SSTI Digest

Due to length considerations, this week's Funding Opportunities Supplement to the SSTI Weekly Digest was sent separately.



During the past two weeks, the federal register has announced 15 federally owned inventions that available for licensing from the Army, Navy, National Institutes of Health and the Department of Energy. The full text of the announcements, including descriptions of the inventions in many cases, can be found at: http://www.ssti.org/Digest/Tables/060101t.htm

The Michigan Economic Development Corporation (MEDC), in partnership with several public and private organizations, has outlined a plan to address telecommunications infrastructure needs across the state.



LinkMichigan, released last week, addresses several telecommunications infrastructure issues or concerns that were increasingly facing the public and private sector, including:

With so much attention given to increasing private seed and venture capital activity as a means of growing tech-based economies, one might expect that encouraging and attracting community development venture capital (CDVC) – that is, equity investments and entrepreneurial assistance to meet both profit targets and community development goals – would be a common element of a state or local community’s portfolio of economic development tools.



Increasingly it is, according to the first in-depth research on the state of the CDVC industry, released recently by the Community Development Venture Capital Alliance (CDVCA).



In fact, the study, prepared by Harvard Ph.D candidate Julia Sass Rubin, found more than 50 CDVC providers actively investing or in formation at the beginning of 2000 – up from a mere handful only five years ago. The combined capitalization of these providers at the end of 1999 was $300 million.



Community development venture capital providers make equity investments in businesses in distressed rural and urban areas. CDVC goals, in addition to receiving a positive return on their investment, are to promote economic growth by providing high-quality, higher-wage jobs for low-income people. As a result, CDVC investments are typically made in low- and moderate-income communities or rural areas, not Silicon Valley or Route 128.



CDVC differs from traditional venture capital in many other ways as well. CDVC deal sizes typically range from as low as $10,000 to $1,000,000, compared to the ever-increasing average VC deal (more than $13 million on average in 1999).



Eighty-six percent are willing to invest at any stage of a company’s growth, according to the study. The majority of CDVC providers also target manufacturing jobs; CDVCA reports 50 percent of all equity-focused investments were in manufacturing companies at the end of 1999.



While technology-related companies accounted for more than 90 percent of private venture capital activity according to groups like the National Venture Capital Alliance and PricewaterhouseCoopers, CDVC providers had placed only 34 percent of their investments in tech firms.



And, the report finds, CDVC funding creates jobs at a lower investment/per job than both traditional VC and Small Business Investment Corps. (SBICs). Three of the oldest CDVC funds reported creating more than 4,000 jobs at an average investment of less than $10,000 per job. The study indicates jobs created through SBICs, for comparison, cost an average of $35,000 per job.



In spite of the recent explosion of CDVC activity, the study indicates there are still 24 states with no access to community-based risk capital. Most CDVC providers work along the East or West Coast, or in Minnesota and Ohio.



Banks and financial institutions are increasingly important sources of capital for CDVCs, according to the report. Banks and financial institutions account for 34 percent of all domestic CDVC funding, yet they provided 58 percent of the capital for the newest funds. Foundations account for 22 percent of all CDVC funds, and the federal government has contributed 19 percent of the capitalization.



Community Development Venture Capital: A Report on the Industry can be purchased for $15 from CDVCA ($10 for multiple copies). More information on the Alliance can be found on the CDVCA website: http://www.cdvca.org

San Jose, Austin, and San Francisco received top honors in the 3rd Annual Forbes-Milken Institute Best Places Ranking. San Jose and San Francisco raced to the top of the list from 29th and 42th place respectively in 1999. Completing the top ten metro areas in 2000 are: Boulder, CO; Dallas, TX; Santa Rosa, CA; Boise City, ID; San Diego, CA; Phoenix-Mesa, AZ; and Oakland, CA. The top metro area east of the Mississippi River, Raleigh-Durham-Chapel Hill, NC, came in 13th.



The Forbes-Milken Institute project ranked the top 200 large metro areas based on a weighted scoring of the eight data categories listed below.

Colorado

The Governor’s Office of Innovation and Technology and the state’s Science and Technology Commission have teamed up to create the Colorado Technology Alliance to provide tech business recruitment information and assistance. According to a recent Pueblo Chieftain article, the Alliance will prepare a clearinghouse website and a 120-page resource magazine. Local and regional information for the website will be administered and maintained by local tech-based economic development officials.



Covington, Kentucky

The Cincinnati Enquirer reports the Madison Avenue Launch Team, a Covington non-profit organization, has signed a five-year lease to create a 21,000 sq. ft. technology accelerator to provide office space for up to 12 firms, mentoring services, and business assistance. So far, $200,000 in funding for the accelerator has been secured from the city of Covington, the Tricounty Economic Development Corp., and private investors. Additional funding is sought from the Kentucky Innovations Commission. More information about the accelerator and the team’s “New Economy Guerrila Warfare tactics” is available at: http://www.madisonavenuelaunch.com/

With an overall positive review, the Office of the Inspector General within the National Science Foundation (NSF) has made several recommendations for improving the performance of NSF's Experimental Program to Stimulate Competitive Research (EPSCoR). EPSCoR plays an important and strategic role in many states’ efforts to build a stronger research enterprise and tech-based economy. In FY 2000, the NSF EPSCoR program distributed $51.7 million to 19 states and Puerto Rico. The FY 2001 budget is $74.8 million.



Created in 1978, the NSF EPSCoR program has served as a model for other agencies’ efforts to increase the research culture of states that have historically received a small share of federal research dollars.



In addition to the EPSCoR program administration, the Inspector General’s office reviewed the EPSCoR programs in Maine and Mississippi. The two states were selected for attention because “they had undergone significant recent changes that were of particular interest to NSF program managers and because the states were substantially different in their demographics and research infrastructures.” General analysis of the other EPSCoR states is included throughout the report as well.



Seven recommendations are made to strengthen the NSF EPSCoR program and the individual state programs reviewed. Recommendations for the NSF program office include:

The Small Business Administration has extended the deadline for states to submit proposals in response to program announcement no. FAST-01-R-001 for the Federal and State Technology Partnership (FAST). FAST will support state efforts to foster economic development among small high technology businesses through federally funded innovation and research and development programs. According to the website for the SBA Office of Science & Technology, the deadline for proposals has been extended to June 28, 2001. See http://www.sba.gov/sbir/fastextension.html

Ever wonder how many SSTI Weekly Digest articles have covered tax credits? (Answer is 47) strategic plans? (35), biotechnology? (80), workforce issues?(92), indicators? (14), telecommunications? (77), math & science? (50), capital, both seed and venture? (150)



To help make your research efforts easier, SSTI has restored the search feature for our website: http://ssti.org.master.com  Feedback from users would be appreciated.



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With an eye toward helping to make Kansas City a leading center for biomedical research, James Stower Jr., founder of American Century mutual funds, and his wife are donating $1.114 billion to the Stowers Institute of Medical Research. The donation is considered one of the five largest philanthropic gifts in history. The Institute, opened last November after completion of the $200 million campus, is engaged in basic research toward long-term solutions for gene-based diseases such as cancer and diabetes.



Already employing four molecular biologists recruited from California, Utah, Texas and London, England, and their staff, the Stowers Institute plans to have more than 50 independent research programs when fully operational.



The success of the Stowers Institute plays heavily in the plans of local efforts to transform Kansas City into a national biomedical center. Building a strong local research capacity and presence in academic and nonprofit research institutions as well as private companies is widely recognized as a critical element to building tech-based economies. Local leaders see the Institute as being a critical element of their tech-based economic development plans.



In addition to its own scientific and technical staff and any commercialization resulting from technologies spun out of the Institute, the sheer size and national eminence of the Stowers Institute is expected to serve as a magnet for other biomedical research investments and biotech companies growth in the area.



The Kansas City Area Life Sciences Institute, a not-for-profit organization founded jointly by the Civic Council of Greater Kansas City and the Kansas City Area Development Council, has been charged with implementing the community's three part life sciences strategy of:

Calling for the program to more than triple in size by 2007, Senator John F Kerry (D-Massachusetts) and several other Senators introduced legislation last week to reauthorize and expand the Small Business Technology Transfer Program (STTR). STTR currently requires five federal agencies -- the National Science Foundation, NASA, and the departments of Defense, Health & Human Services, and Energy -- to award 0.15 percent of their extramural R&D budgets to research partnerships between small businesses and research institutions. If passed, the new bill would gradually increase the set-aside requirement to 0.5 percent by fiscal year 2007.



S. 856 also calls for reauthorizing STTR through fiscal year 2010 and increasing the size of Phase II awards from $500,000 to $750,000, the same level as awards in the much larger Small Business Innovation Research (SBIR) program.



After its introduction, S. 856 was referred to the Senate Small Business Committee for consideration.



Joining Senator Kerry as original sponsors of the bill were senators Kit Bond (R-MO), Max Cleland (D-GA), Mary Landrieu (D-LA), Robert F. Bennett (R-UT), Carl Levin (D-MI), Joseph I. Lieberman (D-CT), Tom Harkin (D-IA), Jeff Bingaman (D-NM), Michael Enzi (R-WY) and Maria Cantwell (D-WA). All but Senator Bingaman are members of the Senate Small Business Committee.



The text of the bill can be found online at: http://thomas.loc.gov

In today's edition of the Federal Register, the Small Business Administration (SBA) has issued the draft revised policy directive for the Small Business Innovation Research (SBIR) Program. The public is invited to comment on the proposed directive, which provides guidance to the ten federal agencies participating in the program. SBIR annually awards more than $1 billion to small businesses across the country for research and development. Comments must be received by the SBA on or before June 18, 2001.



Legislation passed by Congress in December to reauthorize the SBIR program (Public Law 106-554) required SBA to prepare the first changes to the policy directive since 1993. While the SBIR Reauthorization Act did not include many substantive changes to the federal program, a quick review of the new policy directive reveals several proposed changes of potential interest to the tech-based economic development community.



In general, the new directive would provide the federal agencies greater latitude in meeting the legislated requirements of the SBIR program. For example, while the public law sets specific maximum award size and project duration for Phase I and Phase II awards, the proposed policy directive allows any agency to set its own limits provided the new limits are justified in the agency's annual report to the SBA, which would be submitted after the awards had been made.



The draft directive also expands the flexibility provided to the agencies for administering their SBIR and STTR programs (Small Business Technology Transfer Program) to the extent that Phase I projects of one program could receive Phase II funding from the other.



The current draft also requires the agencies to incorporate use of the Internet to facilitate information dissemination for proposal development. Additionally, the Directive outlines the elements of the commercialization plan that is required of all phase II SBIR proposals. Provisions for the newly mandated public and private databases on awards are included as well.



Apparently lacking in the revised policy directive is any discussion of the requirement in the SBIR Reauthorization Act of 2000 for federal agencies to coordinate and link their SBIR programs to their programmatic efforts to increase research activity within states that traditionally do not capture much federal R&D funding. (e.g., Experimental Program to Stimulate Competitive Research (EPSCoR), Institutional Development Award Program, or National Research Initiative Competitive Grants Program.)



The complete Federal Register text of the SBA's proposed policy directive can be found on the accompanying webpage. 

PricewaterhouseCoopers has published the detailed statistics for the Moneytree™ survey of venture capital (VC) activity for the first quarter of 2001. As promised in the May 4, 2001 issue of the SSTI Weekly Digest when the summary results were announced, SSTI has prepared the accompanying table presenting the distribution of VC by state.



Please note, the table includes only those states in which some VC activity was reported for the quarter. Several states fell out of the latest survey as fewer deals were reported across the country.



The complete detailed statistics can be found on the PricewaterhouseCoopers website: http://204.198.129.80/