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Notes from Innovation Policyworks
I used to think that innovation was a non-partisan issue. After all, who can argue with economic growth? Turns out, lots of people. Recently, I've seen a spate of articles that are arguing that it's innovation that has left so many Americans behind; that productivity gains have been at the expense of the workers. I'm having a hard time wrapping my head around this.  MORE

Immigrant Entrepreneurs Driving Growth
New data from the US Census Annual Survey of Entrepreneurs shows clearly that immigrants are a major driver of the entrepreneurial economy. They constitute 15% of the US workforce, but 25% of the entrepreneurs and 25% of US inventors. Sari and William Kerr have found that:
  • More than 40% of Fortune 500 companies were founded by immigrants or their children.
  • Over 50% of American "unicorns" (billion dollar startups) have at least one immigrant founder.
  • Immigrants are nearly twice as likely as native-born to start a new company. 
The top five metro areas in terms of immigrant entrepreneurs are: San Jose, Miami, LA, San Francisco and New York. Not surprisingly, given their demographics, the northern Plains states (Idaho, Montana, Wyoming, the Dakotas, Wisconsin) and Maine, have the lowest percentages of immigrant business owners. MORE

States and localities could capitalize on these trends by supporting immigrant entrepreneurs. Suggested programs include: developing and inclusive and welcoming approach; link immigrants to existing programs and resources; fill the gaps; help non-English speakers navigate the regulatory and permitting waters. MORE

The White House is responding with a proposed new rule for immigrant entrepreneurs that would provide temporary permission for entrepreneurs to live in the United States if they have at least 15 percent ownership in startup companies formed in the country within the past three years. The companies must have investment of at least $345,000 from qualified U.S. investors. MORE 

Venture Capital Trends 3Q16
If it seems like it's harder than ever to raise capital, you are right. According to Pitchbook/NVCA, after almost nine years of increases in the number of deals and the total dollars invested, venture investments are down now for the fifth straight quarter.  Correspondingly, early stage deals are getting larger, squeezing out smaller deals, and valuations are down sharply. However, the median size of exits hit a new high of $100 million, double that of 2015, so 85.4% of US VC funds are meeting their financial targets and fund raising is on pace to exceed the dot-com era.  MORE

But, is VC a Drug?
New research suggests that raising a lot of venture capital is not correlated with success. A new analysis by TechCrunch finds, "of the 20 most successful publicly-traded startups over the past five years, 14 raised $100 million or less." Further, they conclude that the 20 most efficient startups have appreciated by 89% since their IPOs while the ones that had raised more grew by only 22%. Their provocative hypothesis: "Too much capital over time creates a culture that substitutes cash for creativity and operational discipline." MORE

Lessons from the SSBCI
Congress made $1.45 billion in public funds available to the states for debt and equity financing as part of the Small Business Jobs Act of 2010.  Many states used the funds to augment existing loan and venture capital programs. By the end of 2015, $1 billion of those funds had supported nearly 17,000 loan and equity transactions, and leveraged $8.4 billion in private capital. Forty-two percent of the transactions were made to businesses located in low- and moderate-income census tracts and 80 percent went to businesses with 10 or fewer employees. In addition the SSBCI helped states meet capital gaps when they had limited or no funding, and facilitated new program models. MORE

Rhode Island Leading on Energy
Here's the evidence for RI's leadership, as documented in an article by Brookings.
Deepwater Wind has successfully deployed five turbines in an offshore wind farm three miles off Block Island, RI, and commercial operation is expected to begin in November. At 30 MW, this is a relatively small project, but it is the first offshore deployment in the US, and is the first step towards a potential 5 GW of wind power in RI. This would be enough to supply power to more than twice the state's population.
The recently released Clean Energy Jobs Report for RI documents 14,000 jobs in the state, a 40 percent growth in employment over 2015. While energy efficiency is responsible for a large percentage of these jobs, the renewable energy sector itself created over 800 jobs in just twelve months.
RI's nimbleness with permitting and siting was demonstrated with the development of an Ocean Special Area Management Plan. Perhaps it's the vulnerability of a state with 400 miles of coastline that led to widespread support for renewables, and opposition to the development of a huge power plant fueled by natural gas. MORE

In This Issue - October 2016

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Quote of the Month 
" Inspiration is hard to come by. You have to take it where you find it."

Bob Dylan

Is Your Job Safe?
If you are wondering if your job could be replaced by a machine, this nuanced study by McKinsey&Company should be required reading. It turns out that understanding what sorts of work activities are involved in a particular job can lead to a prediction of that job's vulnerability to being automated. For example, jobs that are made up of largely predictable physical work, such as welding and soldering on an assembly line, are highly susceptible to automation. Jobs that are mostly unpredictable physical work, such as construction, are much less likely to be automated. Jobs that involve managing others and applying expertise, are least likely to be automated. MORE

It's Who You Know, Not What You Know, Right?
In addition to their immigrant roots, VC-backed entrepreneurs share something else: their undergraduate degrees. Demonstrating the effect of network ties, Stanford University comes out on top when looking at the alma maters of founders of VC-backed companies. The next nine are: UC Berkeley, MIT, Harvard, Penn, Cornell, Michigan, U Texas, Tel Aviv University and the University of Illinois. See the whole list HERE.

Shocker: IP Essential to US Economy (sic)
It's astonishing that this is a news flash, but the US Department of Commerce just released its 2016 report on Intellectual Property and the US Economy. It documented 81 sectors (out of 313) that have intensive use of patents, trademarks and copyrights. These sectors accounted for 27.9 million jobs in 2014 (about 30% of all jobs), paying wages approximately 46% higher than in non-IP intensive sectors.  MORE

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Innovation Policyworks enables economic development officials at state, regional and local levels make better, data-driven decisions by providing expert research, analysis and recommendations. Our clients see innovation and entrepreneurship as critical elements of their economic development strategy, and are developing new programs or policies, and/or evaluating existing ones. 

Dr. Catherine S. Renault has been delivering innovation-based economic development results in rural states for 25 years, most recently as science advisor and Director of the Office of Innovation for the State of Maine. Cathy is currently working with E2Tech, the Maine State Building and Construction Trades Council 
and iNBIA.  For a list of selected projects, see www.innovationpolicyworks.com/projects.