SSTI Digest

The PitchBook-NVCA Venture Monitor for Q1 of 2020 shows just a few signs of investment activity slowing down. The high and low ends of the VC spectrum appear particularly robust, with the number of angel (653) and mega (62) deal counts both almost exactly on track to match 2019’s figures. Seed deals (335) appear to be behind, at about 50 percent of last year’s pace — although reports of these investments often lag well behind when they occur, and early-stage VC deals (634) are also well behind the pace of the last several years. On the fundraising side, total funds closed were down from last year’s pace by about 20 percent ($21 billion into 62 funds). Q1 included only a few weeks of COVID-19’s national presence, and the next report will likely tell a much fuller story of the pandemic’s impact for equity investment.

SBA released data on the Paycheck Protection Program (PPP) this week for all approved loan activity through April 13 and told banks Wednesday night that the program is nearly out of funds. The data show more than 1 million loans worth more than $247 million approved across all states and territories. While the average loan is $239,000, 70 percent of the loans are less than $150,000. On average, states are seeing 3.1 loans per 1,000 population and nearly $747,000 per 1,000 population. While Texas (88,434) has seen the most loans, many Great Plains states are leading in per capita terms, with North Dakota (10.8 per 1,000 population), Wyoming (9.9), Montana (9.7), Nebraska (9.6), and South Dakota (9.0) comprising the top five. State data is in the table below. Looking at NAICS subsectors, construction is receiving the most loans with nearly 14 percent of approved funds, followed by professional services and manufacturing (each at 12 percent).

A new set of technology transfer strategies designed to incentivize rapid utilization of available technologies that may be useful for preventing, diagnosing and treating COVID-19 infection during the pandemic has been established by a group including Stanford and Harvard universities and Massachusetts Institute of Technology. The licensing strategies are meant to facilitate rapid global access of available technologies to help fight the pandemic. The patenting and licensing strategies include rapidly executable, non-exclusive royalty-free licenses to intellectual property rights that the signatories have the right to license, for the purpose of making and distributing products to prevent, diagnose and treat COVID-19 infection during the pandemic and for a short period thereafter. 

The U.S. Department of Agriculture unveiled a one-stop-shop of federal programs that can be used by rural communities impacted by COVID-19. The resource guide lists programs that can be used to provide immediate and long-term assistance in support of recovery efforts for rural residents, businesses and communities through:

• Technical, training and management assistance;
• Financial assistance; and,
• State and local assistance.

The resource matrix organizes funding opportunities identified in the CARES Act and other federal resources and are categorized by customer and assistance type.

A report released earlier this month by the National Academies of Sciences, Engineering, and Medicine, addresses the barrier of inequality that women, despite making up more than 50 percent of the population, experience in the fields of science, technology, engineering, mathematics, and medicine (STEMM). Further, women of color are severely underrepresented in every STEMM discipline. The report focuses on promoting systemic change in the STEMM enterprise in order to mitigate structural inequities, biases, discrimination, and harassment faced by many women, which consequently discourages education and careers in STEMM.

While startups consistently create more jobs than older firms, the Federal Reserve Bank of St. Louis took a look at the trends in startup’s share of jobs and found that startup employment share has been declining for more than a decade. The Fed story provides an overview of startup employment dynamics between 1994 and 2018. While it found that the construction industry and leisure and hospitality industry contributed to the decline more than did the rest of the economy, the story calls for future research into the reasons behind the decline. Specifically, it notes that questions both about a decline in startups and about a change in employment dynamics among aging firms should be explored.

The U.S. Securities and Exchange Commission is accepting public comments regarding their proposed changes to exempt offerings regulations. These modifications, originally announced last month, aim to streamline and expand the fundraising abilities for businesses while still qualifying as exempt from the SEC’s registration requirements. These changes include the separation of “demo days” from the general solicitation category, providing a new outlet for companies to advertise to potential investors.

The Federal Register entry will remain open for public comment until June 1st. Comments can be submitted via webform, email or mail. Find additional details and instructions on SEC’s website.

A recent report from the U.S. Government Accountability Office (GAO) detailed findings of a review of federal efforts to prevent sexual harassment at universities that receive grants for STEM research. The GAO reviewed five agencies (the Department of Energy, U.S. Department of Agriculture, NASA, Department of Health and Human Services, and the National Science Foundation) that provide approximately 80 percent of federal STEM research grants and found that four of the five received few complaints under Title IX from individuals at universities. Title IX prohibits sexual harassment and other forms of sex discrimination in education program that receive federal funding. Federal agencies are required to enforce the law at universities they fund.

Despite having no coordinated outreach and growth strategy, the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) program has increased university participation in its Post-Secondary Education Outcomes (PSEO) survey — which illuminates the employment and earnings outcomes of graduates as well as what industries they work in and which region of the country they live in after graduation — and is already in the process of negotiating a significant expansion for the next wave. Originally developed in partnership with the University of Texas System, the program has grown to include the Colorado Department of Higher Education, the University of Michigan-Ann Arbor, and the University of Wisconsin-Madison — bringing the total number of participating institutions to 47. The Census Bureau is currently negotiating agreements with university systems and state departments of higher education in Arizona, Indiana, New York (SUNY and CUNY systems), Ohio, Texas (Higher Education Coordinating Board), Utah, and Virginia.

Early-stage research from the Federal Reserve Bank of St. Louis examines the correlations between an area’s level of financial distress and its vulnerability to both the health and economic impacts of the COVID-19 pandemic. The Fed’s initial findings indicate that areas with low levels of financial distress were infected with the coronavirus and reached the point of exponential growth in new infections before areas experiencing greater levels of financial distress, while the rate of new infections is higher in more distressed areas. It also finds that a greater share of workers from areas of higher distress work in industries that are more vulnerable to the economic shocks caused by the virus than workers from areas of lower financial distress.

COVID-19 has generated an economic crisis that is, thankfully, unique to our lifetimes. If we are to recover efficiently as a country, then the policy response must be similarly unique, addressing multiple needs along different time scales. Many people are looking to the Great Recession for lessons on how to move forward, but there are critical contrasts between the two crises that have important implications for the solutions we should consider.

In general, the effect of the pandemic on states’ budgets due to the wave of business, retail, and commerce shutdowns, as well as other reduced economic activity across the nation, is not entirely known, or too early to forecast; however, a number of states are beginning to experience the initial impacts of a substantial downturn. With several states having already enacted their 2020-21 budgets, special sessions are expected later this year to deal with declining revenues. Others ended sessions early without a new fiscal year spending plan in place. Many are also acting quickly to help mitigate the effects of lost revenues and an increased demand for services. Some of the states’ impacts and actions are outlined below.