Virginia’s Technology Future

1. Virginia’s Technology Future Technology, Innovations and Startups Council Josh Levi Vice President of Policy Northern Virginia Technology Council June 24, 2013 Richmond, VA

2. Commonwealth of Virginia Supports and Promotes Business • 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

3. 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

4. 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 establishments Source: The TechAmerica Foundation, 15th edition of Cyberstates

5. Virginia Is National Technology Business Leader Also… • 1st in STEM job growth from 2002-2012 • 1st in STEM job concentration • 1st in high tech share of all businesses • 1st in fast growing firms • 2nd in computer systems design employment • 2nd in private sector scientists and engineers • 3rd in e-government • 4th in engineering services employment • 6th overall in ITIF’s State New Economy Index • 7th in venture capital as percent of worker earnings • 8th in internet and telecommunication services Source: The TechAmerica Foundation, 15th edition of Cyberstates United States Chamber of Commerce, Enterprising States 2013 The Information Technology & Innovation Foundation, The 2012 State New Economy Index

6. Virginia Technology Employment All Industries High - Tech 2012Q3VA Total Employment: 3,621,476 High-Tech Employment: 594,306 84% 16% Source: CHMURA Economics & Analysis, Virginia Economic Trends, 2nd Quarter 2013 Report

7. Virginia Technology Wages All Industries High - Tech 2012Q3VA Tech workers earned an average wage of $98,920 93 percent more than Virginia’s average private sector wage Total Wages: $45.24B High-Tech Wages: $14.19B 69% 31% Source: CHMURA Economics & Analysis, Virginia Economic Trends, 2nd Quarter 2013 Report

8. Virginia Has Strong And Diverse Technology Industry • 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

9. Virginia’s Government has Embraced Technology • 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

10. The Commonwealth of Virginia Supports & Promotes Technology Business • 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

11. 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

12. Dual Emphasis Economic Development Strategy is Key • 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

13. Mature Business Lifecycle

14. Research • 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

15. 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

16. 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

17. 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

18. (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

19. Tax And Regulatory Predictability Research

20. Leveraging our Competitive Advantage in Targeted Industry Sectors • Big Data Analytics • Biotechnology • Computers/Telecommunications/ IT • Cybersecurity • Data Center Infrastructure and Investment • Green Technology and Alternative Energy • Health IT • Modeling & Simulation • Nanotechnology • Security and Information Assurance • Space and Aerospace

21. Virginia’s Technology Future Technology, Innovations and Startups Council Josh Levi Vice President of Policy Northern Virginia Technology Council June 24, 2013 Richmond, VA

22. Technology, Innovation and Startups June 24, 2013

23. Mission 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

24. Service Lines and 2013 Objectives Accelerate federal funding for small businesses Operate the GAP Fund Operate technology sourcing and management consulting practice Operate Office of Telework and Broadband Promotion Provide demand generation and infrastructure services Deliver technology solutions via R&D programs Maintain a statewide research and tech roadmap Administer the Commonwealth Research Commercialization Fund

25. Areas of Operation PROOF OF CONCEPT OR INVENTION EARLY STAGE DEVELOPMENT PRODUCT DEVELOPMENT RESEARCH PRODUCTION

26. 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

27. 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

28. GAP Funds – Leverage Value (all) 13x

29. 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 … • Entrepreneurs • Co-Investors • Commonwealth of Virginia

30. R&D Service Line • Deliver technology solutions to solve national and regional challenges • Coastal ocean observing • Remote sensing technologies for mine safety • Vessel detection • Manage the Commonwealth Research Commercialization Fund • Maintain a statewide research and technology roadmap • Established the Innovation & Entrepreneurship Measurement System

31. R&T Roadmap - Legislation § 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 • § 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

32. R&T Roadmap • Identify key industry sectors for potential investment • Identify basic and applied research opportunities withcommercial promise in these sectors • Encourage commercialization and economic development in these sectors • Help ensure that investments in research are made prudentlyin focused areas with significant potential for commercializationand economic growth

33. Findings • Cyber security • National defense • Smart grid • Semiconductors • Bioinformatics • Health IT • Defense intelligence • Cyber security • Information assurance • Biotech • Health IT • Med devices • Energy storage • Biomass conversion • Drug research • Biothreat defense • Information assurance • Educational software • Wireless RF • Cognitive radio • Nuclear plant life • Med isotopes • Integrated comms • Sensor / measurement • Secure telework • Defense logistics • Cyber security • Information assurance • Green tech • Green construction • Power electronics • Smart construction • Bioinformatics • Remote patient care • Intermodal ports • Smart sensing • Cyber security • Data management / analytics • Smart grid and analytics • Surface engineering • Biotechnology • Med devices • Health IT • Data imaging • Hybrid conversion • Energy storage • Uranium mining • Nano solar cells • M&S • National defense / homeland security • Smart grid and analytics • Biofuels • Aerospace • Health IT • Coal bed methane conversion • Biomass • Plug-less power • Personalized medicine • Tobacco-cultured vaccine • Application software

34. Roadmap Application Tobacco Comm. CIT Industry Localities Universities VEDP CRCF Value Add Strategic planning Investment vetting Company recruiting Research recruiting Scholar recruiting Investor recruiting NewCo formation Fed program dev

35. Accelerating Commercialization Commonwealth Research &Technology Strategic Roadmap Eminent Researcher Recruitment Fund Research Matching Fund SBIR Matching Fund STTR Matching Fund PROOF OF CONCEPT OR INVENTION EARLY STAGE DEVELOPMENT PRODUCT DEVELOPMENT RESEARCH PRODUCTION GAP Fund Commercialization Fund Facility Enhancement Loan Fund

36. Commonwealth Research Commercialization Fund (CRCF) Driving innovation and economic growth in Virginia through technology-based research and commercialization Roadmap: Key Industry Sectors 2012 Program Profile • Advanced Manufacturing • Aerospace • Communications • Cyber Security • Energy • Environment • Information Technology • Life Sciences • Modeling & Simulation (M&S) • Nuclear Physics • Transportation • 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 Example CRCF Project Profile and Impact 2013 Program Profile • Focus areas included young companies; proof of • concept work; cyber security, M&S, IT for K-16 ed, • life sciences • Security for wireless devices – active • defense mechanism • Novel compounds – new therapeutic strategy • to halt or reverse diabetes • 100+ proposals submitted, with $7.4M requested • Portable device for bone imaging – battlefield and • emergency trauma analysis • 43 grants were awarded • $3M funding was provided • Simulation software – 3D modeling for homeland security • Funding was 100% matched by recipient

37. Broadband Service Line • Operate Commonwealth’s office of Telework Promotion and Broadband Assistance • Provide demand generation and infrastructure development services Program areas Broadband Mapping Technical Assistance • Availability data collection • Community workshops • Availability mapping • Digital literacy programs • Refresh cycle is 6 months Capacity Building Special Projects • “Connectedness” data collection • Stakeholder coordination to deploy • Sources for assessment – hospitals, • doctors, schools, businesses • Environmental sensors • Smart grid

39. 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: • Innovation & Entrepreneurship Measurement System (IEMS) • Virginia Performs Scorecard • “Virginia Blueprint” economic development strategic plan • STEM • Veterans Employment Initiative

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