Programs with Results: California's Matching Grants Yielding Big Results

Note: With this issue, the SSTI Weekly Digest is launching a new occasional "Programs with Results" series — articles profiling a variety of technology-based economic development programs that have been around many years and are yielding positive results. Our goal is to help answer the question "What Appears to Work?" with models that potentially could be duplicated in other states, regions or communities.

The California Technology Investment Partnership (CalTIP) provides matching grants of up to $250,000 to support California companies that receive competitively awarded federal research and development grants for projects in emerging technologies with the potential to be commercialized in the state. Begun in 1993 in response to federal defense conversion activities, CalTIP has evolved to focus almost exclusively on supporting small technology-based firms with financial awards and technical assistance through the state's six Regional Technology Alliances (RTAs).

With more than nine rounds of CalTIP funding, the state has provided a total of $46 million through 237 awards. To assess the impact of the state's emphasis on emerging and commercializable technologies, the Division of Science, Technology and Innovation in the California Technology, Trade and Commerce Agency surveyed the 119 CalTIP grants made between 1993-1999 to 93 unique small and medium-sized businesses. These businesses received nearly $22 million from CalTIP and matched it with $109 million in private support (in-kind and cash) and almost $106 million in federal R&D funding.

With a 79 percent response rate, the survey determined:

• "One of every three CalTIP-funded projects results in the launch of a new product within 25 months of project start date."
• "Each new CalTIP-supported product directly creates more than five sustainable jobs with average annual salary of $63,000."
• "More than a third of grant recipients interviewed said that CalTIP funds were instrumental in raising needed funds from other sources, including Federal research and development awards and venture capital investments."
• "More than 75 percent of CalTIP projects would have been terminated or significantly impeded without CalTIP funds."
• "Nine of ten companies receiving CalTIP grants survive well beyond the period of their grant, and most of those not surviving are acquired by or merged with other companies."

Because of the close relationship between the RTAs and regional CalTIP winners, the survey also examined which areas of the state were seeing the greatest economic impact of the awards. Grants to San Diego-area companies were found to be more productive in the creation of new jobs and new products than those to companies in other regions of California.

The San Diego Regional Technology Alliance conducted its own survey of CalTIP recipients in the region and determined, from 1993 to 2001, 38 private high tech or life sciences companies leveraged more than $700 million in outside equity investments in public and private funding. During that time period, every dollar of CalTIP seed capital investment in San Diego generated 160 percent return in the form of increased state tax revenue, and CalTIP companies created over 2,200 new jobs. The total value of CalTIP projects in San Diego is estimated at $113 million.

Both the statewide CalTIP assessment and San Diego RTA's CalTIP Impact Report are available at http://www.sdrta.org/ under "economic development research."