SSTI Digest

Venture development organizations are reaching into new territory for funding partners and finding success in innovative models. Two new funds, the San Diego Tech & Life Science Investor Syndicate and Rev1 Fund I in Columbus, OH, have recently opened with less traditional funding sources, testing the waters of crowdfunding and heavy corporate backing, respectively. The San Diego fund, launched by CONNECT, allows anyone wanting to invest $1,000 the opportunity to participate alongside more experienced lead investors.

Opportunities for successful workforce development partnerships exist across a variety of industries and geographies, according to a recently released report from the Community Development Department at the Cleveland Fed. The report, Addressing Employment Needs through Sector Partnerships, includes five case studies from throughout the Federal Reserve’s Fourth District, which contains Western Pennsylvania, Eastern Kentucky, the panhandle of West Virginia and all of Ohio. Although sector-based initiatives have been around for quite some time, the Workforce Innovation and Opportunity Act, whose final regulations became publicly available in June 2016, places a strong emphasis on aligning education and job training with employer needs, according to the report’s authors Kyle Fee, Matt Klesta, and Lisa Nelson.

The big data technology and services market is expected to grow at a compound annual rate of 23.1 percent over the 2014-2019 forecast period, with annual spending projected to reach$48.6 billion in 2019, according to a 2015 study from IDC – a market research firm. Hoping to leverage this exponential growth into research and economic development opportunity, several universities are fund raising to establish new big data R&D Centers in the communities they serve. The results are mixed so far: while big data center projects at universities in Massachusetts, Nebraska, and Nevada are seeing significant progress, the University of Akron’s proposed Center for Data Science, Analytics and Information Technology will be shuttering its doors before it ever opened.

Last week, the U.S. Department of Transportation announced that Columbus, home to SSTI’s 2016 Annual Conference, has won a $40 million grant from the agency, beating out five other cities in the Smart City Challenge. As is often the case in Columbus, partnerships were vital to the city’s success; to complement the federal funds, businesses and other public entities in the region pledged $90 million to support the future transportation initiatives.

Ohio Gov. John Kasich signed a bill (HB 233) last month that authorizes cities and villages to create Downtown Redevelopment Districts (DRDs) that can address innovation districts and/or historic rehabilitation. The DRDs permit tax abatements of up to 70 percent of increased assessments in conjunction with payments in lieu of taxes (PILOTs) or a redevelopment charge that functions as a special assessment tax. In the case of innovation districts, these charges may be used to fund loans or grants to technology businesses—specifically including R&D and technology transfer activities—or to incubators or accelerators in the district.

In the last month, major new developments have occurred in TBED capital programs. Launch Tennessee and Pittsburgh-based Innovation Works both announced positive findings about the growth of their startup investment ecosystems with $1 billion being raised by Tennessee startups from 2012 to early 2016 and over $279 million invested in Pittsburgh startups in 2015. Meanwhile in Ohio, both Youngstown-based and Cincy-based startups will see an influx of capital, while a new $150 million fund focused on stem cell companies and regions has been launched.

To support the growth of Northeast Ohio’s entrepreneurial ecosystem, The Greater Cleveland Partnership (GCP) announced a limited-partner investment in JumpStart's new for-profit $20M venture capital fund. Co-investing alongside other VCs and private-sector investors, the JumpStart NEXT Fund will invest in Ohio-based companies that need to raise $2 million to $8 million in private capital to continue their growth.

GCP is a membership association of companies and organizations in Northeast Ohio, serving as the region’s chamber of commerce for the region. In 2001, GCP helped create Northeast Ohio’s regional economic development system, which includes JumpStart, a venture development organization tasked with supporting entrepreneurs and growing companies.

Now that many governors have signed spending bills and legislative sessions are drawing to a close, the SSTI Digest will check on the status of proposals related to the innovation economy, and examine the state of technology-based economic development funding in the states. This week, we review spending bills in California, Iowa, Ohio and New Jersey.

California
On June 24, Gov. Jerry Brown signed a FY16 budget package that includes $115.4 billion in general fund spending. The final budget includes $49.4 billion in general funds for K-12 education, $14.2 for higher education and $214 million for labor and workforce development. Within the higher education allocation, there is $29.1 million in new funding for community college apprenticeship programs, including $14.1 million to expand current programs and $15 million for apprenticeship-demonstration projects in emerging industries.

SSTI's Tech Talkin' Govs series has returned as governors across the country formally convene 2015 legislative sessions. The series highlights new and expanded TBED proposals from governors' State of the State, Budget and Inaugural addresses.

The final installment of this year’s series includes excerpts from speeches delivered in Alabama, Florida, Ohio, Pennsylvania and Texas. Read the first, second, third, fourth and fifth installments of this year’s series.

This week, governors in Michigan, Ohio, Oklahoma, Tennessee, and Wisconsin unveiled their budget proposals. Included in the governors’ recommendations are several cases of agency restructuring and funds for workforce development, innovation tax credits, and other TBED-relevant issues.

In a new report, the Ohio Board of Regents highlights promising policies to build more competitive innovation economies by tapping into the skills, knowledge and entrepreneurship of women, African-Americans, rural residents and other underrepresented populations. The review includes models pioneered by community organizations, academic institutions, entrepreneurship support organizations, philanthropies and tech-based economic development groups that draw traditionally underrepresented residents into innovation networks and ensure that benefits of the high-tech economy reach people of all backgrounds. The board’s Subcommittee on Inclusive Competitiveness provides specific recommendations for the state’s university system, including support for the Believe in Ohio Youth STEM Commercialization and Entrepreneurship program and the Choose Ohio First Scholarship. Download the report…

In Q3 2014, venture capital (VC) investments in the U.S. dropped by 30 percent from Q2 totals, according a new report from CB Insights. Q3 VC deal levels also dropped by 10 percent from Q2 totals. The severe drop, however, can be attributed to Q2 being the most successful VC quarter since Q1 2001. The good news is that the first three quarters of 2014 saw the U.S. VC investment total reach $33.75 billion – an increase of 59 percent compared to the first nine months of last year.

The initial public offering (IPO) market fell off significantly in Q3 with just 18 U.S.-based, VC-backed companies going public. In comparison, 59 companies went public in Q1 and Q2 combined. CB Insight researchers also found while late-stage deal share remained consistent at about 16 percent with Q1 and Q2, the size of those investments in share of venture capital dollars by series dropped from 35 percent in Q1 to only 22 percent in Q3. Read the report…