the FLC develops and tests transfer methods, addresses barriers to the process, provides training, highlights grass-roots transfer efforts, and emphasizes national initiatives where technology transfer has a role. For the public and private sector, the FLC brings laboratories together with potential users of government-developed technologies. This is in part accomplished by the FLC Laboratory Locator Network and regional and national meetings. 

FLC News... 
As the new FLC Chair, Ann Rydalch outlines her goals and objectives in the Summer 2001 edition of FLC Insider, the Consortium's quarterly newsletter. Ms. Rydalch offers the following: 

A gold sponsor of SSTI's fifth annual conference,Creating Opportunity: Tools for Building Tech-Based Economies, September 20-21, 2001, FLC will have its own conference exhibit and session. More information on FLC is available at http://www.federallabs.org/ Requests to subscribe to FLC Insider should be sent to flcnews@utrsmail.com

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Funding Opportunities 
Because of the number of opportunities released by the federal government this week, a supplement to this issue of the SSTI Weekly Digest was distributed separately and is available here. 

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