SSTI Digest

In a recent Digest article, SSTI covered research highlighting the oversized role that offshoring multinationals had in manufacturing employment decline from 1983 to 2011. During this time, deindustrialization and manufacturing unemployment had a profound impact on community approaches to economic development. Larger metropolitan areas like Pittsburgh, PA, Roanoke, VA, and Greenville, SC, have received considerable acclaim for their ability to restructure their economies around new and innovative technologies. Less covered, however, are the smaller rural or rust belt regions that are seeking to leverage higher education, community partnerships, an increasingly skilled workforce, and innovative technologies to become more competitive in a 21^st century economy.

Congress has passed a budget for FY 2017 that largely continues support for federal innovation programs and R&D investments. Among the highlights are $17 million for Regional Innovation Strategies (a $2 million increase over FY 2016), level funding of $130 million for the Hollings Manufacturing Extension Partnership and $5 million for SBA’s clusters program. In reviewing dozens of line items, offices that had received significant cuts in the White House’s skinny budget appear to receive some of the largest funding increases (such as the Appalachian Regional Commission, Community Development Block Grant and ARPA-E). However, with the exception of multi-billion dollar increases for Department of Defense R&D, many increases are rather small in terms of overall dollars. This is, at least in part, a reflection of non-defense spending caps rising by only $40 million for FY 2017, limiting the availability of new funds. In this context, science and innovation gains are particularly impressive, with a five percent overall increase for federal R&D that particularly benefits NASA and NIH.

Both before and after the new administration released its budget plan, SSTI was communicating with both parties to identify how Congress would react to significant budget reductions. The message we heard was clear and consistent: Congress would continue to fund its existing priorities. The FY 2017 Omnibus shows that legislators were true to their word. Innovation policymakers and practitioners throughout the country should take a moment to appreciate this…. and then prepare to both work with agencies on program implementation and vigorously advocate for FY 2018 and beyond. While we thank Congress for its support for innovation in the FY 2017 budget, the fight for FY 2018 funding will require even more effort because of greater involvement of the Trump Administration in the budget process and lowering of spending caps. Further, the consequences of the FY 2018 budget are likely to be greater as the budget may serve as the roadmap for the next several years.

As the state budgeting process comes to a close, SSTI will report over the coming weeks on actions taken by state legislatures to invest in economic growth through science, technology, innovation and entrepreneurship. This week, we look at the budgets passed and signed by governors in Indiana, which includes new funding for an institute focused on health and life-sciences research and commercialization, and Maryland, which includes funding for the Maryland Technology Development Corporation.

In collaboration with the Angel Capital Association and Pitchbook, the Angel Resource Institute (ARI) released its 2016 Annual Halo Report, which highlights several trends including a decrease in median pre-money valuation from 2015; an increase in the number of syndicated deals; and, data revealing the lack of angel investments in both female- and minority-led startups. ARI also found that convertible notes are becoming increasingly popular among angel investors for first-time investments in a company. In Texas, nearly 60 percent of all deals included a convertible note with many other regions/states reporting over 35 percent of deals including a convertible note.

The report includes data from 2,751 deals and over $3.5 billion invested in total rounds including co-investors. ARI, however, excluded deals with first-time investment rounds greater than $5 million to avoid skewing the data.

Valuations/deals

Unfair treatment is the largest driver of employee turnover in the tech industry, according to a new report by authors at the Kapor Center for Social Impact with support from the Ford Foundation. In the 2017 Tech Leavers Study, the authors surveyed a national sample of 2,000 adults who in the past three years have voluntarily left a job in a technology-related industry. They find that unfairness or mistreatment in the work environment was the most frequently cited reason for leaving (37 percent), especially for professionals from underrepresented populations (e.g., women, black, Latinx, and Native American).

The traditional school season is ending across the country, but a new offering from Y Combinator (YC) does not follow a traditional path and instead allows students of startups the opportunity to participate from anywhere in an online course. The 10-week course, which began April 5, was open to startup founders, but the lectures are posted online weekly for “spectators.” Y Combinator, the Silicon Valley-based accelerator, explains on the course webpage that they thought the barrier to entry for people to start a startup is still too high, so they decided to share what they’ve learned through Startup School.

As the state budgeting process comes to a close, SSTI will report over the coming weeks on actions taken by state legislatures to invest in economic growth through science, technology, innovation and entrepreneurship. Up this week is a look at commitments that legislatures in Arkansas and Idaho have made including funds for a new accelerator program, Manufacturing Extension Partnership (MEP) centers, and more than $14 million for a biosciences research institute.

Among this year’s most talked about books on economic development is Richard Florida’s The New Urban Crisis. This commentary provides a brief overview of Florida’s book, a response to his conclusions, and insight into what the crisis may mean for economic development practitioners more broadly. 

Florida, well known for his theories on the creative class, has long advocated that the competitiveness of cities depends on their ability to embrace innovation and attract the knowledge workers essential to the 21^st century economy. To do so, the author has recommended that cities and regions focus on three things: technology, talent, and tolerance.

In his new book, Florida suggests that the impact of these recommendations has had both positive and negative effects. While the clustering of talent and innovation is now the basic engine of economic growth, it has led to deep divides within our society, Florida notes. These divides are at the root of The New Urban Crisis, which the author outlines with five dimensions:

As the relationship between technology and work continues to evolve, concerns abound, including its effects on jobs, education and business. The National Academy of Sciences, Engineering, and Medicine took a deeper look at the relationship and its impact, convening an expert committee to delve into the topic and set forth a research agenda. The resulting report, Information Technology and the U.S. Workforce: Where Are We and Where Do We Go from Here, explores the current state, trends, and possible futures of technology and work, as well as the possible implications for education, privacy, security and even democracy.

Here at SSTI, we receive requests from time-to-time from members looking to better understand their regional economy through data. Though the federal government has long been the largest provider of publicly available data, the mechanisms to explore it have been unwieldy. Now more than ever, users have options for interactive resources to explore government data and help inform decision making around economic development. This Digest article highlights many of the free tools and databases that are available.

Innovation Index 2.0: StatsAmerica, a project of the Indiana Business Research Center funded with support from the U.S. Economic Development Administration, operates this index for economic development practitioners to use in strategic planning, site requests, developing metrics, and grant writing. The recently updated index includes more than 50 new measures.

The Federal Laboratory Consortium (FLC) held its national meeting this week, and the emphasis of many conversations around the conference site in San Antonio was how labs can implement new partnerships to yield greater tech transfer successes. This topic was core to a new training course at the conference led by Crane's John Dement, and at which SSTI VP Mark Skinner presented, as well as during the meeting’s Industry Day. Partnerships were also a clear factor in several of FLC’s awards, including those for a NASA technology supported by the University of Central Florida, a Sandia Labs partnership with the state of New Jersey on a post-Superstorm Sandy microgrid project, and an individual award to Elizabeth Brooke Pyne that specifically cited her role in developing a Lilly Endowment-funded collaboration between Crane and Indiana universities. SSTI is also currently working with two of the FLC regions to produce reports on opportunities for new lab partnerships to promote innovation and tech transfer.