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HomeMy WebLinkAboutLetter of Support - Applied Research CenterDeschutes County Board of Commissioners 1300 NW Wall St., Suite 200, Bend, OR 97701-196(1 (541) 388-6570 - Fax (541) 385-3202 - www.deschutes.org AGENDA REQUEST & STAFF REPORT For Board Business Meeting of February 10, 2010 Please see directions for completing this document on the next page. DATE: February 9, 2010 FROM: Dave Kanner Administrator ext. 6565 TITLE OF AGENDA ITEM: Consideration of Board signature of a letter of support for a proposed Applied Research Center. PUBLIC HEARING ON THIS DATE? No. BACKGROUND AND POLICY IMPLICATIONS: Bend City Councilor Jim Clinton has been circulating a concept paper regarding the creation of an applied research center that would provide research and support services to local businesses, incluc ing "lab and fabrication equipment, and incubator space." A complete copy of the concept paper is attached to this agenda request. Councilor Clinton envisions supporting the applied research cente primarily through federal grants and he is seeking a federal appropriation to help get the center stai ted. He has requested a letter of support from Deschutes County to attach to his appropriation request. A copy of that letter is attached. FISCAL IMPLICATIONS: None RECOMMENDATION & ACTION REQUESTED: Staff recommends Board signature of the letter of support for a federal appropriation for the propo ;ed applied research center. ATTENDANCE: City Councilor Jim Clinton DISTRIBUTION OF DOCUMENTS: Councilor Clinton CONCEPT: AN APPLIED RESEARCH CENTER Jim Clinton v1.0 Dec 2009 541 383-0568 iimclintonC�bendcable.com The Applied Research Center (ARC) will serve to build a network of small high-tech businesses by providing facilities, research, and business advice. Facilities will include lab and fabrication equipment, and incubator space. Income to cover staff and facilities will be derived from charges for services and from outside contracts and grants. Associated companies want to develop new products and services, and thereby expand. Government contracts (see SBIR below) and investors provide start-up funding. ARC provides the resources to be successful in both arenas. Companies gain expertise and credibility with potential investors and funding agencies by associating with ARC. Relationships with research universities are a core part of the center. Universities have technologies that can be commercialized and have graduate and undergraduate students who could benefit by work at ARC or at an associated company. Cooperative research programs can be supported by STTR funds (see below) and other programs in a way that benefits both a university and the ARC and its associated companies. Longer term, ARC can offer advanced degrees in conjunction with partner universities. Contracts --Business, Federal, State Private Companies Applied Research Center __7 Investors / University Research OHSU OSU ',..,)SU UO INTRODUCTION This paper proposes an applied research center for Central Oregon: a center that would support and help expand the high-tech business sector. The critical need for good jobs and economic diversification in this region is widely recognized but much of the response has focused on job training/career advancement or on assistance for certain businesses. We need additional jobs more than we need additional workers, and we need a more focused and more substantial effort to create good jobs. World-wide, job growth is driven by innovation, and university and industrial research are the engines of innovation. Such research underlies the spectacular growth of the American economy since WWII. In this century, the importance on innovation is even greater as manufacturing and service jobs disappear here and reappear in other countries. And even though our K-12 education is undistinguished compared to other countries, our research universities are the best in the world and continue to produce the people and ideas that are crucial to our success. Building on what research universities provide, American companies that embrace R&D and innovation will continue to be global leaders. However, Central Oregon is not much of a player in this game and the region suffers accordingly. We have no university research and offer no advanced degrees in relevant fields. There is a small corporate research capacity, but it is nearly exclusively of in-house benefit. There is some venture investor activity, but it would be hard to claim it is a major economic development force as it is in some other regions. So while we do have a number of companies well positioned for future growth, we lack a critical mass in any field and are far from being known as industry leaders in any sector. A properly organized and operated applied research center will serve a major role in correcting these deficiencies. ORGANIZATION ARC will be operated as a non-profit institution and locally governed by a board and a director. Board members would include heads of associated companies and investors. Initially there needs to be a small staff of research professionals and engineers, and an expert in technology transfer and business development. SPECIALIZING IN WHAT FIELDS? ARC is based on components successfully developed elsewhere and is intended to benefit local companies and institutions. So we look to areas where research is crucial to developing innovative products or services that have a real potential to create good jobs. We also look fo' a fit to what is already going on in this region. The idea is not to set up a isolated research institute; it is to support interests and capabilities of high-tech companies that are here or can be enticed to locate here. We have identified the following fields as suitable: Applied Bioscience, Computer Technologies, Energy Engineering, and Applied Geology. These are fields where we can see a path to achieving a critical mass. Other potential areas include aerospace, and advanced materials. The underlying theme: applying research and computer science advances to important problems in bioscience, energy, and information technologies. Energy Engineering encompasses renewable and conventional energy sources and uses. Applied Geology would focus on geothermal and environmental challenges. WHY THESE? 1. Nationwide, the future will see increased use of technology, particularly information technology, to more efficient health care, to new energy sources, to transportation and communication systems, to environmental protection and energy efficiency. 2. Businesses will see increasing global competition, feel an increased need to innovate, will use more information and automation technology, and will require a better educated workforce. 3. Recent employment trends will continue: the Bureau of Labor Statistics projects that among technical occupations those expected to grow fastest (30-50% in 10 years) are in the fields of network systems & data communication, computer software, and medical/veterinary/pharmacy. Many will require specialized advanced degrees. A recent report from the President's Council of Economic Advisors focuses on two key areas of employment growth: health care and "green" jobs. Both will see growth rates 3-4 times higher than the average of other occupations. 4. Helpful trends in higher education: public institutions acting more like private ones, more attention to business ties and technology transfer, growth in interdisciplinary and applied programs, new partnerships and programs attractive to new generations of students. TECH -BASED ECONOMIC DEVELOPMENT As the US economy becomes more driven by technology and more globally interconnected, regions with a strong complement of innovation -based companies will prosper. Regions dependent on traditional industries are likely to struggle, especially during recessions. While nearly every part of the country acknowledges the desirability of a vibrant high-tech sector, only a few have been successful in putting one together. Numerous studies have identified the necessary factors: 1. An idea infrastructure: research universities or institutes, or private Tabs that make discoveries and generate new knowledge. 2. An effective means of transferring knowledge from researchers to businesses. 3. Educated, skilled and motivated entrepreneurs to start and run new businesses. 3. Availability of skilled and trained technical workers. 5. A quality of life that attracts and retains business leaders, innovators and workers. 6. Sources of risk capital willing to invest. 7. An infrastructure that includes advanced facilities and high-speed Internet. Much has been written about each of these factors and how to make them work for economic development. Nearly every part of the country hopes to attract and retain high-tech businesses, but regions deficient in one or more of these factors are not likely to be competitive. For example, just having any college or university does not address #1. There must be quality faculty doing research that is relevant to commercial success. The gap between academic research and commercialization is often spanned through an associated innovation or entrepreneurship center that engages faculty and businesses in joint projects. In some places the role of a research university is played by a private or public research institution. We have no chance of duplicating (even on a small scale) Silicon Valley, the Boston area, the Research Triangle or San Diego. Also, we should not place much faith or devote resources to attract a plant of some high-tech mega -corporation, a goal that often proves illusory when all aspects are carefully considered. By contrast, we should move to establish a meaningful network to support our existing tech companies and foster dozens of new ones. No one can reliably predict which companies will hit it big so we must get many started and provide a fertile growth environment by ensuring that every one of the 7 factors above is in place and effective. SBIR Program The SBIR (Small Business Innovation Research) program dates to 1982 and has gained widespread support in Congress and in the ten federal agencies that participate. Over the years, funding has increased to about $2.4 billion per year. SBIR provides federal R&D funding through detailed solicitations and a competitive process for Phase 1 (up to $100k) and Phase 2 (up to $750k) projects. Phase 3 commercializes the innovation using private capital. The SBIR program provides unique opportunities unavailable through other means. Federal contract or grant funds do not have to be paid back. Patents and proprietary rights remain with the business and owners do not need to give up equity in their firms. However, the program is very competitive: historically 15% of Phase 1 proposals and 30% of Phase 2 proposals have received funding. Based on population, some states do much better than average (California, Massachusetts, Virginia and Maryland) in winning awards, while some states do much worse than average. Oregon does slightly better than average, both in awards and success rate. Some Bend companies have received awards. In particular, SBIR funding was a major revenue source for Bend Research in its early years. STTR Program The STTR (Small Business Technology Transfer) program is similar to SBIR, but 1/20 in total funding. The small business takes research and intellectual property from a research institution (e.g. a university) and tries to develop a useful product. Venture Capital For most small technology companies, bringing innovations to market requires risk capital. Much of the needed risk capital comes from the venture capital industry. The availability of venture capital varies widely among the states. Oregon gets about $200M per year (about $50 per capita) which is 0.6% of the national total. California gets about $400 per capita, a remarkable 50% of the national total. Washington gets $150 per capita; 3.5% of the national total. At around $30B per year, venture capital dwarfs other sources available to small high- tech companies. However, successful navigation of the system requires expertise and sophistication; it is fraught with pitfalls for both innovator and investor. My Background Since receiving a PhD in Physics from the University of California, San Diego, in 1970, nearly all of my career has involved working with small businesses to develop high-tech products. The company I co-founded in 1980, and was president of, had about 100 R&D contracts before 1995 when I moved to Bend. The mix between SBIR and commercial contracts was about 50- 50. I have continued working with this company and a number of others. My recent projects include a non-invasive blood glucose sensor, specialized optical coatings, advanced non-volatile computer memory, improved Tight bulb filament, hybrid solar collector, advanced cathode for explosive detection system, and corneal inlays. These projects typify the things that high-tech start-ups work on.