This is the third in a series of three articles on workforce development and quality jobs - with a focus on state and regional support for bioscience industry development. Read part one . Read part two .
By Peter M. Pellerito, BIO Senior Policy Consultant ;
George Goodno, BIO Director, State Policy Communications
State governments in 2011 continued to see regional economic growth in the life sciences industry and in 2012 will increasingly focus attention on technology transfer and venture funding as mechanisms to increase private sector innovation related activities within their jurisdictions. Realizing that entrepreneurship is a key ingredient in economic development, states and localities are undertaking the support of programs that assist high technology businesses, and that capitalize on state regional presence of universities and federal laboratories.
Once research yields a new discovery from a university or federal laboratory, there is still a great deal of work in creating a company and funding that research before the technology can be incorporated into the marketplace. The following are state legislative examples of ways industry, universities, and policymakers are creating essential building blocks for bioscience industry growth in company creation and capital for success.
"Forty years of state government involvement and experience in science and technology and technology-based economic development have had considerable impact on the policies and practice of state economic development."
Walter H. Plosila, Battelle Memorial Institute
Economic Development Quarterly, May 2004
Forty-two states now support programs that provide commercialization assistance to technology companies in an effort to more smoothly transition invention into innovation in the marketplace.
CONNECT’s initiatives include Springboard to assist aspiring entrepreneurs in transforming their business visions into reality: CEO CONNECT provides intimate peer group interaction to learn from and teach each other. CONNECT Entrepreneurs’ Roundtable, a monthly program designed for capital providers, CEOs, and presidents of San Diego-based early stage companies to nurture high technology start-ups.
One quarter of the Fund is dedicated to recruiting sought-after, top research talent to the state along with their team, patents, and portfolio of potential emerging technologies. Another quarter of the Fund is to be used as matching grants to help draw down federal dollars and help push a technology through the commercialization phase.
The remaining one-half of the Fund is used by Regional Centers of Innovation and Commercialization (RCICs) to foster collaboration on emerging technologies between public and private entities and institutions of higher education. The legislation also contains provisions for failure to meet contract obligations or misuse of any grant money, and the amount given to the Texas Emerging Technology Fund is up for review each biennium and is subject to legislators’ discretion.
With the financial backing of the state legislature in 2010, the state’s research universities, private foundations and other supporters, the Eminent Scholars Program is marshalling the required talent and resources and driving an effective strategy for achieving these results.
To date, the Alliance has invested some $400 million, which has helped to attract more than 50 Eminent Scholars, leverage an additional $2 billion in federal and private funding, create more than 5,000 new technology jobs, generate some 120 new technology companies, and allow established Georgia companies to expand into new markets.
To support the development of technology prior to company formation, the Alliance created VentureLab, a strategy for enhancing and accelerating the process of spinning new technology-based enterprises out of university research. The goals of VentureLab are to provide earlier and increased awareness by the business and investment community of university commercialization opportunities and to provide an easier and more efficient process for turning these technologies into new companies or new markets for established startups.
Under the Kentucky Innovation Act, the General Assembly directed the Kentucky Science and Technology Corporation (KSTC) to invest in research and development activity to promote innovation and build a pipeline of new ideas and technologies that could add value to the scientific and economic growth in the Commonwealth.
In 2004 and 2005 action by the General Assembly established the Venture Capital Investment Act to increase the availability of venture capital funds to help strengthen the state's economic base and to support South Carolina’s economic development goals. The legislation created the Venture Capital Investment Authority to oversee the program that provides tax credits for private investment companies offering equity, near-equity or seed capital for companies in the state that are emerging, expanding, relocating or restructuring.
State bioscience trade associations advocate to lawmakers and government agencies at every level in favor of public policies that support the responsible development of the bioscience industry. These associations are often the driving force behind state initiatives that address the need for expanded worker training and technology transfer programs. As such, they are a critical component of the mix in both established and emerging bioscience clusters.
A significant number of state governments over the past 15 years have legislatively endorsed measures that pro-actively promote the formation of venture capital and discovery funds that benefit targeted technology sectors, especially at early stages that are underserved by existing capital markets. Understanding that if they are to effectively compete to create and retain biosciences companies, states have modified their supportive investment structures to more accurately reflect the changing nature of the industry and competitive funding techniques.
From encouraging pension fund investments and quasi-public investments mediated by privately managed venture funds to funds of funds mechanisms, several useful capital formation initiatives were created by the states that provide vital “deal flow” funding for companies at various stages of research and development.
The Competitive-Edge Technologies Program within the broader Jobs Fund invests in funds or alongside qualified private equity funds, qualified mezzanine funds, and qualified venture capital funds and a commercial enhancement program to assist small companies
A qualified Maryland biotechnology company has its headquarters and base of operations in the state, has fewer than 50 employees and has been in active business no longer than 10 years. A qualified venture capital firm has at least two principals who each have at least 5 years of venture capital experience and has its principal place of operation in Maryland.
By the early 2000s, governors and legislators in almost every state recognized commercialization of university research and support for small business innovation as a valuable means of economic development. Through the recent economic downturn, lawmakers and state agencies have continued to appreciate and support a broad range of initiatives that foster bioscience industry growth.
Some states have established and funded privately-run organizations dedicated to promoting bioscience investment, entrepreneurship and new product development. Such organizations are often supported by, or operate, as an extension of state economic development agencies.
Other states and regions have adopted more modest strategies while maintaining a broader tech-focus. Despite the variations of strategy, virtually every state recognizes the financial payoff from fostering the unique conditions needed to attract and grow biotech innovation - generally known as the "incubator model."
Biotechnology incubators support early stage companies in a number of ways - providing access to investors, managerial support, and often laboratory and office space. The incubator facilities generate a return on their investment through equity shares in the sponsored companies.
More broadly speaking, states and municipalities eventually see a benefit in the form of tax revenue that come from both company profits and the expanding workforce needed to staff successful ventures. Furthermore the bioscience industry creates a higher than normal indirect employment ripple in terms of jobs generated by essential service industries.
Here is a listing of several state-supported organizations that are singularly focused on supporting bioscience industry development: