In the December 19, 2005 Issue:

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Investments in University R&D Top Virginia Gov's Budget Proposal
To develop and promote higher education research facilities and faculty in Virginia, Gov. Mark Warner proposed $218.8 million in his fiscal year 2006-08 biennial budget proposal for investment in university R&D. In response, state institutions of higher education have pledged to match the governor's proposal with a $299 million commitment.

The funding allows for the hiring of top researchers in the fields of biomedical science, biomaterials engineering, nanotechnology, and modeling and simulation, whose presence will attract more grant-funded research to the Commonwealth, according to the governor's office. In addition to having economic benefits, the initiative also invests in the search for cures for cancer, diabetes, tuberculosis, Alzheimer's and Parkinson's diseases, the governor said.

Included in the initiative is funding to increase state support for the Institute of Applied Learning in Danville, aimed at stimulating economic development by creating research-based jobs, attracting new businesses, and conducting applied research for existing businesses. Examples of projects to be funded under the governor's budget proposal include:

The budget request for the Center for Innovative Technology (CIT) is $7.1 million for FY07, a 17.02 percent increase over the FY06 appropriation, and $6.2 million for FY08, a 1.1 percent increase over FY06. For FY07, Gov. Warner included an additional $1 million to establish a consulting service line to match large-scale consumers with advanced technology companies. This includes the identification of opportunities to accelerate nanomanufacturing and SmartBio research, development and commercialization in the state.

Gov. Warner's FY 2006-08 Budget is available at: http://www.dpb.virginia.gov/budget/06-08/buddoc06/buddoc.htm

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New Mexico Gov. Wants $100M for Private Spaceport
Nearly 40,000 people in 120 countries have placed deposits with the British commercial space company for the opportunity to become tourists in space, according to Virgin Galactic. Last Tuesday, New Mexico's governor said he wants the state to spend $100 million over the next three years to help get them there.

Gov. Bill Richardson and Virgin Companies chairman Richard Branson announced the world's first spaceport designed for personal spaceflight will be built on 27-square miles of state land in southern New Mexico, at an estimated total cost of $225 million. The package includes development of Virgin Galactic's world headquarters, to be built underground, as well as the above-ground runway and support buildings.

The governor’s funding package will be the cornerstone of a larger $225 million financial construction package that includes local, state and federal funding to build New Mexico’s spaceport in Upham, approximately 25 miles southeast of Truth or Consequences and 45 miles northeast of Las Cruces. The state's $100 million, generated from severance tax bonds and available over the next three years, will be used to build infrastructure: including runways, roads, water, power lines, launch pads and a weather station.

The agreement between New Mexico and Virgin says the state will build and then lease to Virgin Galactic customized hangar and training facilities, and the company will pay user fees for use of the spaceport, as is customary in the aerospace industry. Virgin Galactic will sign a 20-year lease.

Virgin Galactic will set up its operations headquarters, administration, marketing/sales, launch, maintenance, pilot training, and other operations critical to basing its operations in New Mexico, creating at least 200 new jobs for New Mexicans.

At first glance, $100 million in public funds for 200 private jobs might seem a steep price, but the Richardson Administration sees larger economic spinoff from the deal based on a study done the aerospace industry consulting firm. The study pegs the annual economic impact of the Southwest Regional Spaceport in 2020 in excess of $750 million in total revenues and exceeding 3,500 jobs, including all commercial space cluster space transportation services and manufacturing activities, as well as tourism-related visitor spending. This estimate, the governor's office points out in its press materials, is strongly dependent on the ability of the State of New Mexico and early commercial space transportation sector entrants to attract vehicle manufacturers and key suppliers to the vicinity of the spaceport.

The study estimates that the earliest economic impact of the spaceport project would come from spaceport construction, which is scheduled to begin as early as 2006, and be completed in 2008. Maximum construction impacts in 2007 are estimated to be $331 million in total revenues and 2,460 total jobs.

In addition to jobs, New Mexico is expected to benefit in the form of revenue to the state and capital investment as a result of overall spending from suborbital and orbital activities, and research and development activities directly related to the Spaceport. A New Mexico State University study projects spending of $1 billion, payroll of $300 million, and employment reaching 2,300 by the fifth year of operation.

Virgin Galactic also anticipates creating a "five-star destination experience" in the area to accommodate customers, their families and space enthusiasts. The company plans to send 50,000 customers into space in the first 10 years of operation, beginning as early as 2009 or 2010.

More information is available at: http://www.governor.state.nm.us/index2.php

Editor's Note: In a 21st century twist on traditional smokestack chasing strategies, New Mexico joins the growing list of states making mega-million dollar investments to support the development of private technology-based facilities with the hope that they in turn will serve as anchors for future economic growth. Unlike the familiar auto plant inducements, nearly all of the risk is borne by the public sector in these new TBED-oriented deals. Florida's deal for Scripps is the most costly to date, but other big-ticket examples include Sematech North in Albany, N.Y., and TGEN in Phoenix.

Also unlike inducements for large factories, whose spinoff benefits are often the second tier parts suppliers or service companies that follow the OEM with little or no additional public outlay, many of the new generation of mega-deals will require supplemental public investment to achieve the initial anticipated benefits. The public cost of Scripps Florida, for instance, quickly grew from $510 million to $1 billion without the recent legal battles and new relocation costs.

The true costs and benefits of these types of deals will not be known for years. SSTI hopes there are academic researchers and policy analysts already collecting the data in all effected regions to help determine the value of these investments.

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Michigan Update
Legislature Approves $600M Tax Relief Package
Following months of debate that ended in a veto last month by Gov. Jennifer Granholm, an agreement was made last week on a $600 million tax relief package for businesses, which now awaits the governor's anticipated signature. Gov. Granholm signed into law the $1 billion Job Creation Fund last month, but rejected a package of tax cuts over a disagreement on two of the bills (see the Dec.5 issue of the Digest).

According to an Associated Press article, one of the bills vetoed by the governor would have provided a 100 percent property tax credit in 2007 and 2008 for businesses that bring jobs into Michigan, although businesses that showed a net job loss because of cuts would not have qualified. Lawmakers changed the bill to allow the Michigan Economic Development Corporation to award the credits to companies with a net job loss by citing "extenuating circumstances."

The revised legislation sent to the governor would:

The governor previously disagreed with lawmakers' decision not to repeal a law that will end the SBT in 2010 without replacement, but reform on that measure has been put off until next year, according to the Associated Press.

The tax relief bills, SB 203, 909-910 and HB 4982, 5459, and 5460-5461 are available through the Michigan Legislature at: http://www.legislature.mi.gov/mileg.asp?page=home

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What Should NSF Look Like in 2011?
One of the most critical federal partners involved either directly or indirectly in determining the success of most state tech-based economic development strategies seeks input from the science and engineering (S&E) community in the development of its next five-year plan.

The National Science Foundation (NSF) is one of the federal government's most important resources for encouraging scientific inquiry, technological advancement, innovation and discovery, providing approximately 20 percent of all federal support for basic research conducted by America's colleges and universities. The independent agency also has been responsible for the design and development of programs integral to most state and local tech-based economic development efforts, programs such as EPSCoR, SBIR/STTR, Partnerships for Innovation, and the Engineering Research Centers, to note a few.

NSF is the major federal source for funding for fields such as mathematics, computer science and the social sciences. NSF also is the source for some of the most relevant statistical data TBED practitioners and policymakers use for assessing the health of their communities: industrial and academic R&D expenditures, education and workforce information, the science and engineering indicators, etc.

As the Foundation prepares its Strategic Plan for FY 2006-2011, it is requesting comments from those interested in the future direction of our nation's federally-funded basic research. In particular, NSF requests comments on the following questions:

Comments are to be submitted by Jan. 20, 2006, through the following website, which provides additional information on the agency's planning process: http://www.nsf.gov/about/performance/input.cfm

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Workforce Readiness Issues to be Tackled in Texas, Los Angeles
On paper, the Jan. 4 FedEx Rose Bowl, which pits the Universities of Texas and Southern California against each other, will decide college football's national champion. On the same playing field therein will be teams from two states trying to tackle something of a slightly different nature - the need for a talented, educated and diverse workforce to support regional economies built on high-paying jobs.

Los Angeles Receives Plan for Building Tech Talent, Businesses
The City of Los Angeles must do more to bridge the gap between its high-tech, research-oriented assets and its low-skilled immigrant workforce if its economy is to grow into the global powerhouse city leaders envision, one recent study finds.

The Los Angeles Economy Project states that the city remains polarized between high-end and low-end jobs and suffers from a labor force that is disproportionately unskilled. Two of the three sectors that defined the Los Angeles economy just two decades ago - manufacturing and financial services - have significantly declined, the report points out. In addition, the city’s diverse business base is severely constrained from participating in the knowledge-based industries that are the key to the region’s long-term prosperity.

While job growth has been stagnant in the city's large corporations, small businesses in Los Angeles have been booming. The creation of thousands of small firms over the last decade have more than filled the employment void left by the big firms, the study shows. The problem is most of these same small firms tend to serve only the surrounding community and employ low-skill workers making low wages – not the kind of jobs that will help the city economy grow and prosper, researchers say.

To help Los Angeles meet challenges in entrepreneurial growth, capital access and workforce training, the study makes a number of recommendations:

“If a well-trained labor force is one key to the city’s future prosperity, the other is an environment that attracts and sustains small and medium-sized businesses,” the study says. “Here, the critical factor is access to reasonably priced capital appropriate to a given firm’s size and stage of growth.”

The study was sponsored by the City of Los Angeles, the Los Angeles Workforce Investment Board and the Los Angeles Department of Water & Power. For more information, including detailed statistics on each of the city's planning areas, and to view the chapters online, visit www.laeconomyproject.com.

Texas Creating 35 Math & Science Academies
In Texas, Gov. Rick Perry announced a $71 million education initiative that will create specialized academies at 35 schools across the state to help Texas students develop a passion for math and science. The governor cited a gap in skills in the two fields among students, particularly those from disadvantaged backgrounds.

Seventy-three percent of white ninth graders passed the state assessment in math in 2005, compared to 38 percent of African American ninth graders and 44 percent of Hispanic ninth graders.

The Texas Science, Technology, Engineering, and Math Initiative (T-STEM) is being launched by the Texas High School Project, one of the largest public-private partnerships for education in the country. One of the primary aims of the T-STEM Initiative is to align high school coursework with postsecondary education and economic development activities.

T-STEM will be funded with $20 million in grants each from the Bill & Melinda Gates Foundation and Susan & Michael Dell Foundation, $20 million in state funds from the Texas Education Agency (TEA), $10 million from TEA in federal funds, and $1 million from National Instruments, an Austin-based maker of measuring and automation equipment.

Over the next five years, funds will be used to:

The 35 T-STEM academies, which will start the program in sixth grade, are meant to help spark students' imaginations by engaging them in real-world learning activities and to inspire more of them to pursue a career in science-based fields. The academies are expected to include a mixture of charter schools, traditional public schools and schools operated in conjunction with an institution of higher education.

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Looking Back at SSTI's 9th Annual Conference
Encouraging Women Entrepreneurship
While women are making strides in entrepreneurship, they still have a ways to go, particularly in science and technology (S&T) fields. This was the theme during the session, Encouraging Women Entrepreneurship, conducted during SSTI's 9th Annual Conference on Oct. 19-21, 2005.

Maggie Kenefake, manager of women's entrepreneurship at the Kauffman Foundation, said there are encouraging signs that women are stepping up to the plate, so to speak, when it comes to owning their own businesses. For example, the rate of increase for starting new firms among women is three times the rate for men, and women-owned businesses currently account for 40 percent of all start-ups.

Unfortunately, women are still underrepresented in most S&T fields, with the exception of life and behavioral sciences, Kenefake said. Fewer than 10 percent of engineers are women, and less than half of all Ph.D.'s are women. Americans cannot compete globally if they continue to underutilize half the population, she added.

Kenefake stressed that the focus should not be why women lag behind men in entrepreneurship, but what can be done to encourage women. Kenefake pointed to mid- and late-career women as a target group. Entrepreneurship can be an exciting alternative to women in private firms and federal labs who are likely to experience glass-ceiling issues.

In addition to Kenefake, who served as moderator, the session featured three presenters involved in organizations dedicated to increasing awareness, exposing youth to the opportunities of entrepreneurship, encouraging supportive policy environments, and promoting access to capital among women entrepreneurs.

Robbie Melton, program manager for entrepreneurial development of the Maryland Technology Development Corporation, provided an overview of the Women in Bio (WIB) program. Founded in 2001, WIB consists of executives, entrepreneurs, scientists, students and professionals that support the bioscience and biotech industry.

The major challenges facing women, Melton said, are gender differences in conducting business, the funding gap, and an inability for women to network. There is a great need for women to network and to know that they have support, but many women do not make this a priority, she said. In 2002, for example, WIB launched a dinner event to honor women entrepreneurs and provide an opportunity for networking. Women also need business and non-business training, access to funding, and mentors, Melton added.

Melton also highlighted Achieving the Commercialization of Technology in Ventures through Applied Training for Entrepreneurs (ACTiVATE), a program funded by the National Science Foundation. The program strives to increase commercial applications of university-related technology by training women entrepreneurs.

Nancy Sullivan, director of the Center for Women Entrepreneurs in Technology (CWET), pointed out that her organization focuses on biotech- and nanotech-led companies at very early stages. Sullivan said the goal is to take a company and enable it to crawl, and then pass it along to where it can walk and run. CWET's portfolio currently consists of 11 early-stage companies, she said.

Jiahong Juda, founder and former chief executive officer and president of Women Entrepreneurs in Science and Technology, Inc. (WEST), said the mission of WEST is to make entrepreneurship relevant to more people, reach a critical mass, and target women in science and engineering. WEST offers exposure through newsletters, conferences and networking opportunities.

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Useful Stats
Count VC Deals, Not Just Dollars
Most of the media coverage for the MoneyTree™ Survey of venture capital investments, prepared quarterly through collaboration of PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association, focuses on the amount of money invested in a particular state or region during the given period and its change relative to another given time period.

Most tech-based economic developers, indices and TBED policy-influencing decisionmakers also use VC dollars as an indicator of the health of their region. This may be unfortunate. Should TBED organizations worry if the dollar figures reported for their state or community in one quarter are lower than the previous quarter while another state's remained equal or increased?

Easy access to risk capital is a key ingredient for most successful regional innovation systems to be certain, but is the amount of equity financing invested as accurate a measure of system health as, say, the number of deals made?

Of the following, which would you consider more entrepreneurial at the end of the year based on the following hypothetical MoneyTree™ Survey results?

Some will argue that the four companies in Community A are more likely to succeed because they had more money; others reflecting on the inflationary values of many pre-bubble dotcom deals or the cost of a biotech deal will know size doesn't equal success. Plus, the question is which community is more entrepreneurial.

Most of the perception problems occur through time, though. So what if, in the next year, Community A gets four deals totalling only $40 million while Community B gets $45 million through 1 large deal? Most analysis, looking only at dollar amounts, would suggest Community A is becoming less entrepreneurial and Community B is in better shape?

To help test this theory for your own state, SSTI has prepared a table presenting the quarterly number of VC deals by state for the five years, 2001-2005, based on MoneyTree™ data. It is available at: http://www.ssti.org/Digest/Tables/121905t.htm

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