SSTI Digest

The sustainability of Manufacturing USA institutes depends on their ability to offer value across a wide range of stakeholders according to a recent report by The National Academies of Sciences’ National Materials and Manufacturing Board, on behalf of The National Institute of Standards and Technology and the Department of Defense. Since 2012, DoD has invested more than $600 million in its Manufacturing USA institutes, with funding intended to help cover startup costs and the first five to seven years of operations. As these institutes begin to reach year five, DoD seeks to evaluate how its institutes are achieving their goals, the best ongoing role for the federal government, and potential long-term funding options. The findings of this study are unveiled in the Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. The study describes the business models deployed by the eight DoD institutes, challenges and lessons learned regarding the development of public-private partnerships around the institutes, and the potential costs and values to DoD associated with different types of engagement strategies. The report also makes four broad…

New research from Congress’ Joint Economic Committee’s Social Capital Project finds that the migration of highly-educated adults toward dynamic states and major metropolitan areas is accentuating America’s geographic divisions. Using census data from 1940 to the present, the authors define “brain drain” as someone in the top third of the national education distribution who resides in a state other than their state of birth between the ages of 31 and 40. Their interactive, data-rich analysis finds that the states that are doing the best cluster around the Boston-Washington corridor and on the west coast, while states in the South and the Midwest/Great Lakes fare worse when it comes to attracting and retaining the highly educated. The authors also analyze changes in states and regions over time, as well as conclusions for what this means for social capital nationwide.

The Federal Communication Commission Chairman Ajit Pai outlined two new initiatives aimed at ensuring U.S. leadership in 5G and continuing efforts to close the digital divide. Pai announced his intent to create the Rural Digital Opportunity Fund, which he indicated would inject $20.4 billion into high-speed broadband networks in rural American over the next decade. The FCC said the fund represents the FCC’s biggest step to close the digital divide and should connect up to 4 million rural homes and small businesses to high-speed broadband networks. However, Route Fifty has reported that the fund is a rebranding of the current Connect America Fund, albeit with higher speeds and more money. The FCC will draft a Notice of Proposed Rulemaking for the fund, which the commission will vote on, followed by a public comment period before the commission votes on final rules. In an effort to lead in 5G connectivity — the next generation of wireless connectivity that is promising faster speeds, lower lag times and more capacity — Pai announced that the FCC intends to start its third 5G auction on Dec. 10, 2019, which will be the largest in American history.…

The IRS released its long-anticipated second tranche of rules on Wednesday, and the regulations provide some clarity around using Opportunity Zones to invest in businesses. Specific examples include details on defining a business’ operations within a zone and funds’ ability to reinvest proceeds. However, further clarification is needed, including around investors’ treatment of interim sales, and additional changes are forthcoming. A partial summary of the 169 pages of new rules follows, and SSTI will provide additional updates as the full implications become clearer. SSTI’s letter to the Treasury on the first set of rules emphasized three areas that required clarity, and the new rules take steps toward all three items. 1.    Safe harbor for initial investments by Qualified Opportunity Funds (QOFs) QOFs are required to certify twice per year that at least 90 percent of their investments qualify for the benefits. However, while the certification timeline is set, the periods for receiving a new commitment from an investor was not. This could lead funds faced with a potential commitment close to a deadline choosing among…

State funding for higher education has only halfway recovered in the 10 years since the Great Recession, according to a recent State Higher Education Finance (SHEF) report. The report also found that while higher education funding is stabilizing, the shift to greater reliance on tuition as a revenue source has leveled off, but remains higher than since before the Great Recession. During the Great Recession, appropriations dropped 24.4 percent from the high in 2008 ($8,848 per full-time equivalent enrollment) to $4,489 in 2012 due to enrollment growth without a proportional funding increase. That trend reversed in 2013 as appropriations increased for five straight years, but have remained flat from 2017 to 2018. The report, the sixteenth annual state study for the State Higher Education Executive Officers Association, shows that educational appropriations grew steadily in the 1990s, but a recession in the early 2000s led to four years of declines. As the economy recovered, appropriations increased in 2006 and 2007 and reached a high in 2008. In 2018, states appropriated almost $2,000 less per student than they did in 2001 and $1,000 less than before the Great…

As the technology behind renewable energy continues to advance, recent research finds that the public sector plays an important role in catalyzing innovation. This can be seen in three main ways: by funding basic research on renewable energy in all 50 states; by partnering with cleantech startups; and by supporting cleantech clusters through networks, commercialization assistance, and access to capital. Taken together, this recent research suggests that public-sector partnerships can complement industry’s role in growing the green economy at the federal, state and local levels. At the federal level, one way that the public sector supports cleantech innovation is through funding for basic research, according to a new report from the National Resource Defense Council (NRDC). This is especially true at the Department of Energy, which was appropriated $2.7 billion in funds for clean energy research through its Office of Energy Efficiency and Renewable Energy (EERE) and the Advanced Research Projects Agency–Energy (ARPA-E). Of these funds, more than $1 billion went to the federal labs directly, while more than $860 million went to private sector and academic…

Concerns over national security have prompted the Treasury Department’s Committee on Foreign Investment in the U.S. (CFIUS) to force international investors to divest from two American tech startups, a move that will affect entrepreneurs and investors alike, according to a recent article by from Jeff Farrah of the National Venture Capital Association. Writing in TechCrunch, Farrah notes that historically CFIUS has targeted areas such as ports and real estate, but is beginning to focus its attention on how access to personal data can serve as a national security threat. Last year, Congress gave CFIUS new tools to scrutinize foreign investment in technology companies and in 2019, the committee has forced Chinese investors to divest from two data-driven startups that collect personal data: PatientsLikeMe, a healthcare IT company, and Grindr, an LGBTQ app. In particular, CFIUS was worried about the potential use of locational and other personal data to blackmail individuals with security clearances or intelligence agents. Farrah provides background on CFIUS, how it engages with technology startups, and what its recent actions mean for the field moving forward.

As the American population ages — by 2035, the country will have more people aged at least 65 than under 18 — so do the country’s business owners. Over the past few years, several studies have attempted to measure how many companies may transition ownership over the next decade, with estimates ranging as high as 10 million small businesses. These studies generally agree that while changes are on the horizon, few companies are even as prepared as having identified a potential successor. Colorado and Massachusetts are stepping into this planning void with a suggestion of their own: transitioning interested small businesses to employee ownership.

This week SSTI wraps up this year’s coverage of innovation-related initiatives covered in governors’ state of the state and budget addresses. This week Louisiana Gov. John Bel Edwards was the last governor to deliver a state of the state address in 2019, and he used his time to highlight the state’s surplus, a first since he has been in office. The governor is taking advantage of the new financial security to focus on funding for basics such as teacher pay and education among other things. He also voiced his support for raising the minimum wage and closing the gender wage gap in Louisiana: “I am also committed to ensuring all high school students have access to dual enrollment opportunities at our colleges. Students who participate in dual enrollment are more likely to meet college readiness benchmarks and boast higher college completion rates. It’s a chance for students to get real college experience before they get there. And it could even be a chance for Louisiana colleges to have an edge on keeping high-performing students in state after they finish high school.” “… I support a constitutional amendment to…

The trend of fewer, larger deals that emerged over the past few years continued through the first quarter of 2019, according to newly released data from PitchBook and the National Venture Capital Association. U.S. activity in the quarter included $32.6 billion of capital investment on 1,853 deals, making it the second-highest quarterly capital investment total in the last decade. The latest edition of Venture Monitor also features a new dataset on investment in female-founded companies, which accounted for 2.2 percent of total VC deal value and 5.5 percent of total VC deal count in the first quarter. The report notes that foreign investment and immigration are two major policy issues that will be critical to how 2019 shapes up. While deal count is down in general, angel and seed stage deal count has faced the greatest decline, which the report notes is in part because startups face steeper expectations for maturity from investors even at that stage, leaving capital being concentrated in fewer but more developed startups. The report also shows that life sciences deal count is off last year’s pace, but ticks higher as a percent of total deals. Globally,…

Seven regional innovation cluster (RIC) initiatives have each been awarded $500,000 from the U.S. Small Business Administration. Although the SBA has yet to publish an official press release indicating the release of the 2019 Regional Innovation Cluster awardees, SSTI identified the awardees through other sources, such as USASpending.gov and a review of local news media. Read on for more information on the program’s awardees.

Two community colleges in Florida became the winners of the 2019 Aspen Prize for Community College Excellence, which recognizes high achievement and performance among America’s community colleges. Winners were Indian River State College (IRSC) ($350,000) in Fort Pierce, Florida, and Miami Dade College ($350,000) in Miami; Odessa College and Palo Alto College in Texas and Pierce College in Washington were named as Rising Stars ($100,000 each). The $1 million shared prize is awarded every two years and focuses on student success, looking at institutional performance in four areas: student learning; certificate and degree completion; success after graduation in the labor market and in transfer to four-year institutions; and equity in access and success for students of color and low-income students. The prize finalists came from different contexts, from rural and urban areas, serving demographically different student bodies, and offering a mix of technical workforce and academic transfer programs, and each was noted as having designed thoughtful approaches. For example, Indian River was able to improve student success rates at scale and is likely to continue to…