SSTI Digest

Over the past few weeks, Delaware, New Jersey, and Tennessee have proposed, announced or expanded investment tax credit programs to spur job creation and innovation. In Delaware, Gov. John Carney signed the Angel Investor Job Creation and Innovation Act, while Tennessee is expanding its Angel Tax Credit criteria, and New Jersey is proposing establishing innovation zones and tax credits for high-tech businesses within those zones.

Although SBIR/STTR matching programs have existed at the state and regional levels for years, Montgomery County, Maryland, recently launched the country’s first county-based match program. The county council overwhelmingly approved the program, which will target Montgomery County-based small businesses receiving Phase I or Phase II SBIR/STTR grants through the National Institutes of Health (NIH), whose main offices are also within the county. Subject to appropriations, Bill 41-17 awards will be valued at up to 25 percent of a Phase I grant ($25,000 cap), or 25 percent of a Phase II grant ($75,000 cap). Grantees under this program may receive one county matching grant each year, up to five total grants. Previous research from SSTI found that the Washington D.C. metropolitan area, of which Montgomery County is a part, averaged the third most SBIR/STTR awards of any region over the five-year period from 2013 to 2017. The state of Maryland ranked fourth among all states in average SBIR/STTR awards during that time.  

The Senate Committee on Appropriations this morning advanced a funding bill that includes $25 million for Regional Innovation Strategies — $4 million more than the current funding round. Commerce, Justice and Science Subcommittee Chairman Jerry Moran (R-KS) spoke to the importance of funding scientific innovation in a statement, and the bill strongly supports many science-related activities. The bill would provide level funding of $140 million for MEP; increase NSF to $8.1 billion (nearly $100 million less than the House bill), with more for research, STEM education and EPSCoR; and, NASA would see a nearly $600 million increase, including $179 million more for science and $10 million more for education. Not all innovation programs would see gains in the Senate bill. NIST would see cuts of $161 million and NOAA of $426 million. Further, while the Census would see a gain of nearly $1 billion over last year, the office is specifically directed to spend less than it did on the 2010 census. In real dollars, level funding the census relative to a decade ago is an approximately 17 percent cut, according to inflation data from the Bureau of Labor Statistics. …

The U.S. biosciences industry directly employs 1.74 million people and indirectly supports $2.0 trillion in economic output and roughly 8 million jobs nationwide, according to "Investment, Innovation and Job Creation in a Growing U.S. Biosciences Industry," a new report by TEConomy Partners on behalf of the trade association BIO. The report, released at BIO’s annual conference last week, finds that biosciences venture capital investment is reaching new highs, while overall innovation ecosystem strength and patent activity is bolstered by increasing NIH budgets and growth in academic R&D. The report’s authors also take an in-depth look at the industry, its components, its contributions to the national economy, and the state and metropolitan areas where it is most concentrated.  

USTAR hosted the Utah Technology Innovation Summit last week to celebrate the state’s achievements in the field. The event featured strong pro-science and innovation statements from a variety of politicians and awards to teachers and scientists. During the opening, USTAR Director Ivy Estabrooke was named the governor’s science advisor (pictured at right). The summit was held in the same venue as SSTI’s 2018 Annual Conference.  

A well-known fact about the venture capital industry is the notorious underrepresentation of women partners in the firms.  That could change, suggests research presented in the NBER working paper And the Children Shall Lead: Gender Diversity and Performance in Venture Capital if male VC partners spend more quality time with their daughters.  Deborah Krueze writes in her NBER Digest article that the authors of the research, Paul A. Gompers and Sophie Q. Wang, suggest that the proportion of daughters among a VC senior partner’s offspring is correlated with their firms hiring more women VC partners. Firms whose partners had more daughters also performed better than their competitors, the research finds. Krueze writes, “At firms whose senior partners had more daughters than sons, the female hiring rate was 11.87 percent; the rate was 9.78 percent at firms where senior partners had equal numbers of daughters and sons, and 8.68 percent where they had more sons than daughters.” On the earnings front, Krueze summarizes the research by explaining, “For all VC firms in the researchers' sample, the probability that a deal resulted in an…

EDA’s Regional Innovation Strategies program — which makes i6 challenge and seed fund support awards — has released its notice of funding opportunity for FY 2018. Applications are due August 29. SSTI hosted a free webinar featuring EDA’s Office of Innovation and Entrepreneurship on June 14.* EDA has $21 million available to award in 2018, thanks to the support of a bipartisan group of congressional champions and the outreach of organizations throughout the country coordinated by SSTI’s Innovation Advocacy Council. The FY 2018 notice of funding opportunity is largely similar to the FY 2017 notice, but i6 awards can now request a maximum of $750,000 in federal support. Of course, all potential applicants are encouraged to review the opportunity in detail. The staff of EDA’s Office of Innovation and Entrepreneurship will participate in a webinar with SSTI the second week of June to discuss the notice, changes from last year, and important advice on completing an application. SSTI has hosted many past webinars on this issue, including one last summer featuring application tips from award winners. * Updated July 18…

NIST’s Manufacturing Extension Partnership program launched a new Policy Academy focused on manufacturing this week. Funded by NIST MEP and organized by SSTI and  the Center for Regional Economic Competitiveness (CREC), the Policy Academy is designed to help states build upon existing strategies, leverage available resources, and spur creative new ideas about how to address major challenges or leverage opportunities around the manufacturing sector. Through a customized and collaborative experience, the Policy Academy will help teams of four-to-ten members representing a cross-section of policymakers and practitioners from relevant state agencies and stakeholder groups to identify best practices, partnerships, and policies to strengthen the manufacturers in their states. The request for proposals, which can be downloaded here, covers the first of two academy cohorts, with up to four states selected. The first cohort will be from states selected from the 15 states that are not holding gubernatorial elections in 2018 (Delaware, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, New Jersey, North Carolina, North Dakota, Puerto Rico, Utah, Virginia, Washington, and West Virginia). The second cohort, in 2019-2020, will be selected from the remaining states. For additional information regarding eligibility and how to apply, contact Jonathan Dworin at SSTI.

Six years after the passage of the Jumpstart Our Business Startups Act of 2012 (JOBS Act), SSTI continues to examine the impact that the legislation has had on startup capital. In previous weeks, SSTI has looked at Regulation A+ offerings and equity crowdfunding (also known as regulation crowdfunding or Reg CF). This week, we look at SAFEs (simple agreements for future equity), an early stage, equity agreement that has gained  popularity due, in part, to the JOBS Act streamlining companies’ ability to raise capital privately. A future story will focus on their use for TBED organizations. At its core, a SAFE is an investment contract between a startup and an investor that gives the investor the right to receive equity from the company on certain triggering events. SAFEs are typically offered during the seed financing rounds as an alternative to the convertible note. This article will describe SAFEs in more detail and highlight positives/negatives from both the company and investor perspectives. What are SAFEs? Introduced in 2013 by Y Combinator and originally drafted by Carolynn Levy, a Y Combinator partner, the convertible agreement is intended…

Noting that we have reached a point in time where STEM “influences every aspect of our education, work, and community life,” STEMconnector, a professional services firm, has released a new report that examines the current state of the field, identifies gaps and makes recommendations for action and investment. State of STEM highlights “five critical gaps” in the STEM workforce: a fundamental skills gap; belief gap; postsecondary education gap; geographic gap; and, demographic gap. The interaction of these gaps throughout the STEM ecosystem creates an overall opportunity gap for students and job seekers, a workforce development challenge for educators and a business imperative for employers, the report states. Closing the gaps will require coordination of practice, funding and policymaking, and the report goes on to make recommendations that are intended to work together. Some of the recommendations seek to enhance organization and professional practice and include exposing young people to STEM routinely, equipping students and job seekers with navigation resources, and assessing skills and credential requirements. Other solutions that focus on…

Congress so far has ignored administration budget requests that call for reducing U.S. investment in research and development.  Science and innovation advocates interpret the legislative branch’s decision as good for many reasons. Authors Nicholas Bloom, Charles I. Jones, John Van Reenen, and Michael Webb add another reason in their NBER working paper Are Ideas Getting Harder to Find? They find U.S. productivity, measured as cost per meaningful innovation across a number of key sectors, is decreasing at an average rate of 5.3 percent annually. Prevailing economic growth projections may be optimistic, they conclude, because the projections do not incorporate ever-increasing prices for R&D outcomes. Steve Maas summarizes the phenomenon in the aptly titled NBER Digest article “Bang for the R&D Buck is in a Long Steady Decline.” The working paper demonstrates that for computer chips, research productivity has dropped at an annual rate of 6.8 percent since 1971. Research productivity to sustain modest improvements in major agricultural crops required to support an ever-growing world population, such as corn, soybeans, wheat and cotton, has…

Myriad data point to a decline in the number of new American business starts, but there have been fewer indicators of whether this overall trend was also true for firms with high growth potential. Recent research now provides evidence that these high growth firms are also becoming rarer. To the extent that high growth firms occur with less frequency, equity investors will have a harder time making successful investments that achieve positive returns — a reality that seems to be indicated by the several-year trend toward a lower rate of exits for venture capital funds. A 2016 study by Decker et al. looked at changing rates of growth among firms that were growing quickly (90th percentile), in the middle (50th percentile) and slowly (10th percentile) from 1979-2012. Their results indicate that firms at the top were growing much faster than firms in the middle, and that firms in the middle were growing much faster than firms at the bottom in 1979. By 2012, these differences had diminished dramatically. Figure 1, from the authors, compares the differences between the percentiles for both public companies overall and tech companies specifically, showing this decrease in…