SSTI Digest

More than $4.7 billion of venture capital was invested in 524 private companies, according to Growthink Private Equity Funding Reports for the Fourth Quarter 2002. Companies securing investments numbered 30 less than the previous quarter.

Among major metropolitan areas, the San Francisco Bay Area continued to lead the nation with $1.43 billion in investments, or 30.5 percent of the nation's total, the Growthink data shows. Boston followed with $460.6 million (9.8 percent) and 58 deals, and Washington D.C., with 27 deals, was next at $274.3 million (5.8 percent). Dallas was the fourth leading metro area, where 15 companies raised $204.5 million.

The U.S economy experienced a turbulent year in 2001. However, small businesses demonstrated resilience and strength according to the Small Business Economic Indicators for 2001, a report released by the SBA Office of Advocacy. The February 2003 report states that although economic activity was sluggish in the months leading up to September 2001, economic output grew for the year as a whole.

In comparison to 2000, small businesses seemed to hold steady in 2001. The levels of employer firms and the self-employed were relatively consistent with previous year totals. While employer firm births showed a slight downward movement during the year and firm closures increased slightly, the most alarming number was the rise in business bankruptcies.

Congress Finished FY 2003 Budget Last Night

Congress wrapped up the Omnibus Appropriations Bill last night before recessing for the holiday weekend. The timing of the document's online release did not allow a complete review of the impact for tech-based economic development groups for today's Digest. Thanks, though, to assistance from the American Society of Mechanical Engineers, Association of American Universities and the Modernization Forum, SSTI does have numbers for selected elements of the Department of Commerce and the Small Business Administration.

Within the past hour, SSTI has learned that Congress zeroed out the $3.5 million for two programs that supported state SBIR/STTR technical assistance efforts. The omission of any mention in the FY 2003 Omnibus Appropriations Conference Report of funding for the Federal and State Technology Partnership (FAST) and Rural Outreach Program (ROP) was not a mistake in the draft as originally thought by the programs' proponents.

In FY 2002, FAST provided $100,000 matching grants to 27 state SBIR outreach and assistance programs. The ROP, which is targeted to those states that historically have under performed in the SBIR program, has provided support to 25 states since its creation only three years ago. Lists of recipients for both programs are available at: http://www.sba.gov/sbir/indexfast.html

In SSTI's final look at the 2003 State of the State Addresses and Inaugural Addresses, we find the importance of building technology-based economies continues to be emphasized by governors across the country, despite – or because of – the down economy. Below are excerpts from speeches given in Michigan, Minnesota, Oklahoma, Rhode Island and Texas.

Michigan

Governor Jennifer M. Granholm, State of the State Address, Feb. 5, 2003

State budget gaps have grown by 50 percent in the last two months and state policymakers will work to resolve unprecedented budget shortfalls for the next 15 months, according to findings from the latest budget survey released by the National Conference of State Legislatures (NCSL).

Based on information collected from legislative fiscal directors in late January 2003, NCSL reports that two-thirds of the states must reduce their budgets by nearly $26 billion between now and June 30, which ends the current fiscal year in most states. In November, when NCSL issued its last report, states projected a cumulative gap of $17.5 billion. States already had addressed a $49.1 billion shortfall as they crafted their fiscal year 2003 budgets.

With nearly $1 billion in federal R&D funding proposed for the new Department of Homeland Security, many states, universities and companies are exploring ways to be actively involved as R&D partners. Already home to several military and intelligence research activities, with proximity to Washington, D.C. in its favor, Virginia recently announced an effort to further strengthen its competitive position in the funding race.

Last Friday, Governor Mark R. Warner announced the creation of the Virginia Institute for Defense and Homeland Security (IDHS), a university and industry research consortium dedicated to delivering solutions to support U.S. homeland security and defense objectives. More than 20 companies have already signed on as founding members to work with the 12 Virginia universities in the consortium.

Governor Tom Vilsack has announced a plan to invest $50 million into the creation of a life sciences initiative to help establish Iowa as a leader in the life sciences. Developed with the Regents Universities, Iowa Business Council and leaders in Iowa's biotechnology industry, the biotech plan's success hinges on a three-part strategy:

NJCST Out, Cancer Research In

Tight fiscal times are the norm for state and local governments across the country. While the federal government can ponder record-busting deficits for FY 2004, declining revenues are forcing state leaders to take scalpels, knives, axes and in some cases even chain saws to their budgets. Most budget proposals for 2004 include some sort of revenue enhancement measures – new taxes, eliminating loopholes and credits, increasing user and service fees – but none of the states are relying completely on increasing revenues to deal with their shortfalls. There are also spending reductions.

Governor John Baldacci used his February 5 budget address to outline a proposal to float a $70 million economic development bond, the majority of which would be dedicated to research and development projects. Citing the successful results of several R&D bond packages approved by voters over the past five years – with last summer's $35 million bond being the most recent – Gov. Baldacci wants the state to take advantage of historically low interest rates and the state's good bond rating to commit an additional $43 million for R&D projects.

The Governor says the funds will support the joint biomedical research efforts of the University of Maine System, Jackson Laboratory, and the other biomedical research organizations around the state. Other funds will continue research in natural resource based industries in the university system.

Rural economic development policies must build upon the natural assets of rural America, advises the latest issue brief from the National Governors' Association (NGA) Center for Best Practices. Innovative State Policy Options to Promote Rural Economic Development suggests rural strengths include natural resources, local business networks, and an under-exploited entrepreneurial culture.

Rural economic development presents distinct challenges as well, including poor links to markets, geographic isolation, a lack of infrastructure and tools for business development and growth, and the out-migration of human capital. The recent economic downturn in the U.S. also has hit rural areas harder than urban and suburban areas, intensifying the challenges for rural communities.

To help formulate the best approach for the state to deploy to help build a stronger technology sector, Arizona Governor Janet Napolitano has established a state advisory group of consisting entirely of high tech business leaders. Created by executive order, the Governor's Council on Innovation and Technology will recommend ideas for energizing the industry.  The Council will include committees on capital formation, technology transfer and infrastructure and supply chain development.

The Council on Innovation and Technology will focus on implementing a statewide strategy for a smooth transfer of technology from universities to the private sector; attracting more venture capital to the state to assist growing and new tech-based businesses; and developing Arizona's infrastructure so it can support tech growth. Additionally, the Council will provide ongoing long-term policy input to the Governor.