SSTI Digest

Kansas City is leaving millions of dollars on the table, funding that could fuel early-stage startups that are the key to creating jobs and economic growth, according to a new report from KCSourceLink and its partners. The report will serve as a roadmap to a new capital initiative led by the Kauffman Foundation; several regional economic and community development organizations; and, other stakeholders in the Kansas City metro region. The new initiative – We Create Capital – aims to increase the availability of microfinance, angel, seed stage, and venture capital for startups by creating better connections between investors, attracting venture capital to the region, and cultivating a deeper talent pool of people to manage venture capital funds. The plan also calls for increasing awareness about available startup funding sources including federal, state, local, and private sources. Read the strategy...

Texas Gov. Greg Abbott has signed legislation that (SB 632) establishes a new Governor's University Research Initiative and ends the state's Emerging Technology Fund (ETF). Created in 2004, the ETF provided financial support for research partnerships at private companies and state universities through equity investments and grants. The new initiative will not take equity in companies, but instead will focus on university research and commercialization grants. A portion of the funds will be used to fund the recruitment of Nobel Prize-winning researchers and members of the National Academies. The approved FY 2016-17 budget allocates $40 million of the ETF's remaining funds for the initiative. Read the governor's announcement...

In 2009, only 9.5 percent of venture-backed startups had a female founder, according to a research by CrunchBase. By 2014, that figure had almost doubled, reaching 18 percent. During that period, the absolute number of companies with a female founder quadrupled. More women are also seeking early stage funds. The University of New Hampshire's Center for Venture Research (CVR) reports that more than a third of entrepreneurs seeking angel capital in 2014 were women. Despite this progress, women entrepreneurs remain underrepresented in high-tech entrepreneurship. A recent academic article found that women often have to rely on their technical resumes and personal referrals to overcome the biases of investors. Gené Teare and Ned Diamond of CrunchBase drew on the organization's database of venture investment to examine gender representation in the 14,341 U.S.-based startups that received funding during the 2009-2014 period. The authors note that CrunchBase did not track the gender of founders prior to March, and thus had to retroactively fill in the missing data. Overall, about 15.5 percent of all U.S. companies that received venture capital during that period…

Part two of a 3-part series: Part one, Part three The first installment of SSTI’s series on basic research discussed the changing nature of federal research and development spending, namely that basic research as a share of federal spending on R&D has increased over time while making up a relatively small proportion of total spending compared to development and applied research. Furthermore, U.S. spending on research and development has failed to keep up as a share of total spending. Since peaking in 2009 with the first stage of funding from The American Recovery and Reinvestment Act of 2009 (ARRA), research and development funding at the federal level has begun to decrease. Recently released data from the National Science Foundation (NSF) now shows funds obligated by federal agencies for research and development and R&D facilities dropped from $141 billion in FY 2012 to $127 billion in FY 2013, a decrease of 9 percent, though increases are projected for FY 2014. Writing in The New York Times, journalist Eduardo Porter offers deeper insight into federal spending on research and development, largely echoing many of the…

This week, the U.S. Department of Commerce’s Economic Development Administration (EDA) announced approximately $5 million in total funding for the 12 recipients of the 2014 Science and Research Park Development Grants, used for feasibility and planning for the construction or renovation of science or research parks. These grants, alongside i6 Challenge grants and Cluster Grants for Seed Capital Funds, comprise the EDA’s Office of Innovation and Entrepreneurship’s (OIE) Regional Innovation Strategies (RIS) program, an initiative designed to advance innovation and capacity-building activities in regions across the country. Additional information on the 2014 Regional Innovation Strategies program competition awardees can be found here. The 2014 Science and Research Park Development Grant awardees include: Ann Arbor SPARK, Ann Arbor, MI: $247,170 for the Plan for a Connected and Autonomous Vehicle Development Center; St. Louis Economic Development Partnership, St. Louis, MO: $500,000 for the Global Plant Science Quad Master Plan; California Polytechnic State University, San Luis Obispo, CA: $498,286 for Planning to support expansion of the Cal…

In 2014, 25 percent of all angel investments supported seed and startup stage businesses, down from 45 percent in 2013, according to the year-end report by the University of New Hampshire's Center for Venture Research. Angels, however, remain a key group in early stage financing, participating in 46 percent of all early stage deals. Angels invested $24.1 billion in 2014, down 2.6 percent from the previous year, though both the number of investors and the number of angel capital recipients had modest increases. Read the full report...

Over the past few months, SSTI has followed proposals issued by governors in their budget requests, State of the State Addresses, Inaugural Speeches and other events. Now that many state legislatures have begun approving budgets, the SSTI Digest will check on the status of these proposals, and examine the state of technology-based economic development funding in the states. This week, we review actions in Tennesse and Nebraska. TennesseeGovernor Bill Haslam signed a $33.8 billion FY16 budget (HB 1375) without the $2.8 billion the governor had proposed for the Insure Tennessee health insurance program. The budget, however, does provide $114.8 million for the Department of Economic and Community Development (DECD), including $30 million for TNInvestco tax credits. Within the DECD budget, Business Development programs are allocated $10.8 million from the state's operating budget, while Innovation Programs would receive $237,000. Also in the DECD operating budget, $1.6 million would be available for Economic Development District Grants, and $19 million would be available for Community and Rural Development. Additional funding for these programs is provided…

Funding obligated by federal agencies for research and development (R&D) and R&D plant (facilities and fixed equipment) dropped from $141 billion to $127 billion (9 percent decrease) in current dollars from FY12 to FY13, according to a new National Science Foundation (NSF) InfoBrief. NSF researchers found that federal funding for research dropped by 4 percent; support for development efforts dropped by 14 percent; and, R&D plant funds were reduced by 11 percent. They also found that basic research saw a decline of 4 percent ($1 billion in current dollars) and applied research saw a decline of 5 percent ($2 billion). A $10 billion reduction (14 percent decrease in funding) in R&D and R&D plant obligations by the Department of Defense was the driving force behind the overall drop in federal funding. However, the Department of Health and Human Services ($2 billion decrease), NASA ($293 million decrease), NSF ($214 million), and the Department of Energy ($111 million) also reported reductions in their obligations for R&D and R&D plant funding. The author projects that R&D and R&D plant funding are estimated to rise 3 percent ($4 billion in…

The Canadian Securities Administrators (CSA) announced that securities regulators in five Canadian Provinces have agreed to CSA Notice 45-316 – a common set of rules that will allow startups to raise up to $500,000 CD (approximately $401,600 USD) per year from unaccredited investors via authorized Canadian-based funding portals. With the passage of the new rules, the provinces of British Columbia, Manitoba, Québec, New Brunswick and Nova Scotia join Saskatchewan as provinces that allow non-accredited investors to make equity investments in startups and other small businesses, according to techvibes.com. Under CSA Notice 45-316, each investor is limited to investing a maximum of $1,500 CD (approximately $1,200 USD) per investment. The rules include a unique feature that allows investors to rethink their investment and withdraw within the first 48 hours if any changes are made to the offering document. However, unlike shares in public companies, these crowdfunded securities will not be freely tradable when issued. They can only be resold during another round of crowdfunding offering or four months after the issuer becomes a reporting issuer. Startups can only…

Part one of a three part series: Part two, Part three Innovation in the United States, once a hallmark of economic success, finds itself resting on an increasingly weak foundation, according to an article in The New York Times.  The author, Eduardo Porter, suggests that two trends – increased international competition and a stagnant R&D-to-GDP ratio – pose key challenges for the U.S. First, government funding for basic research continues to fall and is politically vulnerable. Second, evidence suggests that American corporations are walking away from basic science as well. Each of these challenges, Porter notes, bodes poorly for American progress.    This article is not the first to lament the changes in how research and development is funded in the United States. In The Future Postponed: Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit, the authors, MIT faculty members from a variety of fields, suggest that a lack of basic research investment threatens U.S. innovation. This report, which SSTI previously covered, highlights a national decline in basic research investment as well as numerous examples of…

Yesterday, the U.S. House Appropriations Committee approved a Commerce, Justice and Science appropriations bill that includes $11 million in funding for the Regional Innovation Program.  This action marks the first time the House bill has included funding for the program. The Regional Innovation Program is SSTI’s top legislative priority. SSTI thanks all who have expressed support for the program. The Digest will report more when the full House acts and the Senate proposal is released.

Massachusetts needs an advanced manufacturing strategy, preferably one based on regional public-private consortia, according to a new report from the MIT Industrial Performance Center. In Strengthening the Innovation Ecosystem for Advanced Manufacturing: Pathways & Opportunities for Massachusetts, the group recommends that the state look to the federal Institutes of Manufacturing Innovation to develop its own manufacturing infrastructure. The state could also benefit from a systematic effort to inform startups about the early stage prototyping and piloting capabilities of small manufacturers. Read the report...