In the August 1, 2007 Issue:

Copyright State Science & Technology Institute 2007. 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.

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Oregon Governor Signs $28.2M Innovation Plan
Oregon lawmakers haveagreed to fund nearly all of Gov. Ted Kulongoski’s innovation proposals, including investments in seven new industry initiatives and the creation of two new signature research centers. The innovation plan passed by lawmakers falls $10 million short of the original $38 million proposal introduced by the Oregon Innovation Council and included in Gov. Kulongoski’s fiscal year 2007-09 budget released in December 2006 (see the Dec. 18, 2006 issue of the Digest).
 
Gov. Kulongoski signed four bills encompassing the initiative, Senate Bills 5508, 579 and 582 and House Bill 5035. SB 5508 includes $9 million over the biennium for Oregon’s first signature research center, the Oregon Nanoscience and Microtechnologies Institute (ONAMI) - $1 million less than the governor’s recommendation - and $2.5 million for a new signature research center, the Bio-Economy and Sustainable Technologies (BEST) Center. Research conducted by the BEST Center will focus on clean energy, bio-based products and green building.
 
Additionally, SB 5508 includes $2.9 million to support manufacturing competitiveness, such as advanced training and R&D to ensure a competitive workforce, and $4.2 million for the Wave Energy initiative to help build a sustainable industry on the Oregon coast by using ocean waves to generate electricity. The Food Processing Innovation and Productivity Center will receive $3.4 million for R&D and training.
 
Funding for the state’s second new signature research center is designated within HB 5035. The legislation includes $5.25 million for the Oregon Translational Research and Drug Development Institute to develop and commercialize new drugs to fight infectious diseases. The institute also will provide access to drug development resources that many companies cannot afford to build themselves, according to the governor’s press office.
 
SB 579 expands the authority of the Oregon Growth Account (OGA) Board and Oregon State Treasurer’s office, giving them the authority to invest money from the OGA account into funds designated to make seed investments in new and existing emerging companies.
 
The budget does not include funding for the proposed $5 million Cluster Accelerator Fund, a partnership with the Oregon Economic Development Department to strengthen the state’s innovation pipeline in selected technology areas.
 
The bills signed by Gov. Kulongoski represent a victory for the state’s TBED strategy. Earlier this year, Sen. Kurt Schrader (D-Canby) and Rep. Mary Nolan (D-Portland) unveiled the Co-Chairs’ 2007-09 Recommended Budget, which only included $19 million for the initiative -- about half of the original proposal (see the April 30, 2007 issue of the Digest).

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North Carolina Lawmakers Fund Major Research, Education, TBED Initiatives
After running on a month-long stopgap budget, North Carolina lawmakers reached a $20.7 billion budget agreement for fiscal year 2007-08 earlier this week that includes funding for major research initiatives, public and higher education, and TBED-related items.
 
Under the budget agreement signed Tuesday by Gov. Mike Easley, University of North Carolina (UNC)-Chapel Hill is slated to receive $25 million this year, $40 million next year and a recurring $50 million in future years to expand cancer research. Funding for the initiative comes from a 10 percent increase on tobacco products other than cigarettes, $21.2 million in general fund revenue over the biennium, and $8 million from the Tobacco Trust Fund each year.
 
In keeping with a legislative mandated study enacted last year, the budget appropriates $5 million to establish the North Carolina Biofuels Center. The action plan, Fueling North Carolina’s Future: North Carolina’s Strategic Plan for Biofuels Leadership, outlines nine strategies for the coming decade to strengthen the state’s future in biofuels development and use.
 
The budget also provides $1 million to establish the North Carolina Green Business Fund as a special revenue fund within the Department of Commerce. The fund will invest in projects focusing on three priority areas: encouraging the development of the biofuels industry; fostering the development of the green building industry; and, attracting and leveraging private-sector investments in clean technology and renewable energy products.
 
The North Carolina Biotechnology Center appropriation for FY 2007-08 is $15.6 million, with $3 million earmarked to create regional innovation centers that focus on research and technology transfer in biotechnology-related fields. Budget funding for other initiatives includes $14 million for the One North Carolina Fund; $4.8 million for the One North Carolina Small Business Fund to provide grants under North Carolina’s SBIR/STTR program; $4 million to the e-NC Authority to increase availability of internet connectivity in rural areas of the state; and $1.5 million for the Support Defense and Security Technology Accelerator, a business incubator focused on homeland security and defense industries.
 
Education initiatives in both K-12 and higher education fared well in the budget. The budget provides $4.4 million to fund the Focused Education Reform Pilot program, which will offer teacher recruitment and retainment bonuses, teacher mentoring and science and math instructional assistance. A new School Technology Pilot program will receive $3 million, which - along with a grant from the Golden LEAF Foundation and private sector funds - will be used to establish eight pilot high schools that incorporate technology in the classroom by providing computers for all teachers and students. UNC System initiatives funded within the budget include:

HB 1473 is available from the North Carolina General Assembly at: http://www.ncga.state.nc.us/
 
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U.S. Angel Investors Optimistic About the Future, ACA Finds
A majority of angel investment groups report that the quality and quantity of their deal flow increased last year, according to a recent national survey of angel investors. Roughly 54 percent reported an increase in activity in 2006, and almost 58 percent expect even more investments and higher quality deals throughout 2007.
 
The Angel Group Confidence Report, conducted by the Angel Capital Association, is a first-of-its-kind overview of the U.S. angel market. The list of respondents includes angel investment groups of all stripes, from Southern California’s 300-member TechCoast Angels to groups with fewer than 10 accredited investors. The average group invested $1.78 million last year (with a median of $1.06 million). Groups invested an average of $240,000 per round.
 
Much of this newfound optimism appears to be tied to growth within high-tech industries. Almost 60 percent of respondents reported investments in software, biotechnology and medical devices in 2006. Over 75 percent of angel groups expressed an interest in investing in medical devices or software.
 
The vast majority of these groups work alongside other groups in their investments. Although most do not belong to an angel capital network, nearly all angels invest with other angel groups and more than 82 percent invest with early-stage venture capital firms.
 
The survey offers evidence that regions derive some advantage from the presence of local angel groups. Almost 30 percent of groups focus their investments on firms that are located within a two-hour drive from their metropolitan area. Twenty percent invest throughout their home state, and 30 percent pursue firms within their multi-state region of the U.S. Only 13 percent reported no geographic restrictions on their investments. 
 
The Angel Group Confidence Report is available at: http://southeastvc.blogs.com/southeast_vc/files/angel_group_confidence_report_results.pdf
 
Kansas Doubles Angel Tax Credits
In recognition of the growing importance of angel investment, the Kansas Legislature has voted to double the funds available through the state's Angel Investor Tax Credit program for 2007. This program provides a 50 percent tax credit to investors to encourage seed and early-stage investment in high-tech firms, particularly those involved in biosciences or information technology. To provide better support throughout the longer gestation periods required for bioscience companies, the new legislation will also extend the length of time that an investor can claim the credits for investment in a bioscience firm from five years to 10 years. Investments of up to $50,000 are eligible.
 
The Kansas Technology Enterprise Corporate (KTEC) reports that $3.8 million in tax credits have been awarded since the program's creation in 2005. With the recent changes, $4 million will be available this year alone, and $6 million will become available over the next eight years.
 
Find out more about the program at: http://www.ktec.com/sec_news/new/2007angel.htm

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Global Venture Investment Reaches $35B, But Exactly How Global Is the Venture Industry?
The venture capital industry appears to have rebounded from the post-tech bust slump, according to Ernst & Young’s latest Global Venture Insights Report. In the past year, venture investment has climbed to its highest point since 2001. Much of this growth has taken place in emerging markets like India, Russia and particularly China, where the venture industry is a relatively recent phenomenon. After three years of consecutive growth, China has outpaced the United Kingdom, Israel and Canada to assume the rank of second most active target market for venture investment. The report observes that this rapid growth has finally allowed China to make the leap from a promising new market to an important player in the industry.
 
Around the world, almost 20 percent of all venture deals took place across national boundaries. Ernst and Young notes that this is an increase of 250 percent over the preceding five-year period. They observe that this trend has been accelerated by the practice of “venture licensing," the replication of proven business models in new markets. Though the U.S., Europe and Israel remain key in the industry, practices like this are expected to lead to even more focus on emerging markets in the coming years.
 
However, not everyone agrees that national borders are disappearing as a factor in venture investment. Deloitte’s 2007 survey of global venture capital trends reports that most U.S. investors would prefer to focus on domestic opportunities. Fifty-four percent of firms indicated that they are not currently investing overseas, and 73 percent do not plan to seek out foreign opportunities in the foreseeable future. China and India are the most commonly targeted markets for investment, but those countries also suffer from the greatest perceived barriers to investment.
 
In China, firms cited the lax enforcement of intellectual property laws and the lack of experienced local investors for partnerships as the most vexing impediment to investment. 
 
Mark Jensen, in a Deloitte press release, added that U.S. firms are merely dabbling in overseas markets. Although many U.S. portfolios include foreign companies, most of the time those firms make up less than 5 percent of total firm investment.
 
Instead, U.S. venture firms appear to be taking a different approach to capitalizing on emerging markets. About 88 percent of respondents to Deloitte’s survey indicated that their portfolio included companies with a significant portion of their operations overseas, mostly in India and China. This figure is almost twice the number reported last year.
 
The Deloitte report concludes that venture capital firms remain cautious about expanding their global portfolios and that, although the pace of global investment will continue to grow in the next few years, it will do so slowly. 
 
So who is right? Are the emerging markets of China, India and Russia at the vanguard of a significant shift in focus for the venture capital industry? Has China finally made the leap from “interesting” opportunity to “important” market? Or can we expect the U.S. and European Union to continue to invest in domestic firms and in more familiar foreign markets? The Ernst and Young report suggests that despite the small amount of portfolio space dedicated to investments in China and India, the sum of all of these smaller investments from around the world has made China into a major presence in the industry. The report also provides a number of new models for global investment, including “international joint funds, strategic limited partners, local funds with a global brand, local teams under one global fund or a hybrid of these models” that may ease some of the reservations of U.S. firms about investing globally. These types of partnerships, which are already changing the face of global venture investment, may create an industry in which international investment is common, but a local presence is necessary.
 
Download Ernst & Young’s Acceleration: Global Venture Insights Report 2007 at: http://www.ey.com/global/content.nsf/International/SGM_-_Venture_Capital_Insight_Report_2007
 
Read Deloitte’s Global Trends in Venture Capital 2007 Survey at: http://www.nvca.org/pdf/US_Rpt_Global_VC_Survey_7-25-07.pdf
 
Links to the report and more than 4,500 additional TBED-related research reports, strategic plans and other papers also can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at http://www.tbedresourcecenter.org/.

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Are Dual Enrollment Programs a Good Option for Increasing Postsecondary Opportunities?
With the goal of improving the competitiveness of their workforces, many states and regions are searching for the best policies to encourage participation in educational opportunities beyond high school. Dual enrollment plans are one type of such policies that enable students to enroll in postsecondary level courses while still in high school.
 
According to a recently released study that examines Ohio’s dual enrollment plan, 47 states have enacted policies related to dual enrollment as of August 2006. A joint publication by the KnowledgeWorks Foundation and the Western Interstate Commission for Higher Education (WICHE), The Promise of Dual Enrollment: Assessing Ohio’s Early College Access Policy is the first report that collects and analyzes available data on the state’s program since its inception 18 years ago. The report provides insight into the participation rates, accessibility, levels of success, and costs of the policy to the state.
 
Initially, the Ohio Post Secondary Enrollment Options (PSEO) Policy was intended to allow high school juniors and seniors the opportunity to enroll in college courses and receive high school and college credit at no cost to the student. In 1997, the program was extended to allow freshmen and sophomores to participate, making it one of six states to do so. Depending on the percentage of each student’s time spent in PSEO studies, the Ohio Board of Education transfers an amount of the state’s annual per-pupil allotment to the participating postsecondary institution instead of the local school district. By Ohio law, students and their parents or guardians must receive counseling regarding the program to participate, and students must have a 3.0 grade average in the subject area they would like to take advanced courses.
 
By piecing together data from different sources, the report estimates that less than 5 percent of Ohio high school students participate in PSEO opportunities, two out of three PSEO participants are female, and participation rates are lower around the Columbus and Cincinnati metro areas and the rural parts of the state. The report also notes PSEO students are more likely to attend college, with 70.8 percent of participants who graduated in 2003 enrolled at Ohio public colleges. This is compared to the 58.7 percent of Ohio high school graduate population that attended college anywhere and 38.3 percent of Ohio high school graduates that enrolled in Ohio public colleges. Students are more likely to finish college as well. Six years after graduation, 70 percent of students with a PSEO experience attained their bachelor’s degree, compared to 53 percent of the student population as a whole.
 
While available data allowed the authors to collect and summarize information about students in aggregate, the current data system does not provide the ability to track individual students, their demographics and possible participation in PSEO, and the nature of their postsecondary educational experience. Thus, no absolute conclusions about the effectiveness of the policy can be inferred, meaning it is not known if the PSEO policy encourages students who otherwise would not be heading to college to enroll in postsecondary courses and complete a degree. The self-selection of the students into the program skews the possibility of determining causality.
 
The report provides suggestions to Ohio to improve the effectiveness and measurement of their PSEO policy, which many states might consider as well. The suggestions include:

A similar study with a national perspective on accelerated learning options was published by WICHE in June of 2006. In Moving the Needle on Access and Success, the authors looked at a handful of programs across many states such as AP, dual enrollment, the International Baccalaureate Diploma Program, and Tech-Prep. This report also contends that better data to perform comprehensive evidence-based research on accelerated learning programs is needed, especially to determine if a causal relationship exists between participation in these programs and increased access and success in college. The authors propose that the National Center for Education Statistics should lead the effort to attain this data.
 
The second chapter of Moving the Needle includes charts that contain state-by-state dual enrollment program information comparing eligibility requirements, cost structures, counseling requirements, and applications of course credit. The entire report is available at http://www.wiche.edu/Policy/Accelerated_Learning/report/ALO.pdf.
 
The Promise of Dual Enrollment: Assessing Ohio’s Early College Access Policy was funded by the Bill and Melinda Gates Foundation and can be found at http://www.kwfdn.org/resource_library/publications/pseo_report.asp.

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TEDCO Actively Seeding Start-ups
The Maryland Technology Development Corporation has awarded more than $500,000 to seven start-up technology companies. The program, TEDCO’s Maryland Technology Transfer Fund (MTTF), is designed to help businesses transfer technology from Maryland universities and federal laboratories into the marketplace. The grants range between $70,000 and $75,000.
 
TEDCO reports that MTTF has provided funding to 71 companies. With a total investment of $4,078,793, these companies have gone on to receive downstream funding from angel and venture investors, federal awards and other resources exceeding $152.4 million.
 
You can learn firsthand about this program and other TEDCO initiatives underway at SSTI’s 11th Annual Conference, Transforming Regional Economies, Oct. 18-19, 2007. Register and learn more about the conference at http://www.ssticonference.org/conference07.htm.

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