SSTI Digest

Venture capital (VC) investments for the first quarter of 2001 totaled $10.1 billion, a staggering 40 percent less than the previous quarter, according to the latest Moneytree™ survey prepared by PricewaterhouseCoopers in partnership with VentureOne. Although VC investment now has declined steadily in each of the four quarters since the peak in the first quarter of 2000, the latest results mark the greatest quarter-to-quarter decrease in absolute dollar terms since the survey started.

While the figures of a separate survey released this week by the National Venture Capital Association (NVCA) and Venture Economics reported higher totals for the two most recent quarters, the decline between quarters of 42 percent is consistent with the Moneytree™ results. NVCA reported first quarter 2001 venture capital activity totaled $11.7 billion compared to $20.5 billion for the final quarter of 2000.

According to the PricewaterhouseCooper’s website, seed and first round financings were hit hardest: both deal flow and the amount raised were at approximately half the level of fourth quarter 2000.

A wide range of research and tech-based economic development bills were approved by the Arkansas legislature, which ended its legislative session in mid-April. With proposals and support coming both from Republican Governor Huckabee and the heavily Democratic legislature, Arkansas is the latest state to demonstrate broad bipartisan support for investing in science and technology.



Bills addressed areas as varied as venture capital, life sciences research, creation of a chief information officer, and implementation of the state’s geographic information system. Highlights of the legislative session include:

U.S. companies originally backed by venture capital created 4.3 million new jobs last year according to a new economic impact study released this week by the National Venture Capital Association (NVCA). Those companies generated $736 billion in revenues in the year 2000 and, according to the study, venture capital-backed businesses represented 3.3% of the nation's total jobs and 7.4% of Gross Domestic Product in 2000.



Regionally, the Southeast experienced the greatest job creation with 1 million jobs, followed by California. The consumer industry realized the largest number of jobs created as a result of venture-backed companies at more than 1.1 million in 2000, followed by the computer and medical/health industries. California saw the most venture capital-created revenues with $179 billion in 2000, followed by the Southeast and Southwest. The most significant revenue impact occurred in the computer industry with $204 billion in revenues generated in 2000, followed by the consumer and medical/health industries.

With ten firms, Chicago leaders win bragging rights for being called home by the greatest number of Inc. magazine's "Inner City 100," the fastest growing urban businesses. In fact, six of the top 50 companies were from the Windy City.



Five businesses from Buffalo won inclusion in the magazine's list, earning the New York city the unofficial title as the second most popular home. Pittsburgh, Cleveland, and Oakland, CA each had four companies on the list.



The "Inner City 100" is compiled by Inc. and the Initiative for a Competitive Inner City, a nonprofit organization founded by Harvard professor Michael Porter.



The list of 100 firms, selected based on five-year sales growth, was narrowed from more than 2,300 nominations. Profitability and number of employees are not considered in making the award, although to be eligible for consideration, a company must have had at least 10 employees and $1 million in sales in 1999.

Using survey responses and a weighted index for caliber of students, curriculum, faculty, support for students, and overall program, Success Magazine has identified what it believes are the best 50 business schools for entrepreneurial education. The top honors are not necessarily the business schools that immediately jump to mind for most people.



Babson College, situated outside Boston with an enrollment of 1,550 MBA students, won first place on the list because the students and curriculum are focused on starting businesses, the magazine reports.



UCLA, the University of Illinois at Chicago, DePaul University (also in Chicago), and the University of St. Thomas (Minneapolis) round out the top 5. Finishing the top ten list are: Rensselaer Polytechnic Institute (Troy, NY), Indiana University (Bloomington), Case Western Reserve University (Cleveland), University of Southern California (Los Angeles), and San Diego State University.

Earlier this month Governor Jeanne Shaheen released New Hampshire in the New Economy: A Vision for Expanded Prosperity, the first-ever comprehensive economic development plan for the State of New Hampshire. The plan calls for New Hampshire state government to focus its activities toward encouraging innovation, strengthening education and workforce development, retaining and protecting the quality of life, and extending economic opportunity to every citizen in every part of the state.



The plan’s 39 recommendations are divided among six categories. Specific recommendations relating to tech-based economic development are highlighted below.



Maintaining A Strong Economy

The Small Business Administration (SBA) will distribute up to $3.4 million for small technology business development efforts across as many as 30 states through the first Federal and State Technology Partnership (FAST) request for proposals, released online Tuesday. Proposals are due Thursday, June 7, 2001. Individual state awards will range from $100,000 - $150,000.

FAST, included in legislation reauthorizing the Small Business Innovation Research (SBIR) Program last December, provides matching funds to enable states to augment or expand their tech business assistance and SBIR outreach efforts. Recognizing the priority nearly every state has placed on encouraging technological innovation and commercialization by small businesses, the Science and Technology Council of the States made the FAST program’s creation a top priority during last year’s SBIR reauthorization by Congress.

Legislation for the Technology Education and Training Act, introduced earlier this week by a bipartisan group of six Senators, calls for the creation of a income tax credit for businesses to offset information technology training expenses of their workers and trainees. The credit would be equal to 100 percent of the first $1,500 a business spends to train an individual worker. The credit would increase to $2,000 per individual if the training program offered by the business is located in a specially designated area, including existing Empowerment Zones.



Because the credit would apply to programs which lead to certification in information technology (IT), the bill, if passed, also would encourage businesses to form partnerships with schools, universities and job training programs.

Long-held opinions are hard to change. The state of the US manufacturing sector is a good example. Many people, particularly those in the Northeast and Midwest, hold tightly to memories of mass layoffs and factory closings nearly 20 years ago.



After two decades of transformation, today’s manufacturing sector is quite different. In fact, manufacturing exports, including food production and processing, have enjoyed positive annual growth rates in all but one state since 1986, point out the authors of Comparing Manufacturing Export Growth Across States: What Accounts for the Differences?, a recent journal article from the Federal Reserve Bank of St. Louis. Nationally, manufacturing exports as a share of Gross Domestic Product grew from 4.1 percent in 1986 to 7.0 percent in 1998.

Colorado

The Bill and Melinda Gates Foundation is donating $8 million over five years to support the creation of four “high tech” high schools around the state. Modeled after San Diego’s High Tech High, the Colorado schools will have teacher-to-student ratios of 1:15 and the same teacher will work with the students for four years. Students would have individualized workstations and practical internship experience will be built into the curriculum. The state is providing an $8 million match for the grant. Marc Holtzman, the Governor’s Secretary for Technology, is chairing the effort.



The Gates grant will also support the creation of a charter school network and breaking three large public schools into smaller multiplex schools managed by a private organization. For more information, see: http://www.gatesfoundation.org/