SSTI Digest

In response to an executive order signed last year by President Biden to advance diversity, equity, inclusion, and accessibility in the federal workforce, many federal organizations are evaluating the resources and opportunities available to minority groups. The National Aeronautics and Space Administration (NASA) and the U.S. Department of Defense (DOD) are taking steps to grow strong relationships with Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs) to provide more opportunities for students and faculty members and promote diversity in the federal workforce. According to an article from Inside Higher Ed, NASA recently launched an equity action plan with specific steps to provide more opportunities for students and faculty at MSIs. This plan will include an analysis of common barriers for researchers at MSIs seeking NASA grants and cooperation agreements. To further encourage equity and inclusion at NASA, it is transitioning to a new anonymous peer-review system to reduce implicit bias and is creating the Science Mission Directorate Bridge Program to strengthen its relationship with HBCUs and MSIs, focusing on paid research…

This edition of Useful Stats presents an SSTI analysis for the number of SBIR/STTR awards from 2011 to 2020 (the most recently available complete data), examining which agencies make the most awards in each state and how each state’s composition of awards compares to the national profile. Two federal agencies made the greatest number of SBIR/STTR awards in nearly every state. The U.S. Department of Defense (DoD) accounted for the greatest number of SBIR/STTR awards in 35 states (including the District of Columbia), growing from 29 states as identified in a previous SSTI analysis for the 10-year period from 2009-2018. The U.S. Department of Health and Human Services (HHS) made the most awards in 15 states over the 10-years from 2011 to 2020, decreasing from the 22 states for the previously examined 10-year period, while the National Science Foundation made the most total awards in two states/territories for the combined 10-year period from 2011 to 2020.

A new working paper by the Federal Reserve Bank of Philadelphia used loan-level data from two fintech lenders, Funding Circle and LendingClub, to assess how the companies’ pre-pandemic lending patterns differed from those of traditional banks. The report finds fintechs contribute to a “more inclusive” financial system, expanding credit to more companies and at a lower cost. The paper’s conclusions rely heavily on data from Funding Circle’s loans from 2016-2019. While the Fed describes LendingClub’s loans, the company had a smaller overall level of activity (about $540 million in loan volume), and so was not included in the empirical analyses. The report finds that Funding Circle’s model seems to provide credit to businesses that may not be able to access it elsewhere. The company had a larger share of loans in zip codes with higher rates of business bankruptcy, and it regularly made loans to owners that had a credit score low enough to prevent access to loans from traditional banks. The Fed paper found that the company’s internal risk modeling provides a better prediction of future repayment than traditional measures of loan risk. The working paper ends…

Earlier today, the U.S. Department of the Treasury released information on the $500 million pool of technical assistance (TA) funds authorized as part of the State Small Business Credit Initiative (SSBCI). The agency is allocating $200 million to the states, transferring $100 million to the U.S. Minority Business Development Agency (MBDA), and retaining $200 million at this time. According to guidance released by Treasury, states can use their TA funds for legal, accounting and financial services. The guidance defines these types of TA services somewhat broadly. In addition to covering licenses, financial statements and financial management, Treasury’s list of example eligible services names several activities that would particularly benefit innovation-focused companies. For example, permissible TA could include assisting with business formation, developing term sheets, or preparing presentations to investors. States are allowed to provide TA themselves or work with subrecipients or contractors to deliver services. In selecting contractors, states must have a preference for entities that are owned and controlled by socially- and economically-disadvantaged…

The PitchBook-NVA Venture Monitor Q1 2022 reports that overall venture capital (VC) investment activity was down in Q1 2022, a change from the unprecedented growth seen quarterly through 2021. However, angel and seed stage financing remained strong. Additionally, deal activity for early-stage deals had a strong start in Q1 2022, with a total of 1,499 reported deals as of March 31. Late-stage deal activity also retained its rapid growth this quarter from the previous year. Although overall VC investment activity was down in terms of deal value, some states saw growth in various metrics. New York has continued to see an increase in share of total deal count in the United States. The Miami-Port St. Lucie-Fort Lauderdale, Florida, region also saw a considerable increase in fundraising activity in Q1 2022. It is important to note that the reported data is not final, as PitchBook continues to actively identify additional deals and updates their metrics accordingly. Given this, initial trends regarding investment activity derived from Q1 2022 data may not be fully reflective of the reality of the VC ecosystem. The Pitchbook-NVCA Venture Monitor Q1 2022 report…

Today, SSTI’s Innovation Advocacy Council published a letter to Congress urging the adoption of key tech-based economic development policies in the final version of competitiveness legislation that will soon be conferenced between the two chambers. Known as the U.S. Innovation and Competitiveness Act (USICA) in the Senate and the America COMPETES Act of 2022 in the House, these bills are proposing to authorize new activities to support science, technology, innovation and entrepreneurship across numerous federal agencies. The Council has been talking with offices across the Hill about these proposals throughout the session and will continue to do so as the bill moves to conference. Learn more about the Innovation Advocacy Council’s priorities for this legislation from the letter below (and in this pdf), and reach out to Jason Rittenberg (rittenberg@ssti.org) to add your support.   Dear Speaker Pelosi, Leader McCarthy, Leader Schumer, and Leader McConnell: Thank you for prioritizing America’s economic competitiveness by advancing expanded investments in science and innovation in the America COMPETES Act of 2022 (COMPETES) and the United States…

Earlier this month, legislators introduced bipartisan and bicameral legislation to modify Opportunity Zones (OZs). The beneficial changes would include a reporting requirement, which is overdue for the program,[i] as well as decertification of relatively wealthy zones. However, the bill also introduces questionable changes, including extending the program by two years, shortening the holding period for one of the tax benefits by one year, adding zones with zero population in former industrial sites, and proposing to spend up to $1 billion on technical assistance. The bill also fails to address several fundamental concerns with OZs. The legislation does not appear to address the difficulties of using OZs to invest in small businesses. As Economic Innovation Group’s John Lettieri shared on an SSTI webinar in January 2018, a central goal of the program was to catalyze investments into operating businesses (as well as for business formation). Unfortunately, the design of the incentive and the subsequent program regulations made realizing this purpose largely impossible. The program instead continues to be focused on real estate investment — something that this legislation…

North Carolina is continuing to improve its innovation standing and its research and development enterprise continue to lead among other innovation metrics, according to a new state report. The North Carolina Board of Science, Technology, and Innovation published the eighth edition of its Tracking Innovation report. This report uses 39 measures of innovation capacity to evaluate North Carolina’s standing against other states in the nation. In this year’s edition, the report dives even further by summarizing key measures at the county level along with state-by-state standings on many measures. According to the report, North Carolina now ranks 20th in the nation for overall innovation. This ranking is up from 21st in 2019, 23rd in 2017, and 24th in 2013. Research and development is the state’s best performing area out of the 39 measures studied. The report found that the state is performing above the national average in every research and development measure metric. The report also noted the state’s success in the commercialization of research and development in funding startup companies. According to the report, a lack of current, accurate, and comprehensive…

Earlier today, the Economic Development Administration announced the 2022 notice of funding opportunity (NOFO) for the Build to Scale program. State and local governments, nonprofits, institutions of higher education, National Labs and others are eligible to compete for a total of $45 million in funds to support new and expanded initiatives that support regional commercialization, entrepreneurship and capital formation efforts. EDA has slightly restructured the program for this year’s competition, with two funding streams and two levels of awards for each. The “Venture Challenge,” which focuses on innovation and entrepreneurship, includes a “Build” tier for demonstration projects up to $750,000 and a “Scale” tier for proven initiatives at up to $2 million. The “Capital Challenge,” which focuses on forming and supporting innovation finance, includes a “Form” tier up to $300,000 and a “Deploy” tier of up to $750,000. EDA has posted the formal NOFO and explanatory materials on its website. Applications are due June 13.

Earlier this week, legislation was introduced in the Senate that would rescind $2.3 billion from the State Small Business Credit Initiative. The purpose of the action would be to source funds for an additional $10 billion for new COVID expenses; the Senate proposal opts to reduce selected unspent funds from American Rescue Plan Act and CARES Act programs. The cut to SSBCI is targeted at states’ potential third tranches of program funds, as well as 40 percent of the overall SSBCI technical assistance funding. The language about SSBCI would produce the following effects: States would lose the ability to access a third tranche of general capital funds (about $2.1 billion in total); States that reach their third tranche would still have access to a pool of funds for very small businesses (about $170 million) and for businesses owned by “socially- and economically-disadvantaged individuals” (about $510 million + additional incentive funds); The pool of technical assistance funding available to businesses through the program would be reduced from $500 million to $300 million; and, States would be able to increase the administrative cost rate to 5 percent across all…

Two recent reports feature evidence demonstrating the importance of early-stage entrepreneurship for the United States economy. The first report from the Kauffman Foundation released four indicators used to track early-stage entrepreneurial development. The second report from the Economic Innovation Group studies how dynamic the U.S. economy is and recommends ways to increase the economy's dynamism, many of which center around startups and new small businesses. Both reports highlight new ways to measure early-stage entrepreneurship and offer ways to expand these businesses. The Ewing Marion Kauffman Foundation released its 2021 National Report on Early-Stage Entrepreneurship in the United States last month. This report features four indicators used to track annual early-stage entrepreneurial development. These indicators include the rate of new entrepreneurs each month, the share of new entrepreneurs measured by the percentage of new entrepreneurs creating a business out of opportunity rather than necessity, startup early job creation measured by the total number of jobs created by startups per capita, and startup early survival rate calculated as the one-year average…

Despite the shutdown of many business and government activities during the first year of the COVID-19 pandemic, the total number of SBIR/STTR awards made to innovation-focused companies continued to increase over record-breaking 2019 levels, rising 3.7 percent. This edition of SSTI’s Useful Stats examines the total number of SBIR/STTR awards and the top awarding agency by state in 2020.