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December 12, 2007 - SSTI Weekly Digest

In the December 12, 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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 Education, Research Initiatives Slated for Funding in State Budgets
Just as several states have announced projected budget shortfalls, at least three governors have revealed stable fiscal conditions for the coming year with proposed funding to support new and expanded education and research initiatives.
 
South Dakota
Gov. Mike Rounds unveiled his fiscal year 2009 budget recommendation to lawmakers last week, which includes funding for construction and operation of a high-speed data network connecting universities and research centers across the state. The High Speed Research, Education and Economic Development Network is a dim-fiber optic solution that will enable all six universities, the underground laboratory at Homestake Mine, University Center, EROS data center, and state government to share massive amounts of research data with scientists worldwide by utilizing the highest network speeds available, according to the governor’s press office.

The bulk of the construction costs - $8 million - is provided through a grant from the Great Plains Education Foundation. Gov. Rounds is recommending $3.8 million in FY09 general funds for remaining construction costs and $887,000 in operating costs. SDN Communications will build the network and provide $10 million in incentives for state broadband needs. Overall, the project represents a $30 million investment over 20 years.
 
Gov. Rounds said in a press release that the effort will help the state to achieve its goal of becoming a recognized leader in research and technology development under the 2010 initiative, an aggressive economic development strategy that focuses on tourism revenues, entrepreneurship, and R&D (see the Oct. 31, 2003 issue of the Digest).
 
The governor’s recommendation for higher education also includes a $65 million bond proposal over 25 years for science facility and laboratory upgrades at the state's six public universities. The bonds would be paid for with $2.3 million annually in state general funds and $2.3 million from student tuition and fees.
 
Additionally, the Regent’s budget recommendation includes ongoing funding for South Dakota Opportunity Scholarships and a slight increase in funding for the South Dakota School of Mines and Technology, which specializes in undergraduate and graduate education with an emphasis on science and engineering.
 
Utah
Focusing on raising academic standards across the state, Gov. Jon Huntsman Jr. is asking the legislature to approve $11 million in ongoing funding to be distributed among three initiatives: extended instruction in math and science, establishing a Science, Technology, Engineering and Mathematics program, and the Utah Science, Technology and Research (USTAR) high schools – currently in the planning phase. Overall, the governor is recommending $23 million in ongoing and $41.5 million in one-time funding for teacher recruitment, facilities and new and existing programs.
 
In support of the Engineering and Computer Science Initiative at the state’s institutes of higher education, Gov. Huntsman is recommending $2 million to produce engineering and technical graduates that will meet the needs of Utah businesses.
 
The USTAR initiative – created by the legislature in 2006 to leverage the state’s research universities in creating and commercializing technologies – would receive $25.4 million in FY09, which includes an additional $5 million for research and commercialization efforts in energy development. Gov. Huntsman's FY09 budget is available at: http://governor.utah.gov/gopb/budget.html
 
Wyoming
Referring to the state’s FY 2009-10 biennial budget at a news conference as “stable rather than skyrocketing,” Gov. Dave Freudenthal is asking the legislature to approve a significant portion of funds anticipated from the federal government to be used for alternative energy research and technology development. Beginning this month and continuing over the next several years, Wyoming is slated to receive $550 million in Abandoned Mine Lands funds following renewal of the Abandoned Mine Land Reclamation program by Congress.
 
Gov. Freudenthal recommends directing $17.4 million to fund critical research efforts at the University of Wyoming School of Energy Resources, $1.2 million for clean coal and carbon sequestration, and $10 million to the State Land and Investment Board for county road and bridge construction costs associated with the proposed coal-to-liquid plant. In anticipation of the federal government delaying transfer of these funds, the governor recommends allocating $28.6 million in general fund reserves for the aforementioned projects.
 
The governor also announced that two of the state’s critical higher education funds providing scholarships and faculty positions should reach their fully funded levels in 2008 – the Hathaway Endowment and the Excellence in Higher Education Endowment Fund (see the March 14, 2005 issue of the Digest). Gov. Freudenthal’s budget recommendation is available at: http://ai.state.wy.us/budget/index.asp

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Study Finds Angel Groups Receive Returns Consistent with Other Investments
By nature, angel investing is a risky endeavor. Angels are often involved with unproven seed- and early-stage companies and are frequently the first outside investors to become involved in a new venture. Despite these risks, a report released by the Ewing Marion Kauffman Foundation and the Angel Capital Education Foundation argues that angel investors working through investor groups often achieve attractive returns. Although only about half of all angel deals result in a profitable return, angels who maintain a portfolio of investments and have the resources to devote to extensive due diligence and company oversight frequently see returns that are competitive with other types of equity investment.
 
The authors of the report, Robert Wiltbank of Willamette University and Warren Boeker of the University of Washington, conducted a survey of 539 active angel investors to find out more about their background and the results they had seen from their investments. Since there are no legal reporting requirements for angels, the sample was limited to investors who are associated with angel groups.
 
On average, these investors engaged in slightly more than one deal a year between 1990 and 2007, the period covered by the survey, and had about nine years of investment experience. Three-quarters of all investments were directed toward seed- and start-up-stage businesses. Their median investment was $50,000, including all follow-up investment. The distribution of investments between sectors was similar to that of the venture capital industry, with software receiving the most attention followed by health/biotech and business products and services.
 
About 61 percent of angel investors in the study garnered overall returns that exceeded their investments. Only 48 percent of individual exits earned a full return on the investment, however, indicating that investors who maintain a portfolio of investments tend to accumulate greater returns than one-time investors.
 
Wiltbank and Boeker also evaluate the impact of investor-side factors that can significantly affect the profitability of an exit. Those include:

  • Amount of time spent on due diligence;
  • Whether or not the member angels possessed expertise in the companies' industry;
  • How much involvement the group had with the company after investment;
  • Whether or not the group made any follow-on investments; and,
  • Involvement of venture capital firms.

Due diligence appears to be particularly vital to successful investments. Angels in the survey reported that the median length of time spent on due diligence for any given investment was about 20 hours. The average return to investments that received more than 20 hours of due diligence is more than five times higher than other investments. Active involvements with portfolio companies and industry expertise also have a strong positive impact on returns.
 
Read "Returns to Angel Investors in Groups" at: http://www.kauffman.org/pdf/angel_groups_111207.pdf

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Hiring Additional Tenure-Track Faculty as a TBED Strategy
The University of Michigan announced last month that it will spend $30 million in the next five years to hire an additional 100 junior tenure-track faculty members to build multidisciplinary research and degree programs. Additionally, the university will participate in the Michigan Innovation and Entrepreneurship Initiative, a partnership between the state’s public universities and foundations that would provide entrepreneur training to interested members of the faculty and increase the amount of gap-funding to push research discoveries to market.
 
Hiring additional faculty on the tenure-track is another strategy for building the research capacity of an institution, in addition to the popular policy of seeking and hiring extremely prolific “star” researchers.

Will the long-term strategy of hiring increasing numbers of tenure track faculty become more commonplace?
 
The move to increase the percentage of teaching faculty that are tenured or on a tenure-track at the school is contrary to the trends observed by the American Association of University Professors (AAUP) in its Contingent Faculty Index. For example, an AAUP study shows that the percentage of faculty that are on a tenure-track or have tenure has fallen from 57 percent of faculty in 1975 to 35 percent in 2003. Alternatively, the percentage of full-time non-tenure-track and part-time faculty has grown from 43 percent to 65 percent over the same period.
 
Even though the percentage of tenure and tenure-track faculty are decreasing in aggregate, how does the performance of this faculty compare to non-tenure-track employees? In An Empirical Analysis of the Propensity of Academics to Engage in Informal University Technology Transfer, Al Link, Donald Siegel and Barry Bozeman explore the characteristics of faculty engaged in certain formats of technology transfer. The authors find that tenure-track faculty, as opposed to non-tenure-track faculty, are more likely to work with industry to commercialize technology, are more likely to co-author a paper with industry personnel that has appeared in a journal or conference proceedings and more often serve as a formal paid consultant to an industrial firm. In their sample set of more than 1,500 tenured or tenure-track faculty, 52 percent reported they had some type of interaction with industry over the past 12 months.
 
AAUP’s Contingent Faculty Index is available at:
http://www.aaup.org/AAUP/pubsres/research/conind2006.htm
 
An Empirical Analysis of the Propensity of Academics to Engage in Informal University Technology Transfer is available at:
http://www.economics.rpi.edu/workingpapers/rpi0610.pdf

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Stalling Budgets Add to Uncertain Times at National Laboratories
Federal budget uncertainties, higher health care and retirement benefit costs, a reduced retirement rate and added costs from a structural change from nonprofit lab management have all been mentioned as reasons for the enactment of a workforce reduction plan at Los Alamos National Laboratory. The goal is to decrease the number of lab employees by 500 to 700 workers, and the National Nuclear Security Administration has formally approved the plan, as outlined by Los Alamos’ Director Michael Anastasio. The first phase includes voluntary buyouts to reduce the payroll. After that, additional employees may need to be laid off if the budget shortfall is not met. Currently around 10,900 are employed by the laboratory.
 
Scanning news stories from across the country, Los Alamos is not alone in its predicament. The Associated Press reported in November that Lawrence Livermore National Laboratory in California also plans to cut 500-900 jobs from their current number of about 8,000 employees. Other reports state Sandia National Laboratories also plans to cut 40-80 workers from their 8,500 employees.
 
These job losses might become even larger because of the possible reduction in the budget for the Department of Energy, which includes funding for these and other national laboratories. The federal government has not come to an agreement on the final budget for the current fiscal year, which began Oct. 1. In the meantime, spending comes from a stop-gap measure that sets funding at the amount from the previous fiscal year.
 
The initial appropriations bill, which included funding for the federal laboratories, was vetoed by President Bush earlier this year for being too costly. Leadership in the Congress has been planning to send revised appropriations bills back to the president, although bundled into an omnibus spending bill. In the omnibus version, Democratic lawmakers were considering splitting the $22 billion difference that exists between the original congressional versions and the president’s budget.
 
However, with a veto threat of the revised appropriations bill as well, the Washington Post on Thursday reported that House Appropriations Committee Chairman David Obey wants to take a different approach. He is thinking of reducing the spending bills for the current fiscal year to the president’s overall $933 billion target, the Post states – this, while eliminating all earmarks from members of Congress, the top spending priorities of the president, and additional funds for military spending in Iraq and Afghanistan. Along those same lines of spending reductions, The White House Bulletin cited the president’s advisers as believing President Bush would prefer current funding levels to continue into this fiscal year via a continuing resolution as opposed to an omnibus bill filled with earmarks and costly provisions.
 
The Washington Post story on the current budget situation is available at:
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/10/AR2007121001615.html

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Useful Stats
14 Years of Federal Support for Academic R&D by State, 1993-2006
Federal funding for R&D in academic science and engineering fields totaled more than $30 billion in fiscal year 2006, yet it was not enough to outpace inflation, according to data collected by the National Science Foundation (NSF). After adjusting for inflation, the 2.9 percent increase in federally funded academic R&D expenditures in FY 2006 from FY 2005 was actually a 0.1 percent decline.

For the third year in a row, the top 11 states receiving federal support for R&D conducted by their academic institutions remained unchanged, the NSF data show. They include California, New York, Maryland, Texas, Pennsylvania, Massachusetts, Illinois, North Carolina, Ohio, Michigan and Florida, respectively.

SSTI has prepared a table showing federally financed academic R&D totals for all 50 states and the District of Columbia for the years 1993-2006. Percentage-wise, Maine led all states with a 547.4 percent increase over the 14-year period. Montana and Hawaii also had increases of greater than 400 percent. The U.S. as a whole went from $11.8 billion in FY 1993 to $30 billion in FY 2006, a 155.6 percent increase.

To see how your state fared, visit SSTI's table at http://www.ssti.org/Digest/Tables/121207t.htm. Additional detailed statistical tables from NSF's annual Survey of Research and Development Expenditures at Universities and Colleges are available at: http://www.nsf.gov/statistics/nsf08300/

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SSTI Brought 1,400+ Funding Opportunities to Subscribers in 2007
So far this year, SSTI's Funding Supplement has made its subscribers aware of more than 1,400 different opportunities to secure funding. If you aren't a subscriber, your client companies, academic researchers, and state and local TBED efforts are at a significant disadvantage! Finding alternate sources of cash to support the research and commercialization goals of your client companies and academic researchers is a valuable service provided by the most successful state and regional TBED programs – those programs subscribing to the Funding Supplement.

Competition for federal research funding is growing, particularly as program budgets have been relatively flat or declining in recent federal budget cycles. But your tech companies and faculty researchers are at the greatest disadvantage if they aren't even aware of all the opportunities available to them.

Don't remain in the dark for 2008. Sign up your organization as one of SSTI's members today to begin your subscription to the SSTI Funding Supplement.

Membership has additional benefits as well, including discounts on SSTI events and publications. More information is available at www.ssti.org/benefits.htm.

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

The Edison Materials Technology Center (EMTEC), a collaborative technology development organization whose mission is accelerating technology to market, is seeking to hire a senior scientist and a senior project engineer for its Cleveland office. Both positions will lead or support collaborative projects in alternative and advanced energy materials and materials processing development. A Ph.D. in engineering sciences is required for the senior scientist position; a bachelor's degree in engineering or the sciences is required for the senior project engineer position.

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People

The Delaware Economic Development Office announced Ken Anderson as its new director of entrepreneurial and small business development.

The Metro Orlando Economic Development Commission has named Mike Bobroff as its chief operating officer. Bobroff is also the commission's executive vice president.

Chris Copenhaver, an employee of the Department of Economic Development in Roanoke, Va., was named the city's first entrepreneurial specialist.

Ron Gifford is the new president and CEO of the Indy Partnership. Gifford replaces Gordon Hendry, who left to take an executive position with CB Richard Ellis.

Linda Hartsock was hired by Empire State Development to serve as regional director for Central New York.

John Hertig was appointed executive director of the Alfred Mann Institute for Biomedical Development at Purdue University.

Marilyn Higgins joined Syracuse University as vice president for community engagement and economic impact.

Kenneth Kahn will be the Avrum and Joyce Gray Director of the Burton D. Morgan Center for Entrepreneurship at Purdue University, effective Jan. 1. In addition to directing the center, Kahn will be a professor in the university's Department of Industrial Technology.

Daniel Krichbaum was named Gov. Jennifer Granholm's new chief operating officer, replacing Mary Lannoye who left the administration as chief of staff.

Gov. Arnold Schwarzenegger has selected Brian McGowan to replace Yoland Benson as deputy secretary for economic development in California's Business, Transportation and Housing Agency. McGowan, San Bernardino County's economic development administrator, will start his new position in January. Gov. Schwarzenegger also has appointed Teresa Takai as the state's first Cabinet-level chief information officer.

Gov.-elect Bobby Jindal has appointed Stephen Moret as secretary of the Louisiana Department of Economic Development. Moret will assume his new post on Jan. 14, leaving behind his duties as president and CEO of the Baton Rouge Area Chamber of Commerce.

Mark Robinson resigned as chief operating officer of the Massachusetts Biotechnology Council to join the American Academy of Arts and Sciences.

David Rooney will be the new regional director for Empire State Development Corp.'s Capital Region, effective Jan. 2. Rooney is senior vice president of programs at the Center for Economic Growth Inc.

Linda Toyota was named senior vice president for development at the Houston Technology Center.

Steven Zylstra was appointed as vice president of global corporate communication and public relations for Mylan. Zylstra had been president and CEO of the Pittsburgh Technology Council and the Pittsburgh Biomedical Development Corp.

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