SSTI Digest

The fox pattern on his tie playfully conveyed Josh Lerner knew exactly where he stood as he looked out over the standing-room-only ballroom that served as the henhouse for SSTI’s annual conference two weeks ago. The audience, comprised mostly of practitioners from state, local, nonprofit and university-based TBED organizations, played its role as hens well – some nervous, some angry, all in fidgety anticipation of what the Harvard Professor was likely to say. SSTI fielded several questions before the conference as to why Lerner was invited as a plenary speaker based on apprehension from the title alone of his new book, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do About It. As the book had just hit the streets the week before, we were all about to find out.

Texas leaders have fully embraced the importance that strongly supported top-tier research universities can serve for attracting and retaining high-wage technology companies and as drivers for future economic growth. With Tuesday’s passage of Proposition 4 by a solid 56.7 percent majority, it is evident the voting population of the Lone Star State gets it as well.

Angel investors are reducing the average size of their investments, according to the latest report from the University of New Hampshire Center for Venture Research. In the first half of this year, total angel investment dollars fell by 27 percent from the same period in 2008, but the number of angel deals increased by six percent. As a result, the average deal size has fallen by 31 percent since early 2008.

The report attributes the change to lower company valuations and to angel investors taking a more cautious approach to investing without decreasing their level of activity. Investors have also begun shifting their focus away from seed- and startup-stage firms in order to support their portfolio companies and reduce their risk.

The first third of the current fiscal year was over before Pennsylvania leaders could agree on a $27.8 billion FY10 budget that sharply reduces spending across many areas of community and economic development. It does boost funding for basic education to historic levels, however.

State spending in FY10 is $1.9 billion lower than in FY09 and $524 million less when federal stimulus dollars are taken into account, according to the governor’s press office. In addition to spending cuts across most agencies, the state will raise cigarette taxes by 25 cents per pack and institute a new tax on small cigars.

Gov. Jennifer Granholm signed the final FY10 budget bills last week, cutting nearly $1.9 billion in spending and warning state agencies of a possible 20 percent cut in state spending next year. To help fill the FY10 deficit, the enacted budget incorporates $1 billion in federal stimulus funds. With less than $600 million in federal funds available next year, the state could face a shortfall ranging from $800 million to $1 billion, reports The Detroit News.

The Michigan Strategic Fund, administered by the Michigan Economic Development Corporation, will receive $114.6 million in FY10, down from $152.6 million approved last year. This includes $28.5 million for the 21st Century Jobs Fund, a sharp decrease from last year’s appropriation of $65 million. The fund supports job creation in emerging fields such as renewable energy, life sciences, homeland security, and advanced manufacturing by investing in basic research at universities and providing access to capital. The business incubator program is funded at $1.3 million, a $50,000 boost over last year.

The Chinese government announced last Friday the launch of 20 venture capital funds, designed to target investments in high-tech sectors within their national economy. As outlined by China's National Development and Reform Commission (NDRC), these sectors include the medical and pharmaceutical industries, information technology, energy conservation and environmental protection, and energy production.

The initial capitalization of the 20 funds comes to $1.31 billion, with three-fourths of the total provided by private investment. The remaining one-fourth originates from a split between the Chinese central government and seven provincial governments (Beijing, Jilin, Shanghai, Anhui, Hunan, Chongqing, and Shenzhen). The funds will be managed by professional investment firms independent from the national or provincial governments, according to the NDRC.

Tuesday’s Republican victories in the gubernatorial races for New Jersey and Virginia mean a shift in political power for both states. With current fiscal conditions continuing to press state revenues lower and unemployment rolls higher, much of the new governors’ attentions could pass over tech-based economic development policies. Alternately, increased investments in TBED may be exactly what are needed right now to help create high-wage jobs in both states.

A look at the posted campaign platforms for the two successful gubernatorial candidates suggests changes are afoot in both states, if actions follow the campaign rhetoric when they take office in January. Highlights for both states follow (energy-related policies will be covered in next week’s Digest).

Virginia
The website for the campaign of Bob McDonnell, a 55- year-old former state attorney general, states the governor-elect will focus heavily on traditional business recruitment/retention strategies, regionalization of job training and university research investments, and increasing higher education graduation rates.

Marking the first decline in a decade and despite a then-healthy economy, federal R&D for the Department of Energy (DOE) declined from FY05 to FY06. The percentage of total federal R&D obligations dedicated to DOE R&D also declined from FY05 to FY06.

SSTI has prepared a table displaying the amount of R&D obligations associated with the DOE for each state from FY02 to FY06, the five most recent fiscal years for which data is available. The table also shows the percentage of each state's total federal R&D obligations that come from DOE for each of the five fiscal years. This statistic shows the critical importance of energy research for some states, or for states with large amounts of federal R&D coming in, the degree of diversification in the state's R&D portfolio.

Complete descriptions of this opportunity and others are available at http://www.ssti.org/posting.htm.

The Software and Information Technology Association of Kansas (SITAKS), a state-wide trade association dedicated to strengthening and expanding Kansas’ software and IT sector, is recruiting for a President/CEO to provide overall leadership and management for the daily operation of SITAKS to insure its viability, growth and adherence to its vision, mission and strategic plan. This position is responsible for the organization’s administration, marketing, financial management, community relations, program development/execution, fundraising and strategic direction.

Capturing national attention for initiating successful programs to sustain the nation’s position as a global leader for innovation and competitiveness, six organizations were named recipients of SSTI’s 2009 Excellence in TBED Award. The third annual awards follow a nationwide competition recognizing outstanding achievements in tech-based economic development (TBED) emphasizing impact, strategic value and replicability.

“The impressive stories behind each of these six initiatives illustrate how strategic TBED investments work to promote regional growth through science and innovation,” said Dan Berglund, SSTI President and CEO. “These organizations serve as best practice models in the field for their demonstrated leadership and meaningful impact to state and regional economies.”

Recipients were honored today during a ceremony at SSTI’s 13th Annual Conference in Overland Park, KS, attended by top economic development professionals from across the nation. The following initiatives were selected to receive the Excellence in TBED Award for 2009:

Using the interest earned from $400 million in state savings, Alaska Gov. Sean Parnell announced a plan that would provide Alaska high-school students with scholarship funds to attend the University of Alaska or in-state vocational institutions based on academic performance.

The Governor’s Performance Scholarship would be awarded to students based on grade average. Students with an A grade average would receive a 100 percent tuition scholarship, students with a B average would receive a 75 percent tuition scholarship, and C students would receive a 50 percent tuition scholarship.

In an effort to promote college preparedness, the governor’s plan also stipulates that high-school students take four years of math, science, and language arts, and three years of social studies to be eligible for the scholarships.

Gov. Parnell will seek approval from the legislature in the upcoming session to set aside $400 million of nearly $8 billion currently in the Constitutional Budget Reserve Fund and Statutory Budget Reserve Fund to initiate the program.

While New York City's universities and research centers are among the country's top institutions for performing scientific research, the city’s institutions have not become the drivers of entrepreneurship and economic development witnessed in other regions of the U.S, according to a new report from the Center for an Urban Future. Additionally, the high cost of real estate and lack of affordable laboratory space inhibits local entrepreneurs from succeeding and deters high-tech investment. Building New York City's Innovation Economy authors Jim O'Grady and Jonathan Bowles incorporate data from an innovation index examining 48 comparative metrics of NYC's five boroughs and the greater New York City metro region.