SSTI Digest

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.

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.”

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.

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.

The Oakland-based Kapor Center, a nonprofit focused on leveling the playing field in tech, has announced the Tech Done Right (TDR) Challenge with funds from the Bill and Melinda Gates Foundation. With an emphasis on growing opportunities for women and people of color in the sector, the challenge will fund organizations with innovative solutions to building diverse, inclusive, and thriving tech ecosystems. Awardees will receive one-time grants beginning at $100,000. The challenge is now open and accepting applications here, with a submission deadline of Tuesday, May 7.

While the overall Chinese economy may be facing a slowdown, the venture capital (VC) market continues to report strong growth and became the second largest VC market by total capital invested in 2018, according to a new report from PitchBook. The report, Venture Capital in China, highlights the growing prominence of Chinese startup capital with nearly 30 percent of global VC directed into Chinese startups in 2018.

A recent article from Pew Charitable Trusts shows how routine evaluations can help states make tangible improvements to their tax incentives. According to Pew, 30 states now have laws requiring evaluation of the incentives, and recent examinations in several states included key components that helped to inform the results. When analyses started with an effort to determine the specific goals of each incentive, their effectiveness was more easily determined. High-quality evaluations also measured economic impact. For instance, Rhode Island’s evaluation of the Motion Picture Production Tax Credit showed that revenue gained would never match the cost of the program.

Pew recommends that states should create processes to regularly study tax incentives, produce high-quality evaluations that draw clear conclusions, and use the findings to inform policy decisions. Pew found that when policy makers have high-quality evaluations, they use them, which may mean a decision to end a program that is not performing as expected.

University-based economic development practitioners seeking to improve their relationships with urban areas have a new resource guide available to them, thanks to research from the Thriving Cities Lab at the University of Virginia’s Institute for Advanced Studies in Culture. The lab offers guidance for colleges and universities and in its Field Guide for Urban University-Community Partnerships, authors Joshua Yates and Michaela Accardi conduct three interrelated analyses.  First, their report looks at 100 urban colleges and universities with a focus on how they interact with their home cities. Second, they cluster universities into five-distinct groups based on the types of strategies and activities they employ related to community partnerships. Based on this analysis, the authors highlight best practices at universities across the country, with a focus on specific outcomes, challenges experienced, and lessons learned, and conclude with a stepwise framework to assist colleges and universities, as well as recommendations for practitioners to make the most of these findings.

Innovation initiatives are seeing increased funding in some states as legislatures across the country begin to finalize budget bills and other legislation. SSTI continues to monitor these developments and this week we cover budget bills in Idaho that saw small increases to the Manufacturing Extension Partnership (MEP) program, as well as increases in the Small Business Development Center (SBDC) and STEM Action Center, and new funding for a computer science initiative. South Dakota will see an increase in funding for the Governor’s Office of Economic Development and West Virginia passed bills creating an SBIR/STTR matching grant program, support for community and technical college tuition assistance, expansion of broadband service, and other innovation-related initiatives in its budget that passed earlier in March.  

Idaho

Idaho Gov. Brad Little recently signed several appropriations bills that affect the state innovation economy-focused initiatives, including:

The U.S. unemployment rate is near its 50-year low, but the portion of the population in the labor force is also near a 40-year low. Because business expansion is difficult during periods of extremely low unemployment, a key economic development question is how much the labor force participation rate may increase — bringing more potential employees to the job market and easing the hiring crunch for employers.

An SSTI analysis of American Community Survey (ACS) data from 2013-2017 suggests that there may not be much potential growth for the labor force, at least among those in the prime working ages of 25-54. The participation rate for this group is approximately 82 percent across the country, according to the analysis, and only an additional one percent consider themselves willing to work in the near future (e.g., after a “temporary illness” or have been looking too long to counted as unemployed).