The recent economic downturn has had a significant impact on the bioscience industry.
III. Return on Investment
The one thing that drives state governments as well as venture capitalists to invest in bioscience industry development is the potential for Return on Investment (ROI). ROI is a quantitative performance measurement used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI has been of particular interest to elected officials as they review budget priorities in the face of shrinking state budgets.
For venture capitalists/angel investors ROI comes in the form of recouping their investments, hopefully at a healthy premium. For states it is a bit more intangible. ROI for states could mean creation of high skill, high wage jobs; an opportunity to retain the best and brightest students from state universities; or, even the induced economic impact of numerous construction and service jobs associated with a vibrant bioscience industry cluster.
In 2007 and 2008 several states analyzed the economic impact of funding for the biosciences industries. The results provide lawmakers and other stakeholder's timely and comprehensive numbers that measured the performance of state investments in the industry. Here are four examples of state and region efforts to measure the quantitative value of the biosciences industry.
Hawaii: High Technology Business Investment Credit
The purpose of the High Technology Business Investment Credit is to increase investment in Hawaii's emerging science & tech companies. In order to create high-paying jobs the State supports the early stage growth of Hawaii's emerging innovation economy with targeted investor tax credits. These tax incentives have been put in place to correct the previous lack of early state investment in Hawaii. This has helped to establish Hawaii as a tech-friendly place to do business. During the period 2002 to 2006, results with 287 Qualified High Technology Businesses (QHTB's), benefiting from this incentive were:
Investments received totaled $821.6 million
Spending by these companies in Hawaii totaled $1.043 billion
Salaries paid totaled $505.8 million
The 157 QHTB's that filed in 2006 created, since their inception, 5,383 jobs
The 157 QHTB's that filed in 2006 had an average salary of $67,020
The Tax Credit claimed by Hawaii residents totaled $195.6 million
The direct benefit to the state totals nearly $2 billion, with a cost to the state of less than 10% of that amount. In other words, this is a return on investment for the state of approximately 10 times or 1000%
OHIO Third Frontier Ohio's Third Frontier program has become an important part of Ohio's efforts to build a strong, technology-based economy. Its continuing purpose is to provide financial support to projects that contribute to technology-based economic development in Ohio including the biosciences. The Third Frontier Project was initiated in February 2002. This project is the state's largest-ever commitment to expanding Ohio's high-tech research capabilities and promoting innovation and company formation and the return on investment over the past five years has been substantial. The cumulative effect of the program has provided new investment leverage outside state government, retention, expansion, and attraction of companies, and well-paying jobs. As of January 2008 the state jobs initiative spurred growth in the following areas:
Kansas Economic Growth Act
The Kansas Economic Growth Act of 2004 demonstrated the state's deep commitment to continued bioscience growth. The act created the Kansas Bioscience Authority and appropriated $581 million to invest in the expansion of the state's bioscience clusters, research capacity, startups, and business expansion. The 2008 Kansas Bioscience Index 2008 reported the following economic return on state investments: