In the August 1, 2003 Issue:

Copyright State Science & Technology Institute 2003. 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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Rhode Island Boosts TBED Efforts
Before ending its 2003 session, the Rhode Island legislature signed off on nearly all of the technology-based economic development (TBED) initiatives at the core of Gov. Donald Carcieri's strategy to help the state rebound from the down economy. First outlined in his Feb. 4 State of the State Address (see the Feb. 14 Digest), the governor's multi-faceted approach includes many key pieces to building a stronger tech-based economy: business-university partnerships to advance and commercialize technology, entrepreneurial assistance for tech firms, increased investments in academic R&D capacity, incentives to encourage tech commercialization, access to early-stage capital, and the tech-skill competence of the workforce.

Specifically approved by the state legislature were:

The community to be served through state or local TBED assistance can play a vital role in the design and promotion of the programs. For example, individual and coordinated private business and industrial support helped advance nine out of 10 items on the governor's TBED agenda through the legislature. The Rhode Island Jobs Alliance, a business community group committed to enhancing the state's economic climate, actively supported the measures through a rally, providing testimony before various legislative committees and coordinating letter-writing and phone campaigns to individual legislators.

More information is available at: http://www.trioncom.com/carcieri/

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USDA Offers $6 Million for Rural ED
The U.S. Department of Agriculture (USDA) announced earlier this week the availability of $6 million in USDA Rural Development grant funds to support rural economic and community development efforts.

USDA's Rural Community Development Initiative provides funds to help nonprofit, community-based development organizations, federally recognized Indian tribes and low-income communities improve their ability to develop rural housing and community facilities and to improve economic growth. Rural Development provides equity and technical assistance to finance and foster growth in homeownership, business development, and critical community and technology infrastructure. Recipients are required to obtain matching funds from non-federal sources.

Grant recipients will provide training and technical assistance to eligible organizations and communities located in rural areas with populations of 50,000 or less. Technical assistance includes: setting up homeownership education programs; supporting micro-enterprises, cooperatives and sustainable development; and providing training to develop strategic plans, hire staff and oversee board operations and management.

Detailed information about program requirements and information on how to apply are available in the July 30 Federal Register under Rural Housing Service: http://www.access.gpo.gov/su_docs/fedreg/a030730c.html.

Additional information on the grant program and other USDA Rural Development programs can be obtained by visiting: http://www.rurdev.usda.gov/.

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VC Investments Stabilize in Q2 2003?
The unsettled nature of the venture capital industry is well depicted in two differing reports released Tuesday. Both detail venture capital investments for the second quarter of 2003, but offer a conflicting picture of U.S. investing activity.

Data found in the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey suggest two straight years of quarter-to-quarter declines in venture capital investing ended with Q2 03. The newest data from Growthink, however, reveals the downward trend continued from the preceding quarters, showing a 1.2 percent decline over the first quarter of 2003.

MoneyTree Survey™
Investments totaled $4.3 billion, up marginally from $4 billion in Q1 03, according to the MoneyTree™ Survey. A total of 669 entrepreneurial companies received funding in the second quarter compared to 647 companies in the previous quarter. Further, investments in companies in the early-stage of development increased significantly to $956 million, up from $668 million in the prior quarter — the first such increase in three years.

The increase in Q2 03 is said to be the first in the post-bubble era that began in early 2001. The rate of decline slowed dramatically over the prior nine months, pointing toward a leveling of overall investing activity, according to the MoneyTree™ Survey.

Reflecting a return to core investing, nearly all of the leading industry categories experienced increases over the prior quarter. Software attracted $864 million invested in 179 companies, up 7 percent. Biotech was second with $639 million going to 66 companies, a 14 percent increase. After a significant drop in the first quarter, Medical Devices rebounded to typical levels with 52 companies capturing $437 million, up 54 percent from the prior quarter and the largest increase of any major industry segment. The Life Sciences sector, combining Biotech and Medical Devices, totaled $1.1 billion.

The Telecommunications industry held the number three spot on the strength of later-stage investing with $615 million going to 70 companies, an increase of 21 percent over the first quarter. Semiconductor investing was essentially flat at $268 million. Networking continued to slide, falling 7 percent to $427 million. Changes in the other industry categories were mixed with increases in some offsetting decreases in others.

Detailed information for the second quarter of 2003 is available by region, industry and stage of finance at http://www.pwcmoneytree.com. Historical data dating back to 1995 also are available for the U.S. and selected regions.

Additionally, SSTI has prepared a state-by-state table <http://www.ssti.org/Digest/Tables/080103t.htm> to present the MoneyTree™ Survey results for Q2 03. The table includes data for the number of deals, total amount invested, average deal size and ranking.

Growthink Research
Companies securing investments in Q2 03 numbered 17 fewer than the prior quarter, as nearly $4.25 billion of venture capital was invested in 469 private companies, according to Growthink Private Equity Funding Reports. The $4.3 billion-plus in venture capital that went to 486 private companies in Q1 03 reflects a 1.2 percent decline, Growthink research shows.

Among major metropolitan areas, the San Francisco Bay Area continued to lead the nation with $1.27 billion in investments, or 29.9 percent of the nation's total, and 134 companies securing deals. Boston was next with $452.4 million (10.6 percent) and 57 deals, and San Diego climbed from seventh to third with $208.4 million and 23 deals (4.9 percent). New York City remained fourth, with 28 companies raising $198.7 million.

The Denver/Boulder, Seattle, Washington D.C., Philadelphia, Los Angeles and Irvine/Santa Ana metro areas rounded out the top 10, which accounted for 72.9 percent of the nation's total second quarter VC activity. Austin, Chicago and Dallas fell from the top 10.

Growthink reports only private, U.S.-based companies that receive equity investments of $300,000 or more. The company does not collect information on venture capital investments in public companies, debt financing or other areas. The fourth quarter survey, including data by geographic region, state, metro area and industrial sector, is available in individual sections or in its entirety at: http://www.growthinkresearch.com

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Spokane Authors Strategic Plan for Innovation Economy
The City of Spokane and a group of local organizations have penned a strategic plan designed to help the city and the Inland Northwest achieve an Innovation Economy. Sponsored by the Spokane Economic Development Council, SIRTI and INTEC, Developing an Innovation Economy highlights numerous specific actions believed to have the greatest potential to deliver measurable results for the local economy.

The strategic plan does not give a detailed benchmarking of the region's current economy or emerging clusters, but builds on its fundamental tenet — a "Triangle of Innovation" involving Spokane/Coeur d'Alene, the Tri-Cities and Pullman/Moscow. Within these three points, the plan states, the Inland Northwest has significant research capacity, including several universities (Washington State University, the University of Idaho, Gonzaga University, Eastern Washington University in Cheney and Spokane, WSU Spokane), Pacific Northwest National Laboratory and several strong nonprofit research organizations and private firms.

Various new ventures have resulted from the successful implementation of research projects in these communities. However, the authors of Developing an Innovation Economy call for enhanced regional collaboration and a host of priority activities, or action steps, centering around nine broad categories — leadership, investment capital, research capacity, technology commercialization, human capital, entrepreneurial capabilities, digital infrastructure, regional image and a regional cluster strategy.

Ranked as primary, secondary or out-of-the-box – depending on the level of importance – the action steps range from instituting a leadership team focused exclusively on developing an Innovation Economy in the Inland Northwest to creating a sizeable, professionally-managed seed investment fund. Other action items entail establishing databases that detail research projects, researchers and sources of funding in the region, as well as enablers for entrepreneurs and start-up companies. In all, 34 primary and secondary actions are outlined. Out-of-the-box actions are separate actions described as bearing a level of unusual creativity and difficulty.

Developing an Innovation Economy is available in full or by section at: http://www.spokaneedc.org/innovation/innovation.php

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NACFAM: Manufacturing Sector Challenged by Growing Skills Gap
Nearly 60 percent of the new jobs in the knowledge-based economy of the early 21st century will require skills that are held by just 20 percent of the present workforce, states a new report released by the National Coalition for Advanced Manufacturing (NACFAM). The Case for Enhancing American Workforce Skills examines a growing skills gap in the nation's manufacturing sector and the problems employers have in finding skilled workers able to deal with technological changes in the workplace.

The skills gap is deepening at a time when manufacturing workers are increasingly being laid off — since 1999, more than two million have lost their jobs. Industry and government need to join forces to make substantial improvements in workforce education and training programs and to incentivize American workers to keep pace with technological change by continually improving their skills, NACFAM concludes.

The Case for Enhancing American Workforce Skills offers these findings:

NACFAM's report offers no specific public policy recommendations; however, the new research complements a policy paper published in June by the nonprofit. In that paper, Industrial Transformation: Key to Sustaining the Productivity Boom, four recommendations were given to help workers keep pace with technological change (see the June 6 issue of the Digest):

NACFAM was established in 1989 to enhance the productivity of all tiers of U.S.-based manufacturing. The Case for Enhancing American Workforce Skills is available for purchase at http://www.nacfam.org/.

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Sneak Peak into SSTI's Annual Conference
Tips, Tricks and Techniques to Support Technology Entrepreneurship
Until now, the opportunities have been fairly limited for tech-based economic developers to learn from the lessons of fellow practitioners running successful entrepreneurship programs. Through a unique partnership with the Ewing Marion Kauffman Foundation, SSTI is excited to offer at its annual conference this fall a track of six breakout sessions dedicated to sharing and documenting the specific policies, strategies and practices that foster technology entrepreneurship.

The link between tech entrepreneurship and sustained growth is increasingly recognized by economic developers. As a result, myriad exciting approaches to encourage tech entrepreneurship have sprung up across the country.

These same entrepreneurship programs face unparalleled challenges for the foreseeable future, however. State and local fiscal constraints limit the service delivery capabilities of many initiatives, while also demanding new approaches to creating opportunity for entrepreneurial success. The contraction of the venture capital market, with the disappearance of viable exit strategies, makes launching and growing capital-intensive, technology-based enterprises more difficult. These challenges are occurring when, due to the economic downturn, the need has grown significantly to encourage entrepreneurship and help tech businesses thrive and grow.

The need, too, is greater for practitioners and policymakers to share tools, tips and techniques on successful approaches to encouraging entrepreneurship. That's where SSTI's 7th annual conference plays a key role.

To make sure the track is of optimal value for all participants, it is based on the expertise and support of the nation's leading organization for entrepreneurship, the Kauffman Foundation. Together we've crafted high-impact sessions that will reward attendees with excitement and insights to take back to your state, local and regional efforts — whether you're just starting or well on your way.

Sessions will include:

SSTI's conference, Building Tech-based Economies: From Policy to Practice, will be held in Seattle, Oct. 21-22. Detailed descriptions of the entrepreneurship track and the other breakout sessions, as well as registration information, are available at: http://www.ssti.org/conference03.htm [expired]

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Experts Give Guidelines for Small Businesses Seeking Foreign Patents
Small businesses in the U.S. should consider a wide and complex range of factors before investing in foreign patents, recommends a new report prepared by the U.S. General Accounting Office (GAO).

Experts’ Advice for Small Businesses Seeking Foreign Patents identifies factors small businesses should consider when deciding whether to obtain patent protection abroad and the steps they should take to improve their patent efforts. The Congressional request spawning GAO's inquiry grew out of the apprehension that small businesses were not acquiring patent protection abroad, but were losing prospective sales in foreign markets.

Using surveys from an expert panel of 39 patent law attorneys, GAO outlined three critical factors: identifying and assessing the long-term (cradle to gave) costs of foreign patents; weighing the potential benefits of foreign patents and patent locations; and, the need to understand foreign patent laws and international treaties.

GAO then identified six key steps for small businesses to improve their foreign patent efforts:

Expert’s Advice for Small Businesses Seeking Foreign Patents (GAO- 03- 910) can be located at: http://www.gao.gov/

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People

C. Michael Cassidy, president of the Georgia Research Alliance, has been appointed to the governing board of the Biotechnology Industry Organization.

Joint Venture: Silicon Valley has named Russell Hancock as its new president and CEO.

Dr. Lee Eiden, SBIR Program Coordinator for the U.S. Department of Education for nearly seven years, is shifting positions within the agency to work for the Office of Management/Chief Information Office. Dr. Eiden's contributions toward improving the state-federal partnership for SBIR outreach and technical assistance will be greatly missed by the state and local tech-based economic development community.

The director of the Arkansas Department of Economic Development has announced his retirement. Jim Pickens will remain in the position until his replacement is named, according to local news reports.

Pari Sabety, director of Ohio State University's Technology Policy Group, is leaving to become Director of the Neighborhood Markets Initiative, a new program of the Center for Urban and Metropolitan Policy in the Brookings Institution.

The director of the Nebraska Department of Economic Development, Al Wenstrand, is leaving to become executive director of the Florida's Great Northwest, an economic development agency serving the Florida Panhandle.

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