SSTI Digest

After a down year for both the number of venture capital (VC) deals and the total dollars invested in U.S.-based startups, analysts remain split on whether 2017 will be a continuation of the downward trend or a rebound year. Those bullish on the market point toward strong fundraising totals in 2015-2016 and a likely uptick in the number of initial public offering (IPO) market. Whereas, those bearish on the VC market are concerned about a congested industry.

2016 by the Numbers

PitchBook reports that VC firms invested just $68.3 billion via 7,966 deals with U.S-based startups in 2016 – a nearly 14 percent decrease from the previous year’s record high of $79.2 billion. This significant decline in VC activity returns total capital invested to levels comparable with 2014, while deal count will likely be at its lowest point since 2012.

This week, we take a look at the top SSTI Weekly Digest stories from 2016 and give you an idea of what to look for in the coming months.

Venture capital market stories are always popular with our readers, and this year you found the January story VC Trends to Look for in 2016 particularly interesting. If you liked that one, you may have also read one of the follow ups that ran later in the year, when Companies Receiving VC Funding Declined for 5th Straight Quarter, or you may have turned to the picture of the global VC market in the story that ran the following week. And you’ll want to check back for more information on what is happening with VC in 2017 in the forthcoming January and February issues.

The National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) becomes the eleventh institute in the Manufacturing USA network, U.S. Secretary of Commerce Penny Pritzker announced last week. The $70 million award marks the first institute with a focus area proposed by industry and the first funded by the U.S. Department of Commerce (DOC). The institute will focus on the complex manufacturing process used to produce treatments for conditions such as cancer, autoimmune disorders and infectious diseases and also seeks to develop manufacturing capabilities for a quick response to pandemics and other biological threats. Each of the institutes has a unique technological concentration and is designed to accelerate U.S. advanced manufacturing as a whole.

Last week, Congress passed the American Innovation and Competitiveness Act (S. 3084), which reauthorizes the America COMPETES Act. The Act does not include any funding levels for any of the programs or agencies reauthorized in the bill but does reinforce Congress’s support for research and makes adjustments to some programs. One crucial component of the bill adjusts the cost share requirement for NIST’s Hollings Manufacturing Extension Partnership to 1:1 throughout the new authorization period. In a press release, Senator Cory Gardner (R-CO) emphasized that the act will also provide agencies more leeway to adjust EPSCoR solicitations and encourage NSF to expand I-Corps through agreements with other federal agencies, state and local governments, and follow-on grants.

The National Institute of Standards and Technology (NIST) is requesting feedback on a 2017 funding opportunity that will allow the Hollings Manufacturing Extension Partnership (MEP) Centers and their partners to add capabilities to the MEP program, including projects to solve new or emerging manufacturing problems.  Small and medium-sized U.S. manufacturers are encouraged to send information about their needs in four areas: critical manufacturing technologies; supply chain; potential business services, including information services; and other technologies or services that would enhance global competition. NIST also requests recommendations for other critical issues that it should consider in strategic planning for future investments.

Gov. Andrew Cuomo proposed a new initiative this week to grow the life science research cluster throughout the state, pledging $550 million through a variety of programs including tax incentives, state capital grants, and investment capital with an expected match of $100 million from private sector partnerships for operating support.

The life science initiative includes $250 million in tax incentives for new and existing life sciences companies that are expanding research and development.  Under this program:

Congress approved the National Defense Authorization Act for FY 2017, which now awaits the President’s signature. The bill includes several significant provisions for the innovation community, including:

Megatrends like ageing societies and digitization are expected to shape future research and development agendas across the globe, according to a recent report by the Organisation for Economic Co-operation and Development (OECD).  A broader distribution of science, technology and innovation are expected around the world due to the fast pace of economic development in emerging economies, and global competition for talent and resources will most likely intensify according to the OECD Science, Technology and Innovation Outlook 2016. Such megatrends, and others highlighted in the report, require policy responses that will likely face major constraints, including high public debt, international security threats, a possible erosion of social cohesion and the rise of influential non-state actors, the report maintains.

To ensure economic growth and the success of the industries of tomorrow, the U.S. government needs to expand federal support for research and improve the efficiency of the process of federally funded knowledge leading to U.S. innovation and jobs, according to a recently released study by the Information Technology and Innovation Foundation (ITIF) and the Brookings Institution’s Bass Initiative on Innovation and Placemaking. In Localizing the economic impact of research and development: Policy proposals for the Trump administration and Congress, ITIF and Brookings suggest 50 policy proposals that the new administration and Congress can undertake to bolster tech transfer, commercialization, and innovation.

Despite the economic recovery since the Great Recession, the U.S. remains in a long-term decline in productivity, according to a pro bono study by Gallup commissioned by the U.S. Council on Competitiveness for the council’s 30th anniversary.  The study, No Recovery An Analysis of Long-Term U.S. Productivity Decline, finds that since 2007, U.S. GDP per capita growth has been one percent, and Gallup Chairman and CEO Jim Clifton warns that “America is dangerously running on empty.” Problems with the economy did not start with the Great Recession, but have been prevalent for decades, the report contends.  While the tech sector, professional services and top universities are “world class,” the rest of the economy – especially the healthcare, education and housing sectors – act as drags and expenses with little value in return.

The 21st Century Cures Act was signed by President Obama on Tuesday and is broadly intended to facilitate the research, development and transfer of medical discoveries in order to better-address diseases affecting American people. While the bill has received mainstream coverage for its bipartisanship – the core authors were two Democrats and two Republicans – and billions in new research spending – more than $5 billion in authorizations – the text also contains potentially significant changes for federally-supported medical research policy.

Funding

The bill is achieving significant attention for its appropriation of new research dollars. The National Institutes of Health will receive $4.8 billion over 10 years, distributed through four innovation projects: precision medicine, brain research, cancer research and adult stem cells. The Food and Drug Administration is appropriated an additional $500 million of funding over 10 years, primarily to accelerate drug and device access.

Nearly half of the U.S. states and the District of Columbia saw a 10 percent or greater increase in higher education R&D expenditures from FY 2010 to FY 2015 with five of those states (Connecticut, Georgia, Massachusetts, Nebraska, and Utah) seeing at least a 20 percent change, according to the National Science Foundation’s (NSF) Higher Education Research and Development (HERD) survey for 2015. Between FY10-15 overall U.S. research and development (R&D) spending at U.S. universities grew 12.1 percent, from about $61.2 billion to $68.7 billion.