SSTI Digest

The third package of emergency assistance related to COVID-19 is currently making its way through Congress, having passed the Senate last night and being expected to pass the House tomorrow. The legislation includes additional emergency loans and tax credits for retaining employees, as well as near-term aid for individuals, small businesses, and some of the most affected industries. While relatively little assistance is directly relevant to science- and innovation-related business development, many broader small business provisions can still be of assistance to these companies.

At a high level, the following sections of the third coronavirus relief package are most likely to be relevant to the TBED field:

Just days after the first reported US death from COVID-19, federal grant recipients capable of performing essential research and services related to COVID-19 were provided with additional flexibilities to the terms of their contracts and supplied with additional administrative resources to pivot their efforts towards combatting the virus. As the coronavirus pandemic continues to grow and disrupt all sectors of the economy, the Office of Management and Budget (OMB) has now issued guidance to the heads of all federal grant-making agencies, offering short-term emergency flexibilities and administrative relief.

Some of the measures provided by OMB include:

While the income benefits of a college education receive frequent attention, a recent article from the Federal Reserve Bank of St. Louis highlights the importance of a college degree for wealth accumulation. The average wealth for a college-educated household has tripled since the 1970s, while wealth for households without degrees have remained stagnant. These divergent trends in economic well-being are further evidence of the growing inequality among Americans, and the rising importance of education to staying ahead of this divide.

The authors compare wealth between households whose head holds a college degree (college households) and households whose head does not hold a college degree (noncollege households). Between 1971 and 2016, the wealth of college households tripled. Gains were particularly robust for households with two college-educated spouses. Over the same time period, noncollege households saw an increase of about 25 percent in their wealth, or about one-twelfth the gain of college households.

A report released last fall on the financial stability of U.S. small businesses in 25 metros has been given new context as attempts to slow the coronavirus pandemic have brought a majority of in-person commerce to a halt across communities, the country, and the globe. The JP Morgan Chase report found that 29 percent of small businesses were unprofitable and 47 percent had less than two weeks of liquidity. The situation was worse — often twice as much — in communities with lower-than-average home values, college graduates, or majority minority populations.

The likelihood of a business having reserves varied by sector. Restaurants had the lowest median profitability (9 percent), followed by retail (11 percent). High-tech services companies (29 percent) and health care services (26 percent) were the most profitable. Of course, even sectors with an average cushion of more than two weeks may be tested by what promises to be a longer series of interventions.

The White House has reached out to the National Association of Manufacturers to seek volunteers who can donate and provide and/or produce within two weeks large-scale quantities of critical supplies to help the nation respond to the COVID-19 pandemic. Those that may have the ability to produce needed supplies are urged to respond to the survey found here.

Postposed primary elections, shuttered schools, sheltering in place orders and millions of workers shifting to home offices while others are displaced completely — the COVID-19 pandemic is radically altering the way of life for the country. States, too, are scrambling to respond to the pandemic while dealing with ongoing legislative sessions and budget negotiations. Some of those responses are detailed here.

A number of states have already suspended their sessions including: Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana (expected to last until March 31 at the earliest), Maine, Mississippi (until at least April 1 and possibly longer), Nebraska, New Hampshire, Rhode Island, and Vermont.

Arizona, Idaho, Kansas, Maryland, and New York are hoping to wrap up their sessions this week and expect to have passed an FY 2021 budget upon doing so.

Alabama lawmakers are currently on a scheduled spring break until March 31. It is unknown whether lawmakers will remain on break after that. Since the state's fiscal year doesn't end until September, there is no rush to advance or pass a state budget before then.

The National Institute of Standards and Technology (NIST) is seeking to expand the network of Manufacturing USA centers for innovation, providing pathways for participation from external industry organizations, according to a recent notice in the Federal Register. These “alliance institutes” will not be federally funded, but will essentially function in the same capacity as the federally-funded institutes. However, alliance institutes will still be eligible to receive public service grants — allowing them to provide workforce development services, small- and medium-sized manufacturer outreach, and conduct other typical Manufacturing USA activities. NIST is also looking for public input on alternative funding ideas and opportunities which alliance institutes could access.

For the first time and in response to the COVID-19 outbreak, the National Institute of Allergy and Infectious Diseases (NIAID) together with the National Institute of General Medical Sciences (NIGMS) has activated the NIH Urgent Award mechanism. The targeted opportunity is intended to provide funds for NIH grantees applying to expand the scope of their active grant. Last month, NIAID and NIGMS published a Notice of Special Interest (NOSI) “to highlight the urgent need for research on the 2019 novel Coronavirus (2019-nCoV). NIAID is particularly interested in projects focusing on viral natural history, pathogenicity, transmission, as well as projects developing medical countermeasures and suitable animal models for pre-clinical testing of vaccines and therapeutics against 2019-nCoV.”

The biotechnology industry has made progress in increasing representation, especially in pre-revenue, smaller and private companies, however, diversity and inclusion programming is still in the nascent stages at most companies responding to a survey by the Biotechnology Innovation Organization (BIO). BIO published its first annual survey on the industry’s progress in its report, Measuring Diversity in the Biotech Industry: Building an Inclusive Workforce.

The report analyzes data from a survey of 100 BIO member companies and shows that responding companies reported that of their employees overall, 45 percent are female and 32 percent are people of color. Those numbers decrease at higher levels with 30 percent having female executives and 18 percent female board members. The representation of people of color is lower as well, with companies reporting that 15 percent of executives and 14 percent of board members are people of color.

The U.S. Securities and Exchange Commission (SEC) recently proposed rule changes that aim to make fundraising easier for new companies, including by expanding crowdfunding’s applicability and allowing for “demo day” communications. The changes target three particular methods of exemptions: Regulation A, Rule 504 of Regulation D, and Regulation Crowdfunding.

Organizations using a web address ending in .ORG should be aware of an upcoming change affecting website registrations. In brief, the nonprofit manager of the .ORG top-level domain is requesting permission from ICANN, which is ultimately responsible for domain registration, to a private equity firm. Opponents of the sale have asked ICANN to step in to find a new nonprofit manager, which has, in turn, prompted Ethos Capital, the prospective firm, to propose a binding addition to the .ORG contract.

The first of these additional provisions would be to limit price increases to an average of 10 percent per year for eight years — sufficient to double the cost of registration over this period — and with no price protections after this point. Other provisions would create a “Stewardship Council,” with input on policies but no say over financial matters, and a $10 million fund for the council to use to support nonprofits. Ethos says they are giving ICANN an extension for their review of the proposed transfer until March 20.

A recent New York Times article points to high-profile stumbles by tech startups, particularly underwhelming IPOs by billion-dollar companies and thousands of people laid-off, and declares “start-up bloom deflates, tech is humbled.” As SSTI expressed concern about in the past, the trends of equity capital being invested at later stages, companies remaining private for longer, and (relatedly) valuations inflating beyond reason, have clearly set up the broader venture capital market for high-profile failures.