SSTI Digest

Across the nation, R&D at colleges and universities plays an important role in generating promising inventions, training our STEM talent pipeline, and supporting regional economic development. An SSTI analysis of National Science Foundation data finds that higher-education R&D (HERD) is a multi-billion dollar industry that directly employs nearly one million personnel on projects and grants in the United States. However, the locations of R&D projects and personnel differ greatly by state and region. There are approximately 930,000 R&D personnel at colleges and universities in the United States, according to the NSF HERD Survey. Of this amount, roughly 17.5 percent are considered “principal investigators”, which means they are “designated by the institution to direct the R&D project or program and be responsible for the scientific and technical direction of the project.” The remaining 82.5 percent includes all other personnel, students, and post-docs paid from R&D accounts, regardless of the amount they received. Each individual counts only once, and if a person serves as a PI or co-PI on one project and as support on…

PitchBook and NVCA released the 2018 Q1 Venture Monitor this week, and the data show that 2017’s trends toward fewer, larger deals are only accelerating into the new year. First financings are over $5 million for the first time since Q3 of 2006, and the average angel and seed deals are at their largest sizes in at least a decade — largely due to investments under $1 million now accounting for just 39 percent of disclosed deals. Publicly-supported investors are leading the way in 2018 investments, according to the report, with Innovation Works (13), Elevate Ventures (11) and TEDCO (4) noted for angel/seed investments and Ben Franklin Technology Partners (7) and Connecticut Innovations (6) on the list for most active early stage investors. The report also indicates that while several notable IPOs have brought renewed attention to exits, the number of exits in 2018 is on pace to be slower than in 2017. Finally, the report’s data on funds closing in 2018 show that fundraising — particularly for funds over $50 million — is also occurring at a slower pace than in 2017.

Age is a predictor of entrepreneurial success – and not in the ways that many might expect – according to a new National Bureau of Economic Research article. While the venture capital community and the media sensationalize young entrepreneurs like Mark Zuckerberg, the authors of Age and High-Growth Entrepreneurship – Pierre Azoulay, J. Daniel Kim, Benjamin Jones, and Javier Miranda – find that older entrepreneurs have more success. In their analysis of multiple administrative datasets, the authors discover that the average founder age of a technology startup with more than one employee is nearly 42 years old, the average founder age of the highest growth technology startups is 45 years old, and the average founder age of technology startups with successful exits is nearly 47 years old. With similar findings across a variety of industries, geographies, and other subcategories, the authors suggest that the coverage of the millennial tech-entrepreneur has been overblown. Moving forward, these conclusions may prompt changes in how the economic development community designs and implements programs supporting entrepreneurship.  

Due to the effectiveness of employer-sponsored training program, U.S. states are working to build partnerships with industry partners that leverage public resources to help develop a 21st century workforce that addresses specific industry needs. Over the last month, partnerships have been announced between states and key industry leaders including AGCO, CVS, Tesla, and the U.S. Chamber of Commerce Foundation. Some of those collaborations are detailed below.

In reviewing data regarding the hundreds of TBED-related investment funds, SSTI found that 24 of them have invested in at least one dozen startups each over the past year.  The funds are characterized as economic development, university-centric, regionally focused, or impact oriented investment funds, incubators and accelerator programs located in the U.S. or Canada. Data the various funds provide to  Pitchbook is the source of the list below, ranked in order by activity level. Each organization may have used their public or university funding to support operations, due diligence or mentoring of portfolio companies and/or to support direct invest into startups.  University-centered activities in the list are denoted by an asterisk at the end of the entry.  Two of the most active 24 funds are nonprofit, impact accelerators supported in part by foundations and corporation philanthropy. It is important to note the investment totals below may be made in a broader geographic area than their specific town, region or even state/province. In all but a few cases, however, these organizations are significant policy instruments for increasing risk-tolerant…

In the immediate aftermath of the FY 2018 federal budget deal’s announcement, SSTI covered the increased funding for a few key programs, including Regional Innovation Strategies ($21 million) and the National Science Foundation ($7.5 billion). Today we reveal our full analysis covering several new funding line items and substantial funding increases for regional innovation organizations to consider. For even more information on science and innovation funding in the FY 2018 budget, review SSTI’s new federal science and innovation budget tracking report. The document, which can be found here, lists more than 220 line items across 19 agencies with funding levels from FY 2016-2018 and highlights programs of note. An snippet of the report can be found below. New Funding Dept. of Agriculture, Rural Development: Rural Broadband Pilot Program – $600 million – Congress provides substantial funding for a new initiative “closing the digital divide” with an explicit emphasis on prioritizing access and being open to any technology that can meet the broader goal. Dept. of Defense: Defense Innovation Unit Experimental (DIUX) – $23.…

While conventional wisdom suggests that university entrepreneurship efforts should focus on faculty spinoffs or student inventions, recent research highlights the importance of student talent in entrepreneurial ecosystems. In an effort to create employment opportunities in the startup space, several universities throughout the country are implementing programs that embed students into their local startup communities.   In Revisiting the Roles of the University in Regional Economic Development: A Triangulation of Data, authors Yas Motoyama and Heike Mayer argue that the teaching function of a university is overlooked in discussions on economic development. First, the authors use a regression model and find that the educational achievement of the general population was statistically significant in explaining differences in startup rates and the ratio of high-growth firms. They do not find evidence that the numbers of research-intensive universities and research expenditures are statistically significant. The authors supplement these conclusions by surveying and interviewing firms in three regions (Boise, Kansas City, and Portland) on how they interact with…

The U.S. Small Business Administration and Department of Treasury have released strategic plans through FY 2022. Similar to the new Department of Commerce plan, these documents do not mention programs and offices that the administration has marked for elimination, creating a lack of clear strategic direction for millions of dollars in entrepreneurship and innovation funding that Congress continues to appropriate and direct. Specific areas of concern at these agencies are the SBA’s Regional Innovation Clusters and Growth Accelerator programs and the Community Development Financial Institutions Fund.

In a previous Digest, SSTI discussed the positive impact that community banks have had on small business lending activity and economic growth in communities across the country since the Great Recession. In this article, SSTI shares two studies on the existing roadblocks and pessimism faced by minority small business and entrepreneurs as they seek financing through banks. In a recent study – Financing Patterns and Credit Market Experiences: A Comparison by Race and Ethnicity for U.S. Employer Firms – published the Small Business Administration’s Office of Advocacy, Alicia Robb examined racial and ethnic differences in financing patterns, access to capital, and credit market experiences among U.S. employer firms. After nearly a decade since the Great Recession, the researcher found that minority-founded firms face ongoing financing challenges including issues related to amounts received as compared to requested, and avoidance of financing. Robb reports that Hispanic and black Americans are underrepresented in business ownership compared with their shares of the general population. And, as the figure at the right shows, black…

The equal-weighted internal rate of return (IRR) for the venture capital (VC) industry was 6.6 percent between Q2 of 1999 and Q2 of 2017, according to the 1Q 2018 PitchBook Benchmarks. Over that 18-year timespan, several other asset classes – such as private equity (10.5 percent), debt financing (10.1 percent), fund-of-funds (8.1 percent) and several stock market indices – significantly outperformed the VC industry’s equal-weighted IRR. The report also highlights that increased fundraising by a new class of mega-VC funds ($1 billion or more raised) has led to larger individual rounds of investments, at faster rates, than ever previously recorded. The average VC fund that was raised in the early 2000s called down less than 60 percent of capital commitments by its third year, but that has steadily increased to roughly 70 percent in more recent years.   The report also provides users with historical data on IRR that compares venture capital and private equity to broader asset classes (e.g., the S&P 500, Russell 3000, fund-of-funds).  To learn more about the potential trends of 2018, read SSTI’s special two part series that…

With final passage and signage pending at the time of publication, the federal budget for FY 2018 provides relatively strong support for innovation economies. The Regional Innovation Strategies program is funded at $21 million, MEP at $140 million and the National Science Foundation at $7.8 billion, increases for all organizations. Other notable innovation programs receiving at least level funding are SBA’s cluster and accelerator programs, DOE’s ARPA-E, NASA science and the National Institutes of Health. Numerous stakeholders weighed in with Congress to preserve these priorities over the administration’s FY 2018 request — and FY 2019 faces the same challenges.  if("undefined"==typeof window.datawrapper)window.datawrapper={};window.datawrapper["6NIEn"]={},window.datawrapper["6NIEn"].embedDeltas={"100":432,"200":344,"300":327,"400":300,"500":300,"700":300,"800":300,"900":300,"1000":300},window.datawrapper["6NIEn"].iframe=document.getElementById("datawrapper-chart-6NIEn"),window.datawrapper["6NIEn"].iframe.style.height=window.datawrapper["6NIEn"].embedDeltas[Math.min(1e3,Math.max(100*Math.floor(window.datawrapper["6NIEn"].iframe.…

An earlier SSTI analysis detailed the Bureau of Labor Statistics labor force participation projections, revealing a continuing downward trend in the number of workers despite a growing population. Additional research papers released in February from economists at the University of Maryland as well as the Kansas City Federal Reserve Bank explores the reasons behind the trend, finding that trade and robots have had a significant impact, and suggests that some prime-age workers may not be coming back.