In the January 23, 2008 Issue:

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 New York Unveils $1B Upstate Revitalization Fund
Last week, Gov. Eliot Spitzer gave New York’s first ever “State of the Upstate” address in Buffalo, outlining his administration’s $1 billion Upstate Revitalization Fund. Among the components intended to encourage economic growth in the northern part of the state are:

Additional pieces of the Upstate Fund target housing, transportation, state park development and other quality of life issues. The $1 billion price tag for these initiatives would be supported by $612 million in Personal Income Tax bonds, $130 million from the sale of the state’s surplus property, $100 million from Mortgage Insurance Fund reserves, $100 million from auto insurance surcharges and $58 million from the state’s General Fund.
 
The proposed Upstate Fund is a component of New York’s other economic development programs, many of which were outlined in the SSTI’s review of Gov. Spitzer’s State of the State speech (see the Jan. 9, 2008 issue of the Digest). On Tuesday, Gov. Spitzer released his administration’s $124.3 billion budget for the fiscal year beginning on April 1.
 
The text of Gov. Spitzer’s State of the Upstate address can be read at:
http://www.ny.gov/governor/keydocs/0116081_speech.html
 
Additional information on New York’s proposed budget for 2008-09 can be found at:
http://publications.budget.state.ny.us/eBudget0809/ExecutiveBudget.html

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University Initiatives Slated for Increased Funding in Arizona Budget
With a budget management plan for the current fiscal year making its way through the state legislature, Gov. Janet Napolitano announced increased funding and borrowing for university programs and research initiatives in her fiscal year 2009 budget recommendation.

Universities would receive a net funding increase of $25.4 million over the FY08 appropriation under the governor’s recommendation, including $7 million to recruit, teach and retain teachers in Science, Technology, Engineering and Mathematics areas. Gov. Napolitano recommends $3 million in FY09 to the University of Arizona (UA) and $2 million each to Arizona State University-Tempe and Northern Arizona University to expand on a student loan program for math, science and special education teachers approved by lawmakers last year (see the June 27, 2007 issue of the Digest). Additionally, UA’s budget includes $1.5 million to expand and implement programs for teacher training, entrepreneurship and commerce- and defense security-related disciplines that will meet the workforce needs of the southern parts of the state.

Lawmakers will be asked to approve a $470 million bond proposal that would be used to complete the Medical Education Building and Arizona Biomedical Collaborative at the Phoenix Biomedical Campus. This request – within the governor’s capital budget for universities – proposes establishing a Capital Acceleration Program to create a pool of funds that the universities can leverage to meet the financial obligations of two phases for the project, which totals $1.4 billion.

Under the proposal, Phase I, which requires the approval of $470 million to complete the Arizona Biomedical Campus, would be structured so that initial payments on the bonds begin in FY10. Phase II addresses remaining capital needs on each university campus and requires $966 million, with debt service payments beginning in FY11.

Gov. Napolitano’s FY09 budget offers continued support for TBED-related initiatives funded last year, including $25 million in the coming year for the Arizona 21st Century Fund and $1.5 million for the Arizona Biomedical Research Commission (see the June 27, 2007 issue of the Digest). Additional non-appropriated funds of $12 million (a decrease of $900,000) from the Health Research Fund and $4.4 million (the same level as FY08) from the Disease Control Research Fund also are included for the commission. These funds are statutorily appropriated and not subject to the annual and biennial appropriation process.
 
The University of Arizona Health Sciences Center is slated to receive $96.5 million in total funds – a slight increase over the FY08 appropriation of $95.1 million.

In October, Gov. Napolitano unveiled a newly structured model for economic development in the state through the Arizona Economic Resource Organization (AERO, see the Nov. 7, 2007 issue of the Digest). To strengthen the research administration and enable AERO to continue building a community and global-based focus, the governor recommends $774,400 for FY09 funding. This includes funding for two labor market economist positions and two previously unfunded vacant research positions to assist rural and small Arizona communities.

The funding level for the Department of Commerce is $19.8 million in total funds ($16.9 million from the General Fund), an increase over the FY08 allocation of $18.9 million, and $2 million is included for rural broadband connectivity within the Government Information Technology Agency (GITA) budget, an initiative that requires a partnership between the Department of Commerce and GITA, budget documents note.

Gov. Napolitano’s FY 2009 budget recommendation is available at: http://www.ospb.state.az.us/

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Maryland Budget Maintains State Investment in Biotech
Funding for several TBED-focused initiatives aimed at increasing the state’s biotech portfolio is prominent in Gov. Martin O’Malley’s fiscal year 2009 budget proposal. Under the recommendation, stem cell research, biotechnology and nanotechnology are targeted for investments to grow the state’s economy, building on the actions of the 2007 legislative session (see the April 16, 2007 issue of the Digest).
 
Gov. O’Malley unveiled his FY09 budget last week, recommending $23 million for the Stem Cell Research Fund. The fund – in its second year of existence – supports stem cell R&D at Maryland research universities and private sector research institutions and is administered by the Maryland Technology Development Corporation (TEDCO). TEDCO is slated to receive $27.8 million in FY09 total funds – a slight decrease from the FY08 appropriation.
 
The governor’s recommendation for the Department of Business and Economic Development is $145.5 million, an increase of 17.7 percent above the FY08 appropriation. The recommendation includes $6 million to provide tax credits to encourage investment in biotechnology firms and $2.4 million for the Nanotech Biotechnology Initiative Fund. Established in FY07, the fund leverages its state support with private funds to provide research grants in the field of nano-biotechnology. Gov. O’Malley also recommends $5 million in the capital budget to continue development of the East Baltimore Biotechnology Park, which is slated for completion this year.
 
Higher education would receive a boost in FY09 under Gov. O’Malley’s proposal, with $54.9 million dedicated to the Higher Education Investment Fund (HEIF). Created during the 2007 special legislative session, the HEIF is a non-lapsing fund that invests in public higher education and workforce development, according to the governor’s office. Gov. O’Malley recommends $16.3 million from the fund to freeze tuition for in-state undergraduates for a third consecutive year and $18.5 million to help meet demands for graduates in critical workforce areas such as engineering, math and science. Specifically, the funds will be used to renovate laboratories, increase doctoral and research capacity, and support workforce initiatives.
 
The budget recommendation for the Maryland Higher Education Commission includes $3 million from the HEIF to support workforce initiatives at Maryland’s higher education institutes aimed at meeting the needs of Maryland’s Base Realignment and Closure.
 
The FY09 budget proposal also includes $4 million for investments in rural broadband: $2 million from the Division of Financing for the Rural Broadband Assistance Fund to continue to expand DSL broadband service to rural communities and $2 million from the capital budget to continue high speed broadband infrastructure in the state’s rural areas. The capital budget also includes $621,000 to construct ethanol fueling stations across the state.
 
Gov. O’Malley’s FY 2009 budget recommendation is available at: http://www.dbm.maryland.gov/portal/server.pt

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Research, Innovation and Education Initiatives Proposed in Kansas Budget
Gov. Kathleen Sebelius delivered her State of the State Address last week proposing new initiatives and continued funding for several TBED programs emphasizing education and innovation as key to the state’s future economy.

Gov. Sebelius announced a proposal to create the Kansas Innovation Consortium, comprised of leaders from business, higher education, and state and local officials charged with advising the governor on research and education priorities for the state to achieve an innovation-based economy. The consortium also would develop specific strategies for investing in innovation and entrepreneurship and develop metrics to measure innovation and determine if the strategy is successful. The governor is requesting $150,000 from the Economic Development Initiatives Fund (EDIF) for start-up costs associated with the new group.

Beginning with education, Gov. Sebelius said that high-quality teachers are critical to retaining more scientists, engineers and skilled technicians for the Kansas workforce. Therefore, the governor’s fiscal year 2009 budget recommendation includes $1 million for a new teaching scholarship program in math, science and technology, the STEM Teachers Service Program. The governor also proposes $250,000 in FY09 funding to the Kansas Academy for Mathematics and Science, a two-year residential program established by the state legislature in 2006. Opening in 2009 at Fort Hays State University, the program combines a high school diploma with college credits equivalent to an associate of arts or science.

The FY09 budget recommendation invests $2 million from the state’s Expanded Lottery Act Revenues Fund (ELARF) in a new Bioenergy Research Program through the Department of Commerce. The program would provide grants and low interest loans to finance the commercialization of new technological breakthroughs in bioenergy research. Commercializing new technologies will require significant capital, the budget documents explain, so the funding would be used to assist bioenergy companies and research institutes with the costs.

Under Gov. Sebelius’ recommendation, the Kansas Technology Enterprise Corporation (KTEC) would receive $14.3 million in total funds (a slight increase over the FY08 estimate of $14 million), which includes $12.5 million from the EDIF and $1.8 million in federal funds. KTEC provides research support, direct company investments and business assistance to grow Kansas enterprises through technological innovation and business acceleration. Recommendations for the following KTEC programs include:

The governor recommends $4 million from the EDIF to Wichita State University for a National Institute for Aviation Research Grant. The funding would be used to finance aviation research and build on previous state initiatives to help ensure the continuation of a strong aviation infrastructure. An additional $2.5 million from the ELARF also is included for the institute, representing a total $6.5 million investment.

The governor’s FY 2009 budget recommendation is available at: http://budget.ks.gov/gbr.htm

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Tech Talkin’ Govs, Part III
Highlights from State of the State addresses delivered in Alaska and Hawaii are included in the third installment of the Tech Talkin’ series.
 
Alaska
Gov. Sarah Palin, State of the State Address, Jan. 15, 2008
“I'm appointing an Energy Coordinator, to activate a statewide Energy Plan. We'll use earnings from a $250 million ‘Renewable Energy Fund’ for alternative projects, like hydro, wind, geothermal, and biomass.”

Hawaii
Gov. Linda Lingle, State of the State Address, Jan. 22, 2008
“We are proposing to start Creative Academies, modeled after the successful STEM Academies, to nurture and support the many talents of Hawai‘i’s keiki. These academies would focus on animation, digital media, game development and writing and publishing in elementary through high school.

“We propose the creation of a Commission on Higher Education made up of the presidents of Hawai‘i’s major universities, members of the community, and business leaders. This Commission will give us the opportunity to embrace new ideas and new ways of using federal and state education dollars.

“And again this year we propose that the state retirement fund allocate $100 million to invest in the creative ideas and talents of Hawai‘i’s companies and people.

“… To further speed our progress toward energy security and a clean energy future, the Department of Business, Economic Development and Tourism is being reorganized to re-establish an Energy Division.

“Every week my departments are visited by developers of renewable energy projects – from wind to solar, from wave and ocean thermal to biofuel, from algae to even energy from space. We need to take action now to make it easier for these kinds of projects to start up and to succeed in Hawai‘i. …

“… Less than two weeks ago, our Airports Division announced an historic plan to develop large solar power arrays at 12 government sites across the state. This project has the potential to reduce Hawai‘i’s need to import 130,000 barrels of oil per year, and to generate enough power to supply about 9,000 homes per year. …

“... I am pleased today to let you know that next week, the State of Hawai‘i and the U.S. Department of Energy will enter into an unprecedented and innovative partnership called the Hawai‘i Clean Energy Initiative. This partnership is based on the vision that Hawai‘i must accelerate its transformation to a clean energy future by tapping into the latest national and global advancements, and that our abundant natural sources of energy position us to be a model for the world to show what can be accomplished by developing indigenous renewable energy. This partnership will bring both technical assistance and project funding to Hawai‘i.”

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Local Capital Programs Help Address Regional Gaps
Although the national venture capital investment continues to expand, many parts of the country still lack access to reliable sources of business capital. Even in states that rank in the top tier for venture investment, there are often insufficient capital resources to support businesses at every stage of development. In order to support entrepreneurs and to attract more attention from the industry, an increasing number of cities, regional organizations, community and technical colleges, and other groups are creating their own capital programs. These programs frequently focus on providing funding at the pre-seed and start-up stages of business development when it is difficult to attract funding.
 
Northeast Ohio
The Lorain County Community College (LCCC) Foundation recently announced that it would make its first three grants to support Northeast Ohio start-ups through its new Innovation Fund. These grants provide pre-seed and technology validation funding for businesses in the region that agree to provide internships for LCCC students and to participate in on-campus lectures on entrepreneurship. The program offers grants of up to $100,000 and a one-to-one match with outside investment. Businesses must agree to contribute back to the fund if they achieve certain agreed-upon milestones.
 
The fund is one of four investment organizations seeded by Cleveland’s NorTech through its TechLift program to create new capital opportunities for Northeast Ohio entrepreneurs. Last year, NorTech reported that the region would need $375 million in seed- and early-stage investments over the next five years to support companies graduating from local incubators and other support programs.
 
Philadelphia
DreamIt Ventures, a new organization in Philadelphia, has begun seeking investors and collaborators in an effort to attract and retain young tech entrepreneurs. The group plans to operate as a pre-seed stage venture firm, which will offer money and assistance to entrepreneurs to develop a prototype of a new product or service over a three-month period. The Philadelphia Business Journal reports that the group has gotten a number of local law firms, accounting firms and experienced entrepreneurs and investors to agree to provide support services for their clients. Company teams would receive between $15,000 and $30,000 to support their efforts. In exchange, DreamIt would retain 5-10 percent ownership.
 
The program will target young entrepreneurs between 19 and 29 years old with little experience in launching tech businesses. New companies would have an incentive to remain in the region, with DreamIt connecting them to local incubators, angel groups, and venture investors after graduation. Though the founders plan to invest their own money in the first round of investments, they are seeking state and local funds for future activities.
 
Ventura, Calif.
The Ventura City Council recently approved a $3 million partnership with a local venture capital firm. DFJ Frontier will use the funds to invest in high-tech start-ups outside of Silicon Valley. The city council stipulated that the firm must use its “best efforts” to invest in companies located within Ventura. Proceeds from these investments must be reinvested in the partnership to be invested in other companies or in separate job growth initiatives.
 
Though California leads the nation in venture capital investment, most of this activity occurs in Silicon Valley. Other regions have had more difficulty in attracting investment and retaining companies.

Ventura also approved a $400,000 job incubator program to supplement its capital effort and train high-tech workers.

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Venture Capital Events Offer Educational Opportunities for Undergraduates
While many universities offer business plan competitions and programs in entrepreneurship and commercialization, fewer opportunities are available to learn about the capital side of the equation. Last week, however, two major conferences invited students to learn more about venture capital (VC) investment and emerging trends in the venture industry.
 
The Wharton School of the University of Pennsylvania's student-run Private Equity & Venture Capital Conference hosted a day of discussions about developments in the venture capital field. More than 900 industry leaders, alumni, faculty and students met for the 14th annual conference to discuss changes in legislation and the regulatory environment for venture investors and the expanding global-orientation of investment.
 
Students were able to meet and talk with national and local venture professionals and to learn about how venture firms respond to change. The conference included panels on how federal and state governance can affect the competitiveness of U.S. private capital and on how capital firms can thrive despite downturns in the overall economy.
 
Find out more about the conference, including speakers and descriptions of panels, at: http://www.whartonpeconference.org
 
Simultaneously in Utah, 20 universities participated in the fifth annual University Venture Summit sponsored by the student-run University Venture Fund. The three-day event, which claims to be the largest undergraduate-produced private equity conference, gives students access to experienced investors and entrepreneurs to discuss the ideas and trends that are driving the industry.
 
The fund itself is managed by undergraduate and graduate students who work with experienced mentors to perform due diligence, evaluate technology, review business plans and make informed decisions about investments. Students also have been responsible for the organization's fundraising activities and have generated more than $18 million since its launch. The group has generally targeted student-run businesses for investment.
 
Many universities offer business plan competitions and pre-seed-stage funding for student entrepreneurs that involve students in the selection process to help educate them about the industry. The Kenan-Flagler Business School at the University of North Carolina, for example, recently organized a competition that allows undergraduate students to gain experience both pitching and selecting venture investments. First, teams of students act as venture capitalists, hearing presentations from local entrepreneurs and conducting due diligence on potential deals. Then, the teams advocate for the deals they believe will make for high-quality investments to a panel of experienced venture investors.
 
Students compete for cash prizes, awarded by the VC judges, while learning about the investment process and even drawing up term sheets for their investments. The two-day event also allows students to make connections in the VC community, which could help them find jobs and remain in North Carolina after graduation.
 
Find out more about the UNC Kenan-Flagler Business School Undergraduate Venture Capital Investment Competition at: http://www.kenaninstitute.unc.edu

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Useful Stats
Federal R&D Obligations to Industry by State, 2000-2004
Each year, the National Science Foundation releases updated information for their Federal Funds for Research and Development series. SSTI has prepared a table illustrating the amount of federal R&D obligations provided to industry in each state from 2000 to 2004, the most recent years for which statistics are available. Additionally, the relative ranking of each state is displayed for every year in this period.
 
For the entire U.S., federal R&D obligations to industry were $27.6 billion in 2000 before steadily increasing to $39.1 billion in 2004. This represents a 41.6 percent increase over the five-year period. In 2004, the states receiving the most federal R&D funding for industry were California ($7.87 billion), Texas ($3.30 billion), Virginia ($3.25 billion), Maryland ($2.38 billion) and Missouri ($2.37 billion). In 2004, 13 states had amounts higher than $1 billion, whereas 10 states received less than $50 million.
 
The values show a high amount of volatility over the years, and the relative ranking among states changes dramatically in some cases. Mississippi, for example, received $105 million in federal R&D funding to industry in 2000, which increased to $1.3 billion in 2004.
 
“Obligations are the amounts for orders placed, contracts awarded, services received, and similar transactions during a given period, regardless of when the funds were appropriated and when future payment of money is required,” according to NSF.
 
SSTI's table is available at: http://www.ssti.org/Digest/Tables/012308t.htm
 
For the last five years of available information used in this Useful Stats, Table 83 in each year’s report has been the source of the data. The entire Federal Funds for Research and Development series can be accessed at:
http://www.nsf.gov/statistics/pubseri.cfm?seri_id=23

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People & TBED Organizations

Tom Ballard was named director of the Oak Ridge National Laboratory Partnerships Directorate, formerly known as Technology Transfer and Economic Development. Ballard had been serving as the organization's interim director since August 2007.

The Howard County Economic Development Authority appointed Larry Collins as a new technology manager and as executive director of the new Howard Technology Council.

The Great Lakes Entrepreneur's Quest hired Diane Durance as its new executive director, succeeding Art DeMonte, now a full-time business consultant. Durance formerly was president of the Ann Arbor IT Zone.

William "Chip" Farmer was named interim director of the Greater Richmond Technology Council. Farmer replaces Robert Stolle, who left in December 2007 to join Core Consulting, a business and information technology consulting firm.

The Indiana Business Incubator Society announced its plans to become a formal organization.

The Illinois Technology Development Alliance (ITDA) this week promoted John Noel to become ITDA's permanent president. Noel had been serving as interim president over the past 15 months.

Lisa Porter was named the first director of the new Intelligence Advanced Research Projects Activity. Porter, NASA's associate administrator of the Aeronautics Research Mission Directorate, said she will leave the agency in February.

Karen Sievewright is the new director of research and analysis at the Toronto Region Research Alliance. Sievewright replaces George Tolomiczenko, who left to become the executive director of research and scientific liaison at the Crohn's & Colitis Foundation of Canada.

Brenda Wyland will join the Research & Technology Park Inc. at North Dakota State University as the incubator manager, effective Feb. 1, 2008.

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