Virginia’s Technology FutureTechnology, Innovations and Startups

Council

Josh LeviVice President of Policy

Northern Virginia Technology Council

June 24, 2013Richmond, VA

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Highly educated workforce World class institutions of higher education Low tax state Attractive regulatory environment Right to work Reliable, available and affordable energy Excellent ports and international airport Well Managed State/AAA bond rating Open to innovative public-private partnerships

Commonwealth of Virginia Supports

and Promotes Business

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Why Technology?

Technology industry drives growth

Technology increasingly important in state government

Technology keeps Virginia businesses competitive

Technology and innovation drive effective and efficient solutions to problems

We are already ahead! Virginia’s technology successes have already distinguished us as a global technology center and a top destination for technology businesses and workers

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Virginia Is National Technology Business

Leader

1st in highest concentration of high tech employees in the nation

3rd in high tech services

4th in number of tech workers

5th in high tech payroll

6th in # of high tech establishmentsSource: The TechAmerica Foundation, 15th edition of Cyberstates 4

Virginia Is National Technology Business

LeaderAlso…

1st in STEM job growth from 2002-20121st in STEM job concentration 1st in high tech share of all businesses 1st in fast growing firms2nd in computer systems design

employment2nd in private sector scientists and

engineers3rd in e-government4th in engineering services employment  6th overall in ITIF’s State New Economy

Index7th in venture capital as percent of worker

earnings8th in internet and telecommunication

services

Source: The TechAmerica Foundation, 15th edition of CyberstatesUnited States Chamber of Commerce, Enterprising States 2013The Information Technology & Innovation Foundation, The 2012 State New Economy Index

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Source: CHMURA Economics & Analysis, Virginia Economic Trends, 2nd Quarter 2013 Report

All Industries

High - Tech

2012Q3VA

Virginia Technology Employment

84%

16%

Total Employment: 3,621,476

High-Tech Employment: 594,306

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Source: CHMURA Economics & Analysis, Virginia Economic Trends, 2nd Quarter 2013 Report

2012Q3VA

Virginia Technology Wages

69%

31%

Total Wages: $45.24B

High-Tech Wages: $14.19B

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All Industries

High - Tech

Tech workers earned an

average wage of $98,920

93 percent more than Virginia’s

average private sector wage

Aerospace

Big Data/Data Analytics

Bioinformatics

Biotech/Life Sciences

Cyber Security

Data Centers

Education IT

Green IT

Health IT

Information Technology

Internet

Modeling and Simulation

Nanotechnology

Professional

Services/Government

Contracts

Semiconductors

Software

Systems Integration

Telecommunications

Virginia Has Strong And Diverse Technology Industry

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Center for Innovative Technology (CIT) Virginia Innovation and Entrepreneurship Investment

Authority (IEIA) Nation’s First Cabinet – Level Secretary of Technology Chief Information Officer to Manage State IT (CIO) Virginia Information Technologies Agency (VITA) Joint Commission on Technology and Science (JCOTS) Senate Committee on General Laws and Technology House Science and Technology Committee Advisory councils including:

Aerospace Advisory Council Broadband Advisory Council Modeling and Simulation Advisory Council

Virginia’s Government has Embraced Technology

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Aggressive computer crimes laws Early leader in e-government Commercial law to support e-commerce State investments to build research capacity Broadband deployment policies and investments Telework promotion and incentives Technology procurement policy Technology tax incentives

The Commonwealth of Virginia Supports & Promotes Technology

Business

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Dual Emphasis Economic Development Strategy is Key

Emphasis 1: Enhance Tools To Attract Companies Seeking To Relocate, Expand, Establish R&D Operations

Includes: Governor’s Opportunity Fund Virginia Jobs Investment Program Virginia Investment Partnership Act Virginia Economic Development Incentive

Grants VEDP Marketing and Overseas Offices Major Business Facility Jobs Tax Credit Worker Training Incentives Department of Business Assistance Program

Activity

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Emphasis 2:  Employ Comprehensive “Grow Your Own”/New Company Formation Strategy

Position Virginia as:

A leader in next-generation tech company formation and innovation

Top destination for entrepreneurs, early stage investors, innovators

Dual Emphasis Economic Development Strategy is Key

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Research

Commercialization

Startup

Growth

Expansion

Mature

Business Lifecycle

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Research Commercialization Startup Growth Maturity

Research

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Direct Research Funding From The Commonwealth

Capital Investments To Provide Space/Capacity

Commonwealth Research and Technology (R&T) Strategic Roadmap

CRCF: Eminent Researchers Component CRCF: Matching Funds Component Higher Education Equipment Trust Fund R&D Income Tax Credit R&D Sales Tax Exemption

Research Commercialization Startup Growth Maturity

Research

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CRCF: SBIR/STTR Match Component

CRCF: Commercialization Program

CRCF: Facilities Enhancement Loan Program

BOVs May Delegate Faculty Conflict Of Interest Waivers To University Presidents

BOVs May Assign Title Of University IP

Research Commercialization Startup Growth Maturity

Research

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Virginia’s Business One Stop

CIT GAP Funds

Mach37™ Cyber Accelerator

Angel Investment Tax Credit (Qualified Equity And Subordinated Debt)

Capital Gains Tax Exclusion

Sales Tax Exemption For Software Publishers

Refundable R&D Tax Credit

R&D Sales Tax Exemption

Research Commercialization Startup Growth Maturity

Research

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Provide highly skilled STEM workforce for growth businesses

594, 306 tech employees 2012Q3

More than 18,700 students were enrolled in information technology programs and over 3,600 degrees and certificates were awarded in the 2010-2011 academic year (SCHEV)

Commonwealth STEM Industry Internship Program

SySTEMic Solutions

Research Commercialization Startup Growth Maturity

Research

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(continued)

Targeted State Incentives: Semiconductor Manufacturing

Performance Grant Program Data Center Incentives Sales Tax Exemption For Downloaded

Software Telecom And Internet-related Incentives Green Jobs Tax Credit Discretionary Performance Grants Local Personal Property Tax Incentives

For: • Biotechnology• Broadband• Data centers

Research Commercialization Startup Growth Maturity

Research

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Tax And Regulatory Predictability

Big Data AnalyticsBiotechnologyComputers/Telecommunications/ ITCybersecurityData Center Infrastructure and

InvestmentGreen Technology and Alternative

EnergyHealth ITModeling & SimulationNanotechnologySecurity and Information AssuranceSpace and Aerospace

Leveraging our Competitive Advantage in Targeted Industry

Sectors

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Virginia’s Technology FutureTechnology, Innovations and Startups

Council

Josh LeviVice President of Policy

Northern Virginia Technology Council

June 24, 2013Richmond, VA

21

Technology, Innovation and Startups

June 24, 2013

CIT accelerates the next generation of technology and technology companies

Our objective is to be globally recognized as the innovator,

builder and premier provider of services that accelerate

technology company development

Mission

Accelerate federal funding for small businesses

Operate technology sourcing and management consulting practice

Operate Office of Telework and Broadband Promotion

Operate the GAP Fund

Provide demand generation and infrastructure services

• •

•

•

•

Service Lines and 2013 Objectives

Deliver technology solutions via R&D programs

Maintain a statewide research and tech roadmap

Administer the Commonwealth Research Commercialization Fund

• •

•

RESEARCH

PROOF OFCONCEPT

ORINVENTION

EARLY STAGE

DEVELOPMENT

PRODUCTDEVELOPMENT PRODUCTION

Areas of Operation

CIT GAP Funds Overview

• Family of Seed-Stage Venture Funds

• Virginia Investment Focus

• Convertible Debt & Equity Fund

• Spin-Outs from Virginia Research Institutions

• “Double-Bottom Line” Fund

• Deep Engagement with Portfolio Companies

GAP Investment Criteria

Management Team / Founder Full-Time Commitment Integrity, Passion, Creativity Coach-ability Record of High Achievement

Investment Stage Seed-Stage Focus Up to 36 Months Prior to Series-A Pre-prototype – Newly-Launched

Technologies

Investment Range GAP Investment

< $200K; >$100K Tranched < $1M Concurrent Syndication  < $1M Previous Financing Follow-On Investment up to $250K

Innovation Investment < $75K per Company > $50K Requires IAB Review

Proprietary Advantage Unique Technology Defensible IP Position Difficult-to-Replicate

Scalability Markets with Big Buying Power Potential for Dominant Market Position

Returns Angel -VC Multiples

Industries Technology BioLife Energy

Geographic Focus Virginia-Only

GAP Funds – Leverage Value (all)

13x

Track Record

81 New Companies Seeded

7 Spin-Outs from Universities and Federal Labs

13X Private : Public Funding Secured

8 Portfolio Companies Exited

4X Named “Top 100 Venture Fund”

Value Creation for …

EntrepreneursCo-InvestorsCommonwealth of Virginia

R&D Service Line

• Deliver technology solutions to solve national and regional challenges• Coastal ocean observing• Remote sensing technologies for mine safety• Vessel detection

• Maintain a statewide research and technology roadmap

• Established the Innovation & Entrepreneurship Measurement System

• Manage the Commonwealth Research Commercialization Fund

R&T Roadmap - Legislation

§ 2.2-2221.2. Commonwealth Research and Technology Strategic Roadmap

Develop the Roadmap…to use to identify research areas worthy of institutional focus and Commonwealth investment in order to promote commercialization and economic development efforts in the Commonwealth

§ 2.2-2233.1. Commonwealth Research Commercialization Fund (CRCF)

Awards from the Fund shall only be made to applications that further the goals set forth in the Commonwealth Research and Technology Strategic Roadmap

R&T Roadmap

• Identify key industry sectors for potential investment

• Identify basic and applied research opportunities with commercial promise in these sectors

• Encourage commercialization and economic development in these sectors

• Help ensure that investments in research are made prudently in focused areas with significant potential for commercialization and economic growth

Findings

• Wireless RF• Cognitive radio• Nuclear plant life• Med isotopes• Integrated comms• Sensor / measurement

• M&S• National defense / homeland security• Smart grid and analytics• Biofuels• Aerospace• Health IT

• Cyber security• Data management / analytics• Smart grid and analytics• Surface engineering• Biotechnology• Med devices

• Power electronics• Smart construction• Bioinformatics• Remote patient care• Intermodal ports• Smart sensing

• Health IT• Data imaging• Hybrid conversion• Energy storage• Uranium mining• Nano solar cells

• Energy storage• Biomass conversion• Drug research• Biothreat defense• Information assurance• Educational software

• Defense intelligence• Cyber security• Information assurance• Biotech• Health IT• Med devices

• Secure telework• Defense logistics• Cyber security• Information assurance• Green tech • Green construction

• Coal bed methane conversion• Biomass • Plug-less power• Personalized medicine• Tobacco-cultured vaccine• Application software

• Cyber security• National defense• Smart grid• Semiconductors• Bioinformatics• Health IT

Roadmap Application

Strategic planningValue Add

Investment vetting

Research recruiting

Scholar recruiting

NewCo formation

Investor recruiting

Fed program dev

VEDP

CR

CF

Toba

cco

Com

m.

Uni

vers

ities

In

dust

ry

Loca

litie

s C

IT

Company recruiting

RESEARCH

PROOF OFCONCEPT

ORINVENTION

EARLY STAGE

DEVELOPMENT

PRODUCTDEVELOPMENT PRODUCTION

Accelerating Commercialization

GAP Fund

Eminent Researcher Recruitment Fund

Research Matching Fund

Facility Enhancement Loan Fund

Commercialization Fund

SBIR Matching Fund

Commonwealth Research &Technology Strategic Roadmap

STTR Matching Fund

Commonwealth Research Commercialization Fund (CRCF)

• Advanced Manufacturing• Aerospace• Communications• Cyber Security• Energy• Environment• Information Technology• Life Sciences• Modeling & Simulation (M&S)• Nuclear Physics• Transportation

2012 Program Profile

181 proposals were received, representing all ten tech council regions

$35.5M in funding was requested

47 grants were awarded

$5.8M funding was provided

Funding was 100% matched by recipient

• Security for wireless devices – active defense mechanism

43 grants were awarded• Portable device for bone imaging – battlefield and emergency trauma analysis $3M funding was provided• Simulation software – 3D modeling for homeland security

Funding was 100% matched by recipient

2013 Program Profile

100+ proposals submitted, with $7.4M requested

Driving innovation and economic growth in Virginia through technology-based research and commercialization

Roadmap: Key Industry Sectors

Example CRCF Project Profile and Impact

Focus areas included young companies; proof of concept work; cyber security, M&S, IT for K-16 ed, life sciences

• Novel compounds – new therapeutic strategy to halt or reverse diabetes

Broadband Service Line

• Operate Commonwealth’s office of Telework Promotion and Broadband Assistance

• Provide demand generation and infrastructure development services

Program areas

Broadband Mapping

• Availability data collection

• Availability mapping

• Refresh cycle is 6 months

Capacity Building

• “Connectedness” data collection

• Sources for assessment – hospitals, doctors, schools, businesses

Technical Assistance

• Community workshops

• Digital literacy programs

Special Projects

• Stakeholder coordination to deploy

Environmental sensors

Smart grid

Innovation & Entrepreneurship in Virginia

Entrepreneurs and startups account for 30% of new jobs in the Commonwealth

• Provide strategic vision for growing the I&E sector of Virginia’s economy

• Develop, track, analyze and report on key I&E metrics• Recommend statewide initiatives designed to capitalize on industry

and research strengths• Assess national priorities and programs that offer opportunities to

Virginians • Support regional organizations and initiatives focused on I&E• Current programs include:

o Innovation & Entrepreneurship Measurement System (IEMS)o Virginia Performs Scorecardo “Virginia Blueprint” economic development strategic plano STEMo Veterans Employment Initiative

Blueprint Virginia Economic Drivers:

Educational Excellence  Workforce Readiness Robust Infrastructure Supporting Advanced Manufacturing  Attractive Business Climate  Technology, Innovation and Startups Small Business and Entrepreneurship Quality, Cost-effective Healthcare  Energy Diversity & Security

Goal - Build a statewide consensus among private and public sector leaders regarding investment priorities