SSTI Digest

To ensure economic growth and the success of the industries of tomorrow, the U.S. government needs to expand federal support for research and improve the efficiency of the process of federally funded knowledge leading to U.S. innovation and jobs, according to a recently released study by the Information Technology and Innovation Foundation (ITIF) and the Brookings Institution’s Bass Initiative on Innovation and Placemaking. In Localizing the economic impact of research and development: Policy proposals for the Trump administration and Congress, ITIF and Brookings suggest 50 policy proposals that the new administration and Congress can undertake to bolster tech transfer, commercialization, and innovation.

Despite the economic recovery since the Great Recession, the U.S. remains in a long-term decline in productivity, according to a pro bono study by Gallup commissioned by the U.S. Council on Competitiveness for the council’s 30th anniversary. The study, No Recovery An Analysis of Long-Term U.S. Productivity Decline, finds that since 2007, U.S. GDP per capita growth has been one percent, and Gallup Chairman and CEO Jim Clifton warns that “America is dangerously running on empty.”

The 21st Century Cures Act was signed by President Obama on Tuesday and is broadly intended to facilitate the research, development and transfer of medical discoveries in order to better-address diseases affecting American people. While the bill has received mainstream coverage for its bipartisanship – the core authors were two Democrats and two Republicans – and billions in new research spending – more than $5 billion in authorizations – the text also contains potentially significant changes for federally-supported medical research policy.

Nearly half of the U.S. states and the District of Columbia saw a 10 percent or greater increase in higher education R&D expenditures from FY 2010 to FY 2015 with five of those states (Connecticut, Georgia, Massachusetts, Nebraska, and Utah) seeing at least a 20 percent change, according to the National Science Foundation’s (NSF) Higher Education Research and Development (HERD) survey for 2015. Between FY10-15 overall U.S. research and development (R&D) spending at U.S. universities grew 12.1 percent, from about $61.2 billion to $68.7 billion. 

In last week’s Digest article – Alternatives to VC: Reconsidering the Startup Financing Paradigm – SSTI examined the conventional venture capital (VC) model as well as its advantages and limitations. In this installment, we will highlight alternatives such as revenue-based financing, venture debt, crowdfunding and a new financing model for cleantech proposed by Massachusetts Institute of Technology (MIT) researchers. We also take a look at the potential that these alternatives have for the field of tech-based economic development.

The U.S. ranks second on a global manufacturing competitiveness index, according to the 2016 Global Manufacturing Competitiveness Index by research firm Deloitte Global and the Council on Competitiveness. The U.S. ranking has improved in each of the past studies and is poised to take over that top spot from China by 2020, the study maintains. However, executives from across the world in responding to the study, noted that talent is the leading factor in determining manufacturing competitiveness, and finding and cultivating that talent is a topic that has received increasing attention from the manufacturing sector. While such rankings provide an interesting focal point, their real value lies in the discussion and attention focused on the subject matter. SSTI recently interviewed several leading thinkers on the subject, finding common calls for changing the approach to the talent pipeline in manufacturing, as well as a cautionary note on rankings.

As new and supplemental state budgets are being proposed, SSTI is monitoring the proposals and will report on developments impacting prosperity through science, technology, innovation and entrepreneurship. The first budgets released – from Colorado, Mississippi, Oregon and Wyoming – represent a mixed bag with new initiatives proposed in three states and program elimination in the fourth.

This week, America remembers the 75^th anniversary of the attack on Pearl Harbor and its entrance into World War II. Veterans of World War II have had a considerable impact on the current economy: The Bureau of Labor Statistics finds that World War II veterans had the highest rates of self-employment of any period of service. The topic of veteran entrepreneurship, however, has received relatively little scholarly attention compared to other aspects of the military experience, according to a recently released report by the Institute for Veterans and Military Families (IVMF) at Syracuse University. This research, which examines qualitative and quantitative research on the topic, coupled with new datasets emphasizing the demographics of self-employment, sheds light on the current state of veteran entrepreneurship.

As a way to support populations that are underrepresented in entrepreneurial activities, the Kauffman Foundation has announced $4.3 million in grants to 12 organizations that provide entrepreneurial support services to women and minorities. The awardees were selected from more than 376 applicants and range in both geography and industry-focus. They will receive awards ranging from $87,000 to $420,000 over the next two years. The Kauffman Foundation Inclusion Challenge grantees are:

NC Gov. Pat McCrory conceded the election to Democrat Roy Cooper on Monday after a recount he requested in Durham County was showing no change in the election results.  Acknowledging that it was a divisive election, Gov.-elect Cooper said, “I know still that there is more that unites us than divides us.”  Cooper will face a Republican super majority in both chambers of the state legislature.

The results of Maine’s Question 2, a tax on income above $200,000 to fund education initiatives, will also stand.  Opponents withdrew their request for a recount of election results, which showed approval of the measure by a less than 1 percent margin. Revenue from the surtax will be used to fund public education.

While the majority of founders say the tech industry is in a bubble (57 percent of respondents),  nine out of 10 founders believe that it’s a good time to be starting a company and are highly optimistic about their own firms’ futures, according to State of Startups for 2016 from First Round Capital – a seed-stage venture firm. This optimism has over 60 percent of startups focused on optimizing for growth with their eyes towards an exit – 72 percent of respondents predicted increased merger and acquisition (M&A) activity in 2017 – instead of optimizing for profitability (only 39 percent of founders). Nearly 25 percent of all respondents reported wanting to be acquired by one of four companies: Alphabet (11 percent); Facebook (5 percent); Amazon (4 percent); and, Salesforce (4 percent). In addition to their optimism about M&A, approximately one in five founders remain confident about their own company’s future  saying they’re certain they’ll build a billion-dollar company. 

University research and development expenditures reached $68.8 billion in FY 2015, an increase of 2.2 percent from FY 2014, according to recently released data from the Higher Education Research and Development (HERD) Survey by the National Center for Science and Engineering Statistics within the National Science Foundation. While the bulk of the funding (55.2 percent of total R&D expenditures) comes from federal expenditures, in current dollars, federally funded R&D at universities dropped 0.2 percent from $37.96 billion to $37.88 billion in FY 2015. Meanwhile, nonfederal R&D expenditures accounted for 44.8 percent of the total in FY 2015 compared to 43.5 percent in FY 2014 growing from $29.24 billion in FY 2014 to $30.79 billion in FY 2015. The greatest increase came from the business community (which increased their funding by 7.5 percent to top $4 billion for the first time), followed by nonprofit organizations and institution funds. Universities’ own funding of R&D comprises the largest source of non-federal R&D funding, or $16.7 billion in FY 2015.