In the June 25, 2008 Issue:

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Venture Capitalists Eying Investment in Overseas High-Tech Markets
Venture investors are increasingly turning to overseas markets for promising investments in key high-tech industries, according to the 2008 Global Venture Capital Survey conducted by Deloitte and the National Venture Capital Association (NVCA). The annual poll of 400 international venture capital investors found that the U.S. is still perceived as the strongest technology economy in all sectors, but other countries are developing industry specializations that allow them to be competitive with the U.S. in one or two particular areas. While no single country is likely to overtake the U.S. high-tech venture investment overall, cumulatively, these niche specializations in other countries are beginning to mitigate U.S. dominance.
 
For example, the survey reveals that several countries within the European Union are now recognized as hotspots for investment in both clean technology and the life sciences, with individual countries having strong niches in specific sectors. Forty-three percent of respondents felt that Germany had the greatest expertise in clean technology, second only to the U.S. Germany's stable alternative energy policy environment and a strong technology base has allowed the nation to develop a sophisticated clean tech industry. Germany also ranked second in medical devices, with the United Kingdom in third. The U.K. was cited as the second most attractive market in biopharmaceuticals, ahead of Switzerland and Germany.
 
The strongest Asian markets have also developed industry niches that have attracted the attention of venture capitalists. Japan ranks just behind the U.S. in telecommunications. Taiwan is second in semiconductors. India is very competitive with the U.S. in software.
 
NVCA notes that though these findings might not be significant individually, together they represent a significant shift in thinking about the U.S.'s position in global technology markets and venture capital investment. Last year’s survey found that U.S. venture capitalists were reluctant to invest directly overseas and preferred to keep their activities close to home. Respondents were more likely to expand their international investments by investing in U.S. companies with a multinational presence than by investing in foreign companies. This was true, despite the fact that 58 percent of respondents found the U.S. investing environment too litigious and 48 percent found it hampered by government regulation. This year's survey indicates that investors are becoming more comfortable with the idea of investing overseas and more aware of the progress being made in foreign high-tech industries.
 
Read more about the most recent findings from Deloitte and NVCA’s 2008 Global Venture Capital Survey at: http://www.nvca.org/pdf/PressRelease2008final.pdf

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Alabama Plans $71M Next Generation Robotics Training, Research Facility
Alabama Gov. Bob Riley recently announced a plan to launch an advanced robotics research, training and education center to prepare workers for the robotics industry and attract high-tech employers to the state. Calhoun Community College in Decatur will host the $71 million center, in partnership with the University of Alabama in Huntsville. Gov. Riley first proposed the robotics campus in 2006 and believes the center will help increase the state’s profile as a leader in the robotics industry. In addition to training facilities, the center will also provide support for the applied research activities of Redstone Arsenal, which houses several U.S. Army directorates, and the NASA Marshall Space Flight Center.
 
The Advanced Technology Robotics Research and Development Complex will be a collaborative project, supported by the state of Alabama, the state’s community college system, Alabama Industrial Development Training (AIDT) and partners from the private sector. Current plans call for a Robotic Maintenance Training Center, an Advanced Technology Research and Development Center, and an Integration and Entrepreneurial Center to be rolled out over the next few years.
 
The first component, the Robotic Maintenance Training Center, will begin operations within 18 months and cost between $14 million and $15 million. The state will contribute $8 million in interest-bearing bond proceeds for the project, with another $7 million to $8 million from the Department of Post-Secondary Education and local governments. Private robotics companies, including Omoron and Mitsubishi, plan to contribute $40 million in robotics equipment for the center, as well as supplying trainers for the program. The center is expected to train 450 students each year.
 
The second two installations are expected to cost $7 million to $8 million each and be rolled out within a “reasonable” period, accounting for changes in the economic climate. The Advanced Technology Research and Development Center would be used by the NASA and the U.S. Army Missile Command to develop and test new robotics technologies for space exploration and military applications. Existing robotics companies would also be able to use the facilities for testing purposes. The Integration and Entrepreneurial Center would provide facilities for new companies to test their software and equipment and to train new workers.
 
Read Gov. Riley’s announcement about the center at: http://governorpress.alabama.gov/pr/pr-2008-06-09-01-robotics_research-photo.asp

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New England Training Entrepreneurs to Capitalize on Clean Energy Sector
This summer, 12 former CEOs with substantial experience in raising venture capital and no particular ties to clean energy will participate in an extensive curriculum-based fellowship program designed to rapidly transition them into a leadership role, in order to help grow the cleantech cluster in the New England region.

The announcement from the New England Clean Energy Council follows a recent report identifying strategies for the region to capitalize on $1 billion in incremental investment over the next four years in clean energy and prevail as a nationally recognized cleantech cluster. Through interviews with area venture capitalists, the report finds that of the three factors that go into creating a cluster, lack of entrepreneurial talent in the field is the most significant barrier in New England.

Currently, New England holds the number two spot nationally for venture-backed cleantech companies. However, increasing competition from Silicon Valley and the Midwest threaten this position, the report suggests. New England’s share of venture-backed cleantech companies is far lower than its share of overall venture capital backed-companies -- 9.7 percent to 11.6 percent, respectively.

The Clean Energy Fellowship Program is the council’s answer to populating the region with highly qualified serial entrepreneurs, and, as the report indicates, it is not necessary or even desirable for the future leaders of these companies to have a background in clean energy. The report states that while 60 percent of cleantech companies overall are led by non-founders (outside management), the number of companies receiving their first round of investment who are led by non-founders was only slightly less (56 percent). What this means, according to the authors, is there is a powerful need to bring in outside executives at the earliest stages to get cleantech companies off the ground. A local cleantech investor advises in the report that it is more important for the executive leadership to have been successful with the entrepreneurial process than to be imbedded in the industry.

The fellowship program is being piloted this summer with funding from the Massachusetts Technology Collaborative’s John Adams Innovation Institute and the Ewing Marion Kauffman Foundation. The curriculum is divided among three areas, including seminars and lectures on the range of energy technology categories, market forces across fuels, power and transportation, and sessions on the structure, impact and status of key policy, tax and regulation factors and how they may evolve in the coming years.

Fellows also will visit laboratories at area universities and are involved in a collaborative relationship with the U.S. Department of Energy to gain exposure on research initiatives and national market perspectives. During the latter part of the program, the fellows will work on business planning projects related to research initiatives or early-stage ventures in conjunction with area venture capital firms.

To continue operating the program two times each year for at least five years, the council is relying on the passage of the Green Jobs Act of 2008 introduced in Massachusetts earlier this year by House Speaker Salvatore DiMasi. The bill directs $50 million over five years for clean energy research and business development and establishes the Massachusetts Clean Energy Technology Center and a Massachusetts Alternative and Clean Energy Investment Trust Fund to finance the activities of the center. The legislation allocates $2.5 million for the Clean Energy Fellowship program.

More information on the Clean Energy Fellowship Program is available at: http://www.necec.org/fellowship

A copy of the A Strong Clean Energy Cluster Can Bring $1 Billion in Incremental Investment to New England by 2012 can be downloaded at: http://www.toplinestrategy.com/cleantech_cluster.htm

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ASEE Finds U.S. Engineering Degrees Decline in 2007
Despite a growing national demand for their skills, the number of engineers graduating from American colleges went down in 2007, according to latest edition of Profiles of Engineering and Engineering Technology Colleges, prepared by the American Society for Engineering Education.
 
The decline in engineering bachelor’s degrees was the first since the 1990s, ending seven years of growth. Although the drop was small ­ 1.2 percent from the previous year ­ ASEE fears it is the beginning of a trend that may continue for several years. That’s because undergraduate enrollment dropped both in 2004 and 2005.
 
Engineering master’s degrees show an even sharper drop than bachelor’s degrees, having declined 8.8 percent since 2005. Ph.D. degrees, by contrast, have been growing an average of 11 percent since 2004.
 
The pain is not being felt uniformly across all sectors of engineering; aerospace and biomedical engineering have shot up in popularity while electrical and computer engineering have fallen.
 
The fall in the number of engineering graduates comes at a time of growing technological competition from Asia and mounting concern about problems involving energy, the environment and infrastructure that require engineering solutions.
 
The U.S. Bureau of Labor Statistics has projected a need for 160,000 more engineering positions over the 10-year period between 2006 and 2016. This 11 percent increase does not include the replacement of many retiring engineers.
 
The 2007 edition of Profiles details the state of engineering education today, listing all college enrollments, degrees awarded, faculty and research expenditures at the undergraduate and graduate levels. More information can be found online at www.asee.org/colleges.

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State Per Capita Early-stage Investment Data Helps Reveal Policy Options
While California and Massachusetts may overshadow much of the venture capital (VC) activity going on around the country, other states have made significant progress in developing venture industries that serve the needs of their economy. Though larger investments in later-stage companies are becoming more prevalent in the U.S. venture industry, some states are seeing increases in smaller, early-stage investments that, if successful, should lead to significant growth in their total VC investment in years to come. Breaking down per capita venture investment by stage reveals states like Maryland, Washington, Colorado and the District of Columbia are building capital industries that service the needs of early-stage entrepreneurs.

In the April 30, 2008 issue of the Digest, SSTI examined states’ VC intensity - measured by per capita venture capital investment - uncovering a few states that have not been recognized for their success in attracting investment due to the size of their VC pool relative to the overall VC market. From the per capita perspective, the District of Columbia, Maryland and New Hampshire entered the top five with Massachusetts and California. SSTI later explored state venture investment data by stage in the May 28, 2008 issue, which revealed the growth of later-stage deals over pre-seed-, seed-, early- and expansion-stage activity. This trend has been partially responsible for the growth in gap between California and Massachusetts and the rest of the country in recent years. The more mature venture capital and high-tech markets in those states provide more opportunity for later-stage investments.

Combining these two approaches by looking at per capita investment data broken down by stage, provides some clues about where seed- and early-stage capital are most accessible for start-up entrepreneurs. The top positions remain with the same two states: Massachusetts and California have the greatest amount of seed-stage dollar investment per capita, with $16.72 and $16.56, respectively.

These figures represent a far greater per capita dollar amount than anywhere else in the rest of the country. The distant third place state in 2007 was Washington, which had $7.61 per person and was followed by the District of Columbia, Colorado, Maryland, North Carolina and Utah. Several states that rank highly in overall investment, and even in seed- or start-up-stage investment, appeared much farther down this list. Texas, for example, received only $1.81 in seed-stage investment per capita last year. Florida had $1.33 and New Jersey received $0.73.

Massachusetts’ and California’s lead, when viewed by the number of seed-stage deals per million residents, is somewhat smaller. Massachusetts had 5.89 seed-stage deals per million people last year, while California had 4.21. This was followed by the District of Columbia with 3.4 deals, then Pennsylvania, Maryland, Washington, Connecticut and Colorado. New Jersey, Texas and Florida had 0.69, 0.5 and 0.33 deals per million people, respectively. North Carolina, which was also among the top states for per capita dollars, had 0.88 deals per million residents.

Massachusetts and California are also the leaders in early-stage investment per capita, but the rest of the field differs a bit from seed-stage investment. Massachusetts received $89.90 per capita at the early-stage and had 18.61 deals per million residents. California had $73.13 in dollars and 11.6 deals. Washington is the clear leader in the rest of the country, with $37.99 per capita and 7.42 deals. Connecticut ranks fourth in per capita dollars, followed closely by the District of Columbia. Virginia, New Jersey, Utah and Georgia are also strong performers in per capita early-stage investment.

Policy Implications of the Data
Overall, these figures reveal that total investment and deals for a state can be misleading when taken as an indicator of how accessible seed- and early-stage capital are for entrepreneurs. The east and west coast still dominate the U.S. venture capital market, but some states outside of California and Massachusetts have managed to develop a supportive venture market for newer companies.

The data provide an opportunity for states to explore and re-evaluate appropriate policy interventions to help boost their private investment activity in the earliest stages of companies’ success if the per capita figure is low, or to help transition more seed and start-up deals into local, later-stage investments if the figure is high relative to their overall position in the VC market.

Simply increasing the pool of available venture capital funds, without appropriate targeting by stage could result in a localized overabundance of capital for the deals with the hottest prospects of yielding quick and high returns.  The higher-risk seed- and early-stage deals could go wanting and the market for later-stage deals could quickly dry up, encouraging VC managers to look for investment opportunities outside of the state. That, in turn, could help defeat one of the most important political goals for enacting the policy intervention in the first place -- growing a local tech-based economy.

Explore the Dashboard on Your Own
State and national per capita figures by stage are now available on the profile pages of the SSTI Venture Capital Dashboard for all 50 states (plus D.C. and Puerto Rico). These pages also provide data from 1995 to 2007 on total venture capital investment and deals, as well as national share and per capita figures for each. Investment information has been derived with permission from the PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report with data from Thomson Financial. The population data has been drawn from the U.S. Census Bureau's Annual Population Estimates.

Visit the SSTI Venture Capital Dashboard at http://www.ssti.org/vc.

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Brookings Targets Productivity, Inclusiveness and Sustainability in U.S. Metros
As a group, the country’s metropolitan areas face substantial long-term challenges as large gaps in issues such as productivity growth, environmental sustainability, and social inclusion separate the leaders from the laggards. Earlier this month, the Brookings Institution’s Metropolitan Policy Program released the second of its “core” reports from its Blueprint for American Prosperity initiative to lay out an economic agenda for U.S. metro areas.
 
In MetroPolicy: Shaping a New Federal Partnership for a Metropolitan Nation, Brookings outlines how leaders are driving gains in prosperity in their regions and how other countries are nurturing metro areas. Brookings kicked off its Blueprint initiative last November (see the Nov. 7, 2007 issue of the Digest), exactly one year before the date of the upcoming presidential election.
 
The report synthesizes various policy recommendations, some of which have emerged from other recent briefs included in the Blueprint initiative. A matrix of these recommendations to promote federal government leadership, empower states and localities, or maximize the performance of government are sorted by topics such as innovation, human capital, infrastructure, sustainable and quality places, and regional governance. Some of these recommendations include:

In order to illustrate the variety within metropolitan areas in the U.S., the report ranks the 100 largest metros in terms of employed population by the following measures (values from 2005 unless otherwise noted):

For example, where the GDP per job was $87,770 for the U.S. as a whole, the Bridgeport (CT) metro area was ranked highest with a GDP per job of $160,400 and the Scranton (PA) metro had the lowest amount with $63,320 per job. Two metros, Baton Rouge (LA) and San Jose (CA), experienced a rise in GDP per job greater than 21.5 percent from 2001 to 2005, where the U.S. as a whole witnessed a 9.4 percent increase in that time period.
 
MetroPolicy: Shaping a New Federal Partnership for a Metropolitan Nation is available at:
http://www.brookings.edu/reports/2008/06_metropolicy.aspx

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Recent Research
What Contributes Most to the Commercialization of SBIR-Funded NIH Projects?
SBIR Phase II awards with additional personal and/or internal business funding are more significant predictors of a technology reaching commercialization than SBIR awards with venture capital, external private equity or foreign investment, and funding from state and local governments or universities, new research shows.
 
In Bringing Science to Market: Commercializing from NIH SBIR Awards, Albert Link and Christopher Ruhm of the University of North Carolina at Greensboro present the results of their analysis, considering the long-term results of 405 National institutes of Health (NIH) SBIR Phase II awards over the 10-year period 1992-2001.
 
Of the 405 projects, which were taken from nearly 2,500 SBIR Phase II awards NIH funded during the period, 59 percent received some additional form of funding. Upon further examination, 74 percent of commercialized projects received some type of additional development funding at some point, whereas only 42 percent of the non-commercialized projects received funding.
 
Besides examining the source of funding, the researchers used additional control variables to predict if a project would reach the commercialization stage. The strongest predictor was if a business had previously been awarded Phase II awards for related research. Less important factors included if the awardees were female-owned and controlled businesses, were minority affiliated businesses, had performed research with universities, and had affiliations with particular separate research divisions within the NIH. Of their total sample of the Phase II projects, 51 percent eventually resulted in a commercialized product, process or service.
 
Link and Ruhm contend if increasing commercialization of projects is the intended outcome of the SBIR program, then it might be examined whether or not Phase II awards should be conditional upon obtaining internal matching funds.
 
Within the paper, the researchers also create an illustrative model to estimate the probability an SBIR-awarded project will reach commercialization based upon certain scenarios. In an example provided in the paper, if a project is not affiliated with a business with past SBIR Phase II experience, does not have internal funding, and does not have university involvement (with all other specified variables at the mean), the probability of commercialization is 26 percent. However, if this same project has internal funding at the average level of observed internal funding – all other variables remaining the same - the probability of commercialization increases to 57 percent. If all three of these variables – SBIR experience, internal funding, and university involvement are at the mean, then the probability increases to 77 percent.
 
Link and Ruhm further explain the caveats that exist within the working paper. First, the analysis is restricted to commercialization taking place rather than additional quantifiable information about the commercialization, such as the monetary amounts produced. Next, the data contain no information about when in each SBIR project’s lifetime it received additional funding. Finally, additional insight into the type of technology involved in each project is not provided; the researchers only indicate the technology is the recipient of an SBIR award from the NIH.
 
Bringing Science to Market: Commercializing from NIH SBIR Awards is available for purchase at: http://www.nber.org/papers/w14057

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Long Live Rock 'n' Roll! Opening Reception Set for Cleveland's Rock and Roll Hall of Fame
NorTech is inviting all SSTI conference attendees to an opening reception at the Rock and Roll Hall of Fame Tuesday, Oct. 14, from 7 p.m. to 11 p.m. Just like the music it pays homage to, inside and out, the Rock Hall exudes coolness. From the adventurously wide-open architecture and eye-popping displays to the sing-along soundtrack of continuously streaming rock and roll hits, this is one museum experience that really gets your heart pumping.

Adding to the excitement, Lt. Gov. Lee Fisher, director of the Ohio Department of Development, will provide brief remarks on the importance of state government investments in technology-based economic development (TBED) and Ohio’s model for investing in TBED, including the $1.6 billion Ohio Third Frontier project. Lt. Gov. Fisher also will highlight Ohio’s Thomas Edison Program, which is celebrating its 25th anniversary this year, and address how the Ohio Third Frontier and Edison programs have helped the state evolve a broader set of TBED strategies and programs to move Ohio’s economy forward.

And yes, there's more. This celebratory event provides a wonderful pre-conference opportunity to reconnect with colleagues and network with conference attendees, speakers and our local hosts. Mingle over spirits, light music and delicious cuisine. Attendees are invited to take a self-guided tour of the entire museum that will stay open until 11 p.m.

More information, including a secure online registration form, is available at: http://www.ssticonference.org/

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SSTI Job Corner
Complete descriptions of these opportunities and others are available at http://www.ssti.org/posting.htm.

The University of Kentucky is seeking an executive director for its new Office of Technology Transfer (OTT). This position is responsible for the oversight of the university’s growing intellectual property and data base system. The executive director provides the overall leadership, management and administration of OTT, executing its assessment, negotiating and licensing functions. The position requires an M.B.A. (preferred), J.D. (desirable) or other advanced degree, with at least 10 years of experience in industry and in a university setting dealing with patent protection, licensing and compliance.

The Oak Ridge Economic Partnership is seeking a director of technology. This position is responsible for leveraging the East Tennessee region’s technology resources to help foster new private sector investment and job creation in the region. Working with a consultant team, the incumbent will identify the core technology strengths at leading research institutions and in the region as a whole, and develop and execute a new technology-driven economic development strategy that will leverage these capabilities to support business development and retention. At least 10 years of experience in the technology-based business arena, preferably in either economic development or in sales, marketing or business development, are required.

The Oak Ridge National Laboratory (ORNL) is seeking an economic development projects/program manager. The primary purpose of this position is to provide strategic leadership in the implementation of the broad role that the Technology Transfer and Economic Development directorate plays in support of ORNL and its research directorates. A bachelor’s degree in business, planning, marketing or a related field is required. In addition, at least 10 years of senior experience involving a combination of community, technology and economic development marketing and recruitment are required.

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People & TBED Organizations

President Bush announced he will nominate Assistant Secretary of Commerce Sandy Baruah to serve as the administrator of the Small Business Administration.

The Rensselaer County Regional Chamber of Commerce has created the Economic Development Partnership to help businesses relocate to or expand in the county.

Barbara Fleisner has been hired as executive director of Centergy, the Central Wisconsin Alliance for Economic Development.

Dr. Lee Herron has joined the Georgia Research Alliance (GRA) as vice president of commercialization. Herron previously was general manager, Biosciences, for the Advanced Technology Development Center.

Linden Rhoads was named vice provost of the University of Washington's TechTransfer department. Rhoads replace Jim Severson, who left to join a start-up company.

Gary Rose announced he will step down as chief of New Jersey's Office of Economic Growth. Angie McGuire, the office's deputy chief since March 2006, will serve as acting chief until a replacement is found.

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