SSTI Digest

State and regional innovation programs continue to encourage significant economic growth across the country. The most recent example of the impact programs are having comes from JumpStart, a Cleveland-based venture development organization, which recently released its 2018 economic impact report. It found that companies in Ohio and New York fostered by JumpStart generated more than $1 billion in economic impact. This increased the cumulative JumpStart total to $6.6 billion since 2010.

Want that kind of economic impact in your region? Attendees of the upcoming SSTI Annual Conference in Providence, Rhode Island, Sept. 9 – 11 will learn lessons learned from programs that are creating a better future through science, technology and innovation and leave the conference with actionable ideas to improve their states and regions.

In response to its shrinking industrial base and having identified a gap in its ability to rapidly acquire and deploy innovative technologies, the U.S. Air Force (USAF) recently made some changes to its SBIR/STTR program. The new Pitch Days have already met with success and 10 more Pitch Days have been scheduled in 2019. The USAF expects to make its roughly $660 million of annual SBIR/STTR funding more easily available to a greater number of startup companies, thereby greatly expanding its industrial base, encouraging innovation and small business generation, and filling the innovation void left by the large prime contractors.

A recent report from global management consulting firm A.T. Kearney calls into doubt the ability of U.S. trade policy in encouraging domestic manufacturing firms to reshore their production efforts. Following the government’s release of 2018 trade data, A.T. Kearney published the findings from its sixth annual Reshoring Index, which compares year-over-year changes in U.S. manufacturing gross output to imports of manufactured goods from 14 traditionally low-cost country (LCC) trading partners in Asia. It found that imports rose by 9 percent for the year while U.S. gross manufacturing output grew only 6 percent in the same period. Combined with the Foreign Derived Intangible Income (FDII) tax deduction created by the 2017 Tax Cuts and Jobs Act, the Trump Administration argued that manufacturing would be driven back to the U.S. by tariffs on imports. Despite the government’s stated intent of bringing back manufacturing jobs, its trade policies appear to be showing different results.

The Angel Resource Institute has released its latest analysis of 2018 angel investing. Characterizing the full year of investments captured in the annual survey – more than 2,500 individual transactions – the report profiles activity by several different factors useful in understanding regional differences in the early stage financing community. It should be noted, however, that adjustments in the deal size ceiling for inclusion in the analysis for 2018, to reflect the degree to which angels are participating in next-stage rounds (Series A), make comparisons to previous years less meaningful.  

There are still many interesting data points profiling the regions in a manner to reflect industry sector preferences, deal structures, valuation and investment sizes, type of investment (new v. follow-on), investment geographic stickiness, and CEO gender and ethnicity by stage of deal.  Some examples:

A new scorecard from the nonprofit American Council for an Energy-Efficient Economy (ACEEE) reveals that while U.S. cities are ramping up their clean energy efforts, most cities with climate goals are either not on track to achieve them or are not yet tracking progress. The 2019 City Clean Energy Scorecard ranks 75 cities on more than 50 metrics and this year for the first time, includes policy efforts to advance renewable energy in addition to energy efficiency. Boston retains its first-place ranking, followed by San Francisco, Seattle and Minneapolis. Three cities, including Providence, Rhode Island, this year’s location for SSTI’s Annual Conference, were also named as Cities to Watch. Providence was deemed a city to watch in part because of its adoption of several major clean energy policies and programs, as well as its commitment to engage low-income communities and communities of color in its environmental process.

The number of women-owned business has increased significantly in recent years, but more needs to be done to level the playing field to increase the revenue and employee counts of these businesses, according to two recent studies. More venture capital is needed, as well as mentoring, training and opportunities for women of color.

Women owned 12.3 million businesses in 2018, more than 30 times the 1972 total of 402,000, according to the American Express 2018 State of Women-Owned Business Report. Women now run about 40 percent of all U.S. businesses. Much of this increase has been led by women of color, who now own about 47 percent of all women-owned businesses.

More borrowers are utilizing the rapidly growing fintech lending industry to garner record numbers of unsecured personal loans.  American have “sharply increased their use of unsecured personal loans because of the growing presence of fintech lenders,” according to a new report from the Federal Reserve Bank of St. Louis.

The total of unsecured personal loans leapt to $138 billion by the end of 2018, an increase of $21 billion from the previous year. The total reached $143 billion by the end of the first quarter of this year and is estimated to rise to an all-time high of $156 billion by the end of 2019, according to the Federal Reserve of St. Louis.

Of the $138 billion total at the end of 2018, 38 percent was issued by fintech firms. This is a seven-fold increase from the 5 percent of unsecured personal loans issued by fintech firms in 2013.

The U.S. Economic Development Administration (EDA) announced Regional Innovation Strategies awards — i6 Challenge and Seed Fund Support — to 44 organizations. Those awards are worth $23.5 million in federal funding matched by $26 million from a variety of private and public sector sources for nearly $50 million for projects to support entrepreneurship and innovation in 28 states and two territories. SSTI members receiving awards include BioSTL, Launch Tennessee, Epicenter Memphis, Research Foundation of SUNY, and VertueLab.  

These new awardees will be working to expand on the RIS program’s already-impressive impacts. These include more than 4,000 companies assisted, supporting the launch of 1,600 new products and $19 million invested in companies, per EDA.

Ten states from across the country have been selected as part of a unique program designed to grow and strengthen their manufacturers. Over the course of the next year, interdisciplinary state teams will meet together in Washington, D.C., and separately in their home states, to develop and refine strategies impacting manufacturing industries.

Based on their specific needs and goals, participating states developed working teams with representatives from areas such as the private sector, governor’s offices, state workforce and economic development departments, Manufacturing Extension Partnership centers, and manufacturing trade associations, among others. The participating states are: Arizona, Colorado, Illinois, Maine, Maryland, Missouri, North Carolina, Pennsylvania, Vermont, and Wisconsin.

With the Census Bureau’s July 17 release of the 2019 2nd Quarter update, the bureau’s Business Formation Statistics (BFS) changed format. Originally developed as an experimental research project in the bureau’s Center for Economic Studies in February 2018, the BFS has been redesigned as a formal release, complete with interactive data selection and visualization tools, and relocated with the bureau’s other regularly released economic indicators.

The continuing trend toward automation could widen the disparities between high-growth urban areas and rural counties at a time when workforce mobility is at historic lows, and the current economic health of urban, suburban and rural economies will impact their ability to adapt, according to a new report from the McKinsey Global Institute: The Future of Work In America.

The trend toward automation will have a growing impact on the economy and “the day-to-day nature of work could change for nearly everyone as intelligent machines become fixtures in the American workplace,” according to the report.

The report finds that many cities and their surrounding suburbs are better prepared for the increase in automation, while other cities and hundreds of rural counties could be left behind unless they adapt to the automation trend.

A recent story from the Federal Reserve Bank of Kansas City examines how hospital closures in rural areas have economic impacts that reverberate throughout the community. The report’s author, Kelly Edmiston, found that rural counties with hospital closures saw meaningfully lower annual growth in employment and aggregate wages three years after the closure than counties without hospital closures. Closings were found to have a larger effect on smaller counties, where the hospital has a higher share of employment and wages relative to the total county employment and wages. Other longer-term repercussions could also impede economic growth, Edmiston states, with the loss of access to care the most fundamental concern. The story can be found here.