SSTI Digest

The Science and Technology Directorate (S&T) within the Department of Homeland Security is looking for partners to help develop scientific advancements and technological innovations that solve homeland security challenges. The directorate is open to a broad range of potential partners, from technology developers and innovators creating ideas in their garages, to small businesses and large corporationsand has issued a guide detailing the ways partners can work with the agency.Industry Guide: R&D Investment Priorities and Business Opportunities 2017 includes a table providing an overview of the R&D investment outlook for the types of technologies and capabilities DHS anticipates will address current homeland security needs.

The U.S. Small Business Administration (SBA) has announced the 20 recipients of the fourth Growth Accelerator Fund competition. The winners, which represent a broad set of industries and a diversified range of demographic groups, will each receive a cash prize of $50,000 to address gaps in regional entrepreneurial ecosystems as part of the award. Awardees will be required to submit quarterly reports for a year, and must report or provide their metrics, including jobs created, funds raised, startups launched and corporate sponsors obtained. 

The 2017 recipients of the Growth Accelerator Fund competition are:

The U.S. International Trade Commission (ITC) this week recommended imposing tariffs on U.S. imports of crystalline silicon photovoltaic cells (CSPV) after finding last month the imports were causing serious injury to the domestic production of the cells. Tuesday’s action was the latest in a closely watched case that many, including solar’s trade group — the Solar Energy Industries Association — are saying could impede the growth of the solar industry in this country. While the ITC can make the recommendations, it is now up to the president to pursue them — or not — and to determine the type and amount of relief. The finding comes at a time when the Solar Foundation reports there are more than 260,000 people employed in the solar industry in the U.S (the entire solar manufacturing spectrum comprises less than 15 percent of those jobs).

In the October 24 edition of the Federal Register, the U.S. Census Bureau released a request for comment (RFI) on a proposed Annual Business Survey (ABS). The ABS is a new survey designed to combine Census Bureau firm-level collections that replaces the five-year Survey of Business Owners (SBO) for employer businesses, the Annual Survey of Entrepreneurs (ASE), and the Business Research and Development (R&D) and Innovation for Microbusinesses (BRDI-M) surveys.  The ABS will provide the only comprehensive data on business owner demographics and business characteristics, including financing, research and development (for microbusinesses), and innovation. These data are not publicly available from nongovernment or other governmental sources.

The intent of the RFI is to gather recommendations and other information from the public to help facilitate the collection process of data for the survey. It also provides information about the data that bureau intends to collect as well as brief details about how the data will be collected. Comments are due on or before November 24. 

At least three dozen states offer reductions in tax obligations to companies for some portion of the costs of the businesses conducting research and development within their particular state. During the 2017 session, one fewer could be included among the ranks. With little documented opposition, the Oregon legislature decided to get out of the R&D tax credit business altogether (p. 41, source).  Why? Are there lessons for other states’ advocates for innovation?

From SSTI’s research, the Oregon decision appears unprompted by financial necessity. The cost to the state to extend the R&D tax credit couldn’t be a serious issue ($40 million over six years in a state budget surpassing $38 billion annually). It also appears not to have been because of any disagreement on the merits of increasing R&D activity in the state. Yet House Bill 2078 to extend the existing credit through 2024 was allowed to die in committee with the session’s adjournment in July.

One of the hottest topics at SSTI’s 2017 Annual Conference centered on helping communities build the investment system necessary for local entrepreneurs and startups to thrive. Led by several panels of experts, the conversations led to sharing many great ideas, thoughtful solutions, and tough realities. This week, we conclude our series of stories on how TBED organizations can help communities ensure a vibrant investment system.  In our first installment, we discussed the necessity of creating a strong deal flow to stimulate the growth and success of the system. The second installment focuses on effective strategies and ideas for building your organization’s investment team. This final installment will cover developing a fund that matches your region.

An aging, more diverse workforce is what the Bureau of Labor Statistics foresees in the coming decade, with a declining participation rate, which may in turn restrict economic growth. The new projections released this week echo the downward trend in the rate of labor force participation since the peak of 67.3 percent in early 2000. While recent trends show an increasing level of participation among the 55+ crowd, there has been a decreasing level of participation among 16 to 24-year-olds as school enrollment has increased, as well as a continuing decline among the prime working-age cohort of 25 to 54-year-olds.

An SSTI analysis of the labor force participation rate of the prime age workers for each state revealed a great amount of variation among the states. The map below shows the participation rate for this cohort averaged out over 2014-2016 to account for yearly fluctuations.

Two 2017 Q3 venture capital market updates are not providing much clarity on the underlying state of the industry. Data on greater uninvested capital, larger deals and fewer exits, among other indicators, suggest that venture capital is in need of a market correction. At the same time, new fundraising, a move toward wider geographic distribution and the rise of alternative financial structures could speak toward the emergence of a more sophisticated market. In the absence of decisive indicators, the data allow for any number of explanations and predictions. This week, we are exploring the deals data, and next week, we will look at funds.

Entrepreneurial growth continues to rebound and is spreading to different industries and geographies, according to the 2017 Kauffman Index of Growth Entrepreneurship, yet the report also states that entrepreneurial growth “continues to be a rare phenomenon. Most firms are not growth firms.” The five metropolitan areas with the highest levels of entrepreneurship were, in order: Washington, D.C.; Austin; Columbus, Ohio; Nashville; and Atlanta, according to the report. The five largest states with the highest entrepreneurial growth activity were Virginia, Georgia, Maryland, Massachusetts and Texas. The smallest population states with the highest entrepreneurial growth were Utah, Hawaii, North Dakota, Nevada and New Hampshire.

The index measures the growth of entrepreneurial businesses in terms of revenue and employment, relying on the rate of startup growth, share of scale ups and high-growth company density to provide a measure of business growth that can be tracked over time.

Would you expect a community of 100,000 people to have less than one-half as much R&D activity as a community with 250,000 residents? Such a simple question cannot be considered without more information. You may ask which two communities are being compared. Would your answer be different if you learned the smaller community was a college town with a research-intensive university as its core economic engine, while the second community was largely a distribution hub and didn’t have a similar R&D asset?*  Yet politicians, pundits, media and even policymakers often benchmark cities, regions and states on incomplete or irrelevant  information.

Consider the varying share of the population in communities across your own state that are engaged in research or development. Would you expect R&D funding to be evenly distributed among those communities?  How, then, do or should we benchmark state or regional R&D intensity?

Support for the recently introduced Startup Act continues to build across the country. The legislation, profiled earlier in the Digest, would accelerate the commercialization of university research, improve the regulatory processes at the federal, state and local levels, and modernize a critical Economic Development Administration (EDA) program to promote innovation and spur economic growth. The legislation also creates both entrepreneur and STEM visas for highly-educated individuals so they can remain in the U.S. legally to help fuel economic growth. Senators Jerry Moran (R-Kan.) and Mark Warner (D-Va.), along with Senators Roy Blunt (R-Mo.) and Amy Klobuchar (D-Minn.) have received support from SSTI and a number of other groups, including the Ewing Marion Kauffman Foundation, National Venture Capital Association (NVCA), the Kansas City Chamber of Commerce, and Engine.

In a report of FY 2011-2016 data, the National Science Foundation finds that rate of female participants in its currently-funded Engineering Research Centers (ERCs) may be higher than for overall engineering programs. Specifically, participation among female faculty is better by about seven percent, by about 15 percent among female undergraduates, and a more modest 1-2 percent increase among doctorate students. This seems to be a significant gain in a field in which male Ph.D.-holders outnumber women 6:1 (per NSF data for 2015).

The findings for female participation come as policy and program leaders at NSF and the National Institutes of Health are expressing concern about how their institutions are affecting a field with long-recognized gender disparities.