The Ben Franklin Experiment: Two Decades of Innovation by RoseAnn B. Rosenthal President & CEO

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The Ben Franklin Experiment:Two Decades of Innovation

by

RoseAnn B. RosenthalPresident & CEO

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“We are, I think in the right Road of Improvement, for we are making experiments.”

Ben Franklin

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Quick Overview

Walk Through Three Phases:

Environment

Response

Results & Lessons Learned Your Portrait of Ben (Team Strategizing Session)

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The view from 20,000 feet

Legislated in December 1982: most continuous S & T economic development program; survived 2 sunset reviews (1988 and 2000)

Regionally based: 4 “centers”

Statewide overseer board

Funding relatively consistent

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Statewide Impact

60,190 High Value Jobs Created and Retained

1,556 New Technology-Driven Businesses Created

1,842 Products & Processes Developed and Commercialized

$1.01 Billion in Private Sector Match

$90 Million in Federal Match

$171.3 Million in College/University Contributions

$168.8 Million in Other Resources Leveraged

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Statewide Impact (cont.)

BFTP clients grow faster—adding 5 more jobs/year

than non-clients

$2.9 billion increase in gross state products due

directly to BFTP

A 14:1 return on the state’s investment

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Three Phasesof Ben

Start Up: 1982 – 1988 - Ben Franklin Partnership Fund • Advanced Technology Centers

Incorporation: 1988 – 2000 - Ben Franklin/IRC Partnership

• 1988-1995 Ben Franklin Technology Centers & Industrial Resource Centers

• 1995-2000 Ben Franklin Technology Partners & PA Technology Investment Authority

Growth: 2001 - Ben Franklin Technology Development Authority

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Phase 1: Start Up (1982 – 1988)

The EnvironmentAn economy in transition: industrialpost-industrial

• Recession

• Manufacturing decline… 21.5% mfg jobs lost; 14/9% unemployment; 400,000 jobs lost

• 40 largest corp employment cut by 50%…1.29 million in ’79 to 600,000 in ’86

Traditional economic development approaches• Smokestack chasing

• Gov. Shapp (D): Volkswagen Rabbit; $40 M subsidies; closes in 9 years

• Social welfare spending

Role of venture capital emerging

Change in Administration 1978: Gov. R. Thornburgh (R)

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Phase 1: Start Up (1982 – 1988)

The Response

“Choices for Pennsylvanians”…study of State’s economy

Importance of small businesses Modernize manufacturing base Diversify economy through innovative, advanced technology

companies New partnerships: public/private; state/local government Identified strong intellectual infrastructure:

• 4 universities among top 50 graduate research institutions• 5th among states: scientists/engineers; workers in adv tech;

$ spent on R & D

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Phase 1: Start Up (1982 – 1988)

The Response (cont’d)

12/6/82 HB 2344 An Act…

…the Ben Franklin Partnership Fund …may establish

advanced technology centers which shall serve as

university-based consortiums between business,

universities and government to provide advanced

technology research and development, training, education

and related activities which show significant potential in

diversification of Pennsylvania’s economy and the State’s

economic growth.”

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Phase 1: Start Up (1982 – 1988)


Challenge Grant to establish 4 regional ATCs• $1 M fy ‘82-’83 f/planning,• $28.45M by fy ‘88; $104 total over 5 yrs

Funding no > 50% from State; competitiveFocus on creating new tech clusters & bringing new technologies to

traditional industries• Joint R & D (business/academic)• Training & curriculum development• Technical assistance & tech transfer• Business incubators• Market development, feasibility studies• Staff support for advanced tech councils or other consortia• Tech Parks

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Phase 1: Start Up (1982 – 1988)


University governance

Board of regional leaders

State overseer board• Full project plan submitted annually to state board

• Approved all projects and technology sector focus

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Phase 1: Start Up (1982 – 1988)


ATP of Southeastern PA

Seed funding for start ups

First incubator

Centers of Research Excellence Network

>80% thru universities

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Phase 1: Start Up (1982 – 1988)

Results & Lessons Learned

National Model• 1986 Presidential Commission on Industrial Competitiveness

Award• Small Business High Tech Institute State Award• David Osborne: INC and Laboratories of Democracy

Economic Impact• 523 new start up companies• $400 M non-state support• 3,283 jobs created• 1,209 companies assisted w/8,649 jobs created & 6,914 jobs

retained

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Phase 1: Start Up (1982 – 1988)

Results & Lessons Learned (cont’d)

Programmatic “From University Lab to the Marketplace”…tougher than expected;

2 different cultures and worldviews

Requirement for university participation in all company engagements posed limitations

Few company spin-outs from university activities

Incubator sustainability an issue

“Silk-stocking” image…few jobs to underprivileged

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Phase 1: Start Up (1982 – 1988)


Structural Competitive funding process for ATPs counterproductive &

time consuming Annual project funding cycle unresponsive to customers State-directed regional technology focus unresponsive to

changing economic/sector conditions State approval of all projects slows process

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Phase 2: Incorporation(1988-1995;

1996-2000)

The Environment: 1988-1995

PA economy still contracting: job retention vs strategy creation Manufacturing competitiveness a national issue; mfg losses in PA to

offshore and Mexico Small businesses proliferating nationally; not in PA

• David Birch era

Defense downsizing hits PA, particularly SE PA w/ 4 installation closures

Jobs, jobs, jobs…..any job a good job…• Role of technology not central to local strategies; tech job growth too slow;

not across all constituencies

Little understanding/policy attention to electronic-based communications and IT sector

Universities pursuing traditional role

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1996-2000)

The Environment (cont’d)

Shift in role & influence of city vs. suburbs

Growth in suburbs; decline in city

Varying rates of tech adoption, city vs. suburbs

Tech sector taking root in suburban ring

Focus on service sector as economic driver for city

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1996-2000)


New federalism Focus on market solutions Search for non-bureaucratic methods; Reinventing Government

theme Fiscal moderation Investment vs. spending Redistribution of opportunities vs. outcomes

State Administration changes Gov. Casey (D) Labor backlash to perceived neglect of traditional industries

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1996-2000)

The Response

Legislation creating Ben Franklin/IRC Partnership

Industrial Resource Centers added

Legislated in 1988 with reauthorization bill

Focus on manufacturing competitiveness

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1996-2000)


Ben Franklin Technology Centers 501 C-3 incorporation Boards must be 51% private sector Equal funding of 4 centers Regional approval of projects “Set aside” to enable mid-year project funding Royalty-based investments in companies without university

partnercompanies become focus of innovative activity• Centers that generate financial returns not penalized

Less emphasis on university “technology transfer” Regional production of strategic technology development plans Job Link added to BFTPs (link welfare population and tech

entrepreneurs)

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1996-2000)


BFTP/SEP: Criteria for Projects

Balanced portfolio

Support consortium activities

Leverage other funding

Add value through joint ventures with strategic partners

Focus on extending benefits to disadvantaged communities

Coordinate with state and regional development strategies

Seek potential for ROI or sustainable asset

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1996-2000)


BFTP/SEP: Job Creation Via Entrepreneurial Development

Provides royalty-based investments - $25,000 to $100,000

Initiates effort to form privately-managed seed fund

Invests in regional seed funds

Supports regional venture & entrepreneurial organizations

Founds Business Information Center for small company access to on-line business information

• Via SBA/NIST/foundation grants, expands to target minority enterprises and community outreach in collaboration with SBDCs

Launches SBA-funded micro-loan program

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1996-2000)


BFTP/SEP: Regional economic diversity via educational and research infrastructure

Centers of Research Excellence restructured

START Technology Partnership to commercialize university

technologies…(international technology licensing organization, multiple

universities & venture firms)

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1996-2000)


BFTP/SEP: Productivity improvements in existing sectors

Technical assistance to mfg companies: RPDC w/IRC Creates Technology Investment Fund: product development in

established enterprises

Partners with region on defense adjustment strategies

• Technology Reinvestment Partnership grant– On-line defense procurement

– SBIR technical assistance

– Federal Technology Assistance Program w/federal labs

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1996-2000)


Upgrade and retrain workers; attention to role of organized labor; Gress Graphics; Greater Phila. Productivity Consortium

Supports regional consortia addressing competitiveness and export development issues

Sponsors and seeds LibertyNet, region’s first internet community

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1996-2000)


Largest regional source of institutional seed capital: core to mission

University spin-outs remain a challenge

Regional advisors from all sectors a strong asset

Regional base of legislative & constituent support critical for stability

Diversification of revenue key to growth

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1996-2000)


Pressure to keep administrative costs low limits programmatic options

Traditional economic development metrics…short term jobs…a poor measure of success for technology development programs

seed-stage tech investments = high-risk & long-term reward affects competition for state funding

Difficulties of small non-profit in large regional economy…impact and visibility

Functioned as a facilitator, reacting creatively to variety of situations…necessary to shift to catalyst, creating reactions

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Phase 2: Incorporation(1988-1995;1996-2000)

The Environment: 1996-2000

Unparalleled national economic growth

Recognition of technology as economic engine of the future

Competition for gazelles replaces focus on corporate recruitment;

rise of the tech entrepreneur

The competitive advantage of regions frames discussions

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The Environment: 1996-2000 (cont’d)

Recognition that competition is global

Pace of economic transformation accelerating

Positive press attention to technology & entrepreneurs…finally

Networks and technology clusters in vogue

Shortage of skilled labor replaces concerns about job creation

Welfare reform adopted; economic empowerment hits

Blurring of lines: traditional/S&T/community economic development

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Phase 2: Incorporation(1988-1995; 1996-2000)

The Environment: 1996-2000 (cont’d)

Private sector incubators/accelerators emerge

Universities defining new role in Knowledge Economy

Venture philanthropy emerges

Federal attention to technology development (NIST, MEPs, SBIR,

ATP, EDA, etc)

New Administration in PA: Gov. Ridge (R)

Ben Franklin Partnership sunset in 2000

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The Response

PA Technology 21 Process

Recognition PA not in the technological vanguard despite strengths Comprehensive approach to technology required Cluster and network based Global approach Industry-led

Creation of PA Technology Investment Authority

Technology financing, e-commerce, and research & development Grounded in regional strategies BFTPs “gatekeeper” of regional process Closer alignment of regional/state strategies

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BFTCs engage Battelle: 10 year strategy Constituent & self assessment Best practices survey, nat’l & int’l Integrates Tech 21 objectives

BFTCs form stronger network Single identity: Ben Franklin Technology Partners State-wide coordinator Produce Tech 21 Cluster reports Common web site; marketing materials Commission Nexus Associates to produce independent economic

impact report

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BFTP/SEP Adopts Expanded Vision:

“Ben Franklin will be the primary economic development catalyst helping the region transition to a knowledge-based economy.”

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The Response (cont’d)BFTP/SEP Approves Strategy Based on 4 Objectives:

BFTP as integral, pivotal link in the region’s economic development delivery system, providing risk capital and services to technology enterprises;

BFTP as broker for knowledge-based solutions, drawing on regional, national and international resources to help companies and communities with technology issues;

BFTP as a source of information on the technology sector, advocating and contributing to the region’s understanding of technology as an economic driver;

BFTP as an enabler, intervening strategically to be a change agent in areas basic to creating the infrastructure for a new economy.

Transform organization growing, sustainable regional institution, with an innovative, entrepreneurial, performance-based culture.

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BFTP/SEP’s Entrepreneurial Development:

Shift from transaction orientation to relationship development

Emphasis on incubation vs. incubators

• MOUs with physical incubators

Increased funding levels to $500,000

New investment vehicle: subordinated debt

w/detachable warrants

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BFTP/SEP’s Entrepreneurial Development: (cont’d)

Larger resource commitment for support to portfolio companies

New models of entrepreneurial support: Success Teams; mentors

Streamlined and improved investment assessment, documentation

and management processes

Lead partner in 3 specialty capital funds

Restructured and refunded micro-loan program; focus on “The

Competitive Edge” through technology & services

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BFTP/SEP’s Technology Solutions:

Creation of EDA-supported Technology Extension Services

Professional field staff co-located with county economic development staff

Call agents to existing technology companies

Technology engagements with University Centers of Excellence

Federal research labs and private research companies, institutions

Product Development Consortium in inner city Philadelphia

Technology expertise to portfolio companies

Refers 25% of successful investment candidates

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The Response (cont’d)BFTP/SEP’s Information and Advocacy:

Sponsor/produce economic reportsRegional benchmarks, the technology workforce, regional entrepreneurial climate, women entrepreneurs and technology, minorities and technology, venture capital in the region, and state report on bio/life sciences sector.

Aggressively market portfolio successes

Support & sponsor regional marketing & agenda-setting events

Developed regional Technology Action Agenda with local public broadcast station

Created web-based communities of interest: TechPhilly.org and winwomen.org

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BFTP/SEP’s Infrastructure:

Management of Regional PTIA process yielding > $25M for region

Nanotechnology Institute: $10.8 M; new model

Ben Franklin Gateway Partners: $4.5M to create $30M guarantee program w/area banks

IT Metrics report

R2C Alliances: multi-institutional/industry consortia for technology diffusion and application

Two private venture funds

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BFTP/SEP’s Infrastructure: (cont’d)

Ben Franklin Innovation Center: COE + incubator Research & commercialization

Company formation

Magnet for company attraction

Educational symposia

Fostered biotech consortium

New anchor for technology development

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BFTP/SEP’s Infrastructure: (cont’d)

Restructured export consortiumWorld Trade Center announced Modeled biomedical technician training: Wistar Institute and

Community College of Philadelphia

Incubated regional consortia: • Women’s Investment Network • Greater Philadelphia Collegetown Project

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Customer/constituent/staff feedback & input key to improvement

Regional structure & support remains basis of strength

Changing conditions require flexibility in approach/strategies/partners

Ability to tap into networks seeded & supported over time an important advantage

Importance of educating funding sources on implications of changing environment and expectations; e.g. more supporthigher staff costs

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Tension between resources for new investments vs. portfolio management & services

• Improved returns from increased services

• Investments greatest revenue generator

Operational strength and systems to support new strategies provide the foundation for change

Incentive-based approach focuses efforts & drives performance

Active, engaged board an asset; refocus as needed

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Phase 3: Growth 2001 Future

The Environment

Senate Bill 876 creating the…

Ben Franklin Technology Development Authority* to:

• “Serve as the Commonwealth’s key regional partners in identifying, developing, adapting and implementing advanced technologies.”

• “Act as regional facilitators and managers for interactions, programs and initiatives.”

• “Establish partnerships.”

* BFTP/PTIA merge; BFTPs on governing board; IRCs independent network; regional system in tact

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Altered, slowing economic environment; BFTP resources in greater demand

Many regional orgs. & seeking role in creating the New Economy Lead universities launching tech. & enterprise development

initiatives Growing attention to value of federal/state alliances Technology strategies in vogue nationally; tobacco settlements

provide added resources Legacy phase of state administration; new governor in 2003 Public school funding & performance, stadiums, land use, city blight

and inner-suburban ring deterioration, population loss, state/local political power plays the key topics

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The Response

BFTP/SEP Adopts New 5 Year Strategy

Regional Vision

BFTP/SEP Vision

Mission

Key Strategic Goals

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Team Challenge:

Given the overview of “The Ben Franklin

Experiment” outlined here, name three key

goals that BFTP/SEP should consider as it

embarks upon its 3rd phase of evolution.

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Regional Vision

To see the region achieve international stature and

recognition as a model for technology, innovation and

entrepreneurship.

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BFTP/SEP Vision

A force for the creation & growth of technology enterprises through integration of scientific discovery, development, commercialization

and innovation.

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BFTP/SEP Mission

BFTP/SEP stimulates economic growth and competitiveness in the region through initiatives and partnerships that nurture innovation, accelerate the development and adoption of technology by companies and communities, and promote the growth of technology-based entrepreneurship.

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BFTP/SEP: Our Plan

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Key Strategic Goals

A leader & partner in the development and implementation of large-scale regional initiatives;

The undisputed leader in the provision of capital and development services to pre-seed & seed stage technology enterprises;

A nationally renowned organization for product development & commercialization;

A contributor to regional understanding of the technology sector, through focused economic research that informs policy and program decisions;

A bridge linking minority and underserved populations to the tech-sector;

An acknowledged international leader in technology-based economic development.

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Achievements/Lessons

News & film 2006!

Documents

The Ben Franklin Experiment: Two Decades of Innovation by RoseAnn B. Rosenthal President & CEO