In the July 2, 2008 Issue:

Copyright State Science & Technology Institute 2008. 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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FY08 Supplemental Appropriation Includes $337.5M in Federal Science Funding
On Monday, President Bush signed the $161.8 billion supplemental appropriations bill for the current fiscal year, which ends Sept. 30, 2008. Though the appropriation primarily provides funding for the wars in Iraq and Afghanistan, the bill also includes almost $3.6 billion in non-war funding. Of this, $400 million was approved for U.S. science programs. The new funding will support programs that were originally authorized by the America COMPETES Act and will help several energy-related national laboratories avoid layoffs anticipated due to previous budget cuts.

The $400 million in science spending will be divided among the major science agencies, including:

An earlier version of the bill would have provided a total of $1.2 billion for the agencies, though it was abandoned when the president indicated that he would veto such a bill.

An additional $387 million will fund research, development, testing and evaluation within the military services and the Department of Defense (DoD). 

Last December, nearly $1 billion in research funding for the physical sciences was eliminated between the initial 2008 budget request and the eventual passage of the Omnibus spending bill. The cuts were expected to lead to layoffs at national laboratories around the country, including Los Alamos National Laboratory, which had initiated a plan to reduce its staff by 500 to 700 workers (see the Dec. 12, 2007 issue of the Digest). Layoffs also have occurred at the Fermi National Accelerator Laboratory and the Stanford Linear Accelerator Center, though the new funding may lead to rehires. In the short term, the appropriation should limit staff reductions, at least until the passage of the 2009 budget.

More information, including the full text of H.R. 2642, is available at: http://thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.02642:

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South Carolina Legislature Overrides Veto, Endowed Chairs to Receive $30M Annually
Coming together for a special one-day session last week, the South Carolina Legislature voted to override a line-item veto issued by Gov. Mark Sanford concerning the funding of the state’s Endowed Chairs program, now called the S.C. Centers for Economic Excellence. The override raises the budget allocation for the program from $20 million to $30 million, which surpasses the original multi-year cap of $200 million set for the Endowed Chairs/Centers of Economic Excellence program, when enacted in 2002. The program uses lottery proceeds to fund strategic faculty positions at the state’s three public research universities: Clemson University, the Medical University of South Carolina, and the University of South Carolina.
 
In a message to the General Assembly dated June 11, Gov. Sanford outlined the following reasons for his office’s concern with the legislation:

While the governor’s message does not call for the end of the Endowed Chairs program, it does call for a review of the program’s policies and accomplishments. In the South Carolina Senate, the veto was overridden by a 34 to 4 vote. It then moved to the House of Representatives and was unanimously overridden by a 103 to 0 vote.
 
More information on the S.C. Centers for Economic Excellence is available at http://www.sccoee.org/.
 
Further details on Gov. Sanford’s concerns with the legislation can be found by searching for R363 or S1252 within the Legislature’s Journal for June 25 at: http://www.scstatehouse.net/sess117_2007-2008/sj08/20080625.htm

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Arizona Legislature Approves FY09 Funding to Stimulate Economy
Arizona legislators approved the fiscal year 2009 budget last week, providing funds for proposals aimed at stimulating the state’s economy through investments in higher education infrastructure and increasing R&D activity.
 
Proceeds from an expansion of the state’s lottery will finance $1 billion in bonding for construction projects across the state’s three universities, including $470 million for completion of the Phoenix biomedical campus and upgrades to several buildings.

The stimulus plan, backed by a coalition of business, civic, nonprofit and educational groups, is twofold. First, the plan aims to boost job creation in the declining construction industry, and second, the infrastructure improvements will allow the state to accommodate for future growth at the universities in order to retain a knowledge-based workforce. The investment is a critical component of Gov. Janet Napolitano’s plan to double the number of bachelor degrees earned in the state by 2020.
 
Although universities will receive increased funds for capital construction, their overall operating budgets will sustain $50 million in cuts for the upcoming fiscal year, while community colleges will see a reduction of $5.5 million with $20 million in planned construction projects placed on hold. Earlier this year, the governor proposed a net increase of $25.4 million over the FY08 appropriation for universities, including initiatives aimed at improving teacher quality in science, technology, engineering and mathematics fields (see the Jan. 23, 2008 issue of the Digest). The approved budget provides an additional $2.5 million for the Arizona Board of Regents for math and science achievement grants as incentives for high-quality teachers. 
 
With no new funds available to support the governor’s Centennial Scholars program for eighth graders, the Board of Regents announced earlier this month a plan to use existing funds to implement the scholarship program for the upcoming school year. Announced during her State of the State Address earlier this year, the program promises four years of free tuition at any Arizona community college or state university for students who pledge to uphold a set of defined standards in high school and participate in community service, beginning with the class of 2012.
 
To help stimulate R&D activity and encourage business growth, legislators passed a bill to expand existing R&D income tax credits. Currently, individuals and corporate entities can claim an income tax credit of 20 percent for research expenses up to $2.5 million and 11 percent for expenses over $2.5 million. SB 1434 increases the credit to 24 percent and 15 percent, respectively. The legislation was crafted to allow Arizona to remain competitive with neighboring state California in state R&D tax policy. The Arizona 21st Century Fund is slated to receive $22.5 million in FY 2008-09 — $2.5 million less than last year. However, lawmakers agreed to restore the reduction, providing $27.5 million in the subsequent year. The approved budget also preserves $10.3 million for the Arizona Job Training Fund, which was slated to be cut entirely.
 
Legislators did not pass HB 2872, a bill to provide solar energy tax incentives aimed at attracting solar energy technology operations and manufacturing projects to the state.
 
Arizona is one of 29 states in which revenues have fallen short or are expected to fall short of the amount needed to support current services in FY09, according to a June 9 report by the Center on Budget and Policy Priorities. The budget passed by lawmakers includes approximately $432.5 million in cuts to state agencies, including $3.7 million from the Department of Commerce and $1 million from the Arizona Biomedical Research Commission to delay the public regenerative tissue repository.
 
The corresponding budget bills include House Bills 2209, 2210, 2211, 2275, 2278, 2394 and 2462 and are available at http://www.azleg.gov/.

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Louisiana Redirects Workforce Investments toward Emerging Industries
The Louisiana State Legislature recently approved several bills as part of a comprehensive package designed to revamp the state’s workforce development programs to focus on job training in emerging industries to ensure these fields have a highly qualified labor pool in the coming years.
 
The workforce reform package is centered on the creation of the Louisiana Workforce Commission, which will replace the state’s Department of Labor. The new commission will oversee the entire workforce development system and is charged with integrating workforce development initiatives through educational and training programs, with the purpose of developing a highly skilled workforce. A Workforce Investment Council also will be established to set workforce training priorities based on input from business leaders.
 
With an estimated 100,000 job vacancies across the state, lawmakers also passed legislation aimed at helping companies fill current workforce needs. HB 1018 establishes the Louisiana Community and Technical College System Workforce Training Rapid Response Fund and dedicates $10 million annually to supplement the cost of high-demand workforce training programs at community and technical colleges. The type of training programs to receive funding will be determined by market demand and economic and employment projections, according to the governor’s office.
 
The passage of these bills will help achieve the goals in the Louisiana: Vision 20/20 strategic plan, recommended by Gov. Bobby Jindal earlier this year (see the March 5, 2008 issue of the Digest). The approved budget for fiscal year 2008-09 includes several proposals championed by the governor for the Louisiana Department of Economic Development, including:

Another $4.5 million is included for the Department of Education to expand career and technical educational opportunities, such as dual enrollment.
 
Lawmakers also supported the governor’s recommendation to provide $8 million in one-time funding for endowed chairs and professorships for Louisiana universities. The approved capital construction budget provides $16 million for a new Pennington Biomedical Center clinical research facility in East Baton Rouge.
 
A bill to allow the use of taxpayer dollars in support of embryonic stem cell research was struck down by lawmakers. HB 370 does not, however, restrict funding for research on stem-cell lines that existed before the August 2001 federal ban. The governor has until July 8 to act on the legislation.
 
The FY 2008-09 operating budget as approved by the legislature is available at: http://www.legis.state.la.us/billdata/streamdocument.asp?did=500043

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Berlin Commits $250M for Star Faculty Recruitment at Research Institutions
Our German isn't what it should be and online translators weren't as helpful as we'd expected, but we wanted to make readers aware of the size of the investment Berlin is making over the next four years to recruit star faculty to its four research universities and the four local, private research institutions of Fraunhofer Gesellschaft, Helmholtzgemeinschaft, Leibniz Community, and the Max Planck Society. Termed the Berlin International Forum for Excellence, the initiative is intended to strengthen the competitiveness of the region's scientific assets in promising fields of research.

To help put the size of the investment into perspective, Berlin had a population of 3.4 million in 2006.

Science covered the announcement briefly at: http://sciencenow.sciencemag.org/cgi/content/full/2008/610/1

The original press release from Berlin's Science Senator and links to the memorandum of understanding among the institutions and government are available at: http://www.berlin.de/sen/bwf/presse/pressemitteilungen/anwendung/pressemitteilung.aspx?presseid=2395

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BIO Conference Provides PR Opportunity, Deadline for TBED Initiatives
The annual convention for the Biotechnology Industry Organization (BIO) provides an opportunity each year for many attendees to announce new initiatives and reports in the field of life science research and bio-related TBED – sometimes blockbuster initiatives trying to create the most buzz during and after the event. For example, at this year’s recently concluded event in San Diego, with more than 20,000 attendees representing 48 states and 70 countries, Maryland and Massachusetts announced biotech initiatives topping the $1 billion mark (see the June 18, 2008 issue of the Digest).
 
Not all of the announcements were attached to expensive price tags. Some involved increased collaboration and cooperation to promote the research strengths of the collective members or to market the geographic area. Examples include:
 
On the research collaboration side, California Gov. Arnold Schwarzenegger and Ontario’s Premier Dalton McGuinty announced Canada’s injection of $100 million into a Canadian-California Cancer Stem Cell Consortium based in Toronto. The California Institute for Regenerative Medicine, the entity responsible for distributing the state’s $3 billion 10-year stem cell commitment, is matching the Canadian investment within the California research community. The Ontario Institute for Cancer Research will oversee the collaboration efforts. According to the press releases, 70 percent of North America’s stem cell research is conducted within California and Ontario.
 
Three life sciences associations – BayBio, BIOCOM, and the Southern California Biomedical Council (SoCalBio) – announced the formation of the California Life Science Alliance, a partnership between the three organizations headquartered in San Francisco, San Diego, and Los Angeles respectively. According to a press release, the alliance will concentrate its efforts on policy issues and advocacy at the state and federal levels, in addition to joint participation in biotechnology conferences and sharing purchasing opportunities.
 
In 2009, the International BIO Conference will head to Georgia, home to the “Innovation Crescent” – a new multi-regional biotechnology initiative covering 13 counties from metro Atlanta and east to Athens. In January, Gov. Sonny Perdue and the Governor’s Office of Workforce Development provided a $500,000 grant to assist this initiative. The Innovation Crescent Regional Partnership includes Georgia Bio, the Georgia Department of Economic Development, and various regional economic development organizations and county chambers of commerce.
 
While the Innovation Crescent’s branding efforts are to market these 13 counties as the center of biotech companies and organizations in Georgia’s life science industry, a goal of the initiative from a workforce development perspective is to prepare people for careers in the life sciences, whether they be high school, community and technical college, or university students.

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Which States Are Seeing the Amount of Capital Available to New Companies Increase?
With the recent news that initial public offerings and mergers and acquisitions for venture-back companies are becoming scarce, many are anticipating a national venture capital crisis. A lack of exit opportunities could lead angel and venture investors to become more hesitant to invest at any stage of venture development as they seek opportunities that produce a return in the foreseeable future.

In this sort of environment, it may be appropriate to examine how recent trends have effected early-stage investment around the country and which states have been successfully cultivating early-stage capital in a time when risk-averse investors increasingly have turned toward later-stage investments for short-term returns.

Last week, SSTI analyzed the data on per capita venture capital dollars and deals at different stages of company development. Adjusting for population and focusing on seed- and early-stage capital revealed that several states, including Washington, the District of Columbia, Colorado, Maryland and Connecticut, are seeing impressive increases in capital opportunities for early-stage entrepreneurs, even though their achievements are often overshadowed by the sheer volume of dollars invested in California and Massachusetts. This week, SSTI examines trends in this data and, in particular, which states have increased the amount of per capita venture capital available to early-stage entrepreneurs since 2003.

After the end of the tech boom, the venture capital market hit a six-year low point in 2003. Since then, investment has grown steadily from $19.75 billion to $30.25 billion, while the number of national deals has increased from 2,925 in 2003 to 3,900 last year. This growth reflects a strong rebound in the national venture market, but these gains have been neither equally distributed around the country nor equally strong for all stages of investment. Later-stage investments have gained in popularity, nearly overtaking expansion-stage investment as the most common type of deals. Meanwhile, seed- and early-stage investment has languished in many states, including those where overall investments are growing due to the rise in later-stage investments and the larger size of those deals.

California and Massachusetts lead the country in per capita seed- and early-stage venture dollars and in overall growth in investments since 2003, so it is unsurprising that those two states are near the top of the list in earlier-stage per capita growth and deals. California leads the country in terms of dollars, with seed- and early stage investment increasing by $43.78 per person in the last four years. The state has increased its number of seed- and early-stage deals per million residents by 5.46 in that same time, making it the third-fastest grower. Massachusetts increased its per capita investment in the earlier stages by $19.43, placing it in third, and grew its number of deals by 5.24. These two venture capital hotspots posted large gains in both dollars and deals; however, several other states also have made impressive progress.

Washington performed well in both categories, increasing its earlier-stage per capita investment by $29.16 and its number of deals per million residents by 6.13, placing it in second in both categories. The District of Columbia was the only other state to rank in the top 10 in both dollars and deals. Vermont led the country in deal growth with 6.43 more deals per million people in 2007, though it did not appear in the top ranks for dollars due to the smaller size of these deals.

View the top 10 lists for dollars and deals, as well as figures for all 50 states, on an Excel spreadsheet here.

In the U.S. as a whole, the amount of per capita dollars invested in seed- and early-stage deals increase by $8.42, and the number of deals grew by 1.39 per million residents. Only 10 states had a dollar increase higher than the national average. Only 13 states did the same for earlier-stage deals. This indicates that relatively few states are seeing substantial gains in increasing the early-stage capital available for entrepreneurs.

Of course, this data is susceptible to the quirks of annual data, particularly in smaller states where a few deals can mean massive changes in the per capita figures. For instance, Maryland had a particularly weak year in 2007 for early-stage investment and Delaware had a strong year in 2003, despite the downturn in the rest of the country. Visualizations of state-by-state trends are available on the profile pages of the SSTI State Venture Capital Dashboard.

As mentioned last week, this data can be useful to help target state venture capital policy effort to support the companies and entrepreneurs that need the most help. In many states, the amount of deals involving seed- and early-stage companies is not growing at a pace that is sustaining long-term growth in the high-tech economy. Also while many states currently are seeing their total number of invested dollars increase due to trends in later-stage investment, only about half of all states have experienced increases in per capita dollars at the earlier stages since 2003. State venture capital tax credits or other policies that support investment without taking into account the specific needs of the state’s capital-seeking businesses may not be effective as a better targeted initiative.

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. Per capita data on the growth of seed and early capital by state is available in Excel spreadsheet format. Investment information has been derived with permission from the PricewaterhouseCoopers/National Venture Capital Association MoneyTreeTM Report with data from Thomson Financial. The population data have been drawn from the U.S. Census Bureau's Annual Population Estimates.

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

CTC Tampa Bay is seeking a venture lab manager to establish and build its Venture Lab program. This postion involves bridging relationships with government, private sector, and university entities in order to support the growth of selected early-stage technology-based companies. The selected companies must offer innovative products and services that can potentially generate significant revenues from the defense/homeland security market and other dual-use markets. A BA/BS degree in science, engineering or business, plus at least 10 years of directly related experience (or an MA/MS degree, plus at least eight years of directly related experience), are required.

The Massachusetts Technology Collaborative's John Adams Innovation Institute is seeking a director of innovation policy. This position will participate in and support the conceptualization, development and implementation of a rationale and intellectual framework for the Innovation Institute's project and investment activities. The position will oversee the division's research and analysis activities and will take lead responsibility for management of major collaborative research center investments and other projects that enhance innovation in Massachusetts. A master's degree from an accredited college or university, in the field of public policy, technology policy, business administration, community development, or applied economics is required.

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