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

The Ben Franklin Experiment: Two Decades of Innovation by RoseAnn B. Rosenthal President & CEO. “We are, I think in the right Road of Improvement, for we are making experiments.” Ben Franklin. Quick Overview. Walk Through Three Phases: Environment Response Results & Lessons Learned

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

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  1. The Ben Franklin Experiment:Two Decades of InnovationbyRoseAnn B. RosenthalPresident & CEO

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

  3. Quick Overview • Walk Through Three Phases: • Environment • Response • Results & Lessons Learned • Your Portrait of Ben (Team Strategizing Session)

  4. 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

  5. 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

  6. 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

  7. 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

  8. Phase 1: Start Up (1982 – 1988) The Environment An economy in transition: industrialpost-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)

  9. 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

  10. 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.”

  11. Phase 1: Start Up (1982 – 1988) The Response (cont’d) 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; competitive Focus 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

  12. Phase 1: Start Up (1982 – 1988) The Response (cont’d) University governance Board of regional leaders State overseer board • Full project plan submitted annually to state board • Approved all projects and technology sector focus

  13. Phase 1: Start Up (1982 – 1988) The Response (cont’d) ATP of Southeastern PA Seed funding for start ups First incubator Centers of Research Excellence Network >80% thru universities

  14. 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

  15. 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

  16. Phase 1: Start Up (1982 – 1988) Results & Lessons Learned (cont’d) 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

  17. 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

  18. Phase 2: Incorporation(1988-1995; 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

  19. Phase 2: Incorporation(1988-1995; 1996-2000) The Environment (cont’d) 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

  20. Phase 2: Incorporation(1988-1995; 1996-2000) The Response Legislation creating Ben Franklin/IRC Partnership • Industrial Resource Centers added • Legislated in 1988 with reauthorization bill • Focus on manufacturing competitiveness

  21. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) • 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 partnercompanies 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)

  22. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  23. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  24. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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)

  25. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  26. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) • 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

  27. Phase 2: Incorporation(1988-1995; 1996-2000) Results & Lessons Learned • 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

  28. Phase 2: Incorporation(1988-1995; 1996-2000) Results & Lessons Learned (cont’d) • 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

  29. 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

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

  31. 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

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

  33. Phase 2: Incorporation(1988-1995;1996-2000) The Response (cont’d) 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

  34. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) BFTP/SEP Adopts Expanded Vision: “Ben Franklin will be the primary economic development catalyst helping the region transition to a knowledge-based economy.”

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

  36. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  37. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  38. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) BFTP/SEP’sTechnology 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

  39. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) BFTP/SEP’sInformation and Advocacy: Sponsor/produce economic reports Regional 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

  40. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  41. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) 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

  42. Phase 2: Incorporation(1988-1995; 1996-2000) The Response (cont’d) BFTP/SEP’s Infrastructure: (cont’d) • Restructured export consortiumWorld 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

  43. Phase 2: Incorporation(1988-1995; 1996-2000) Results & Lessons Learned • 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 supporthigher staff costs

  44. Phase 2: Incorporation(1988-1995; 1996-2000) Results & Lessons Learned (cont’d) • 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

  45. 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

  46. Phase 3: Growth 2001  Future The Environment (cont’d) • 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

  47. Phase 3: Growth 2001  Future The Response BFTP/SEP Adopts New 5 Year Strategy • Regional Vision • BFTP/SEP Vision • Mission • Key Strategic Goals

  48. Phase 3: Growth 2001  Future 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.

  49. Phase 3: Growth 2001  Future Regional Vision To see the region achieve international stature and recognition as a model for technology, innovation and entrepreneurship.

  50. Phase 3: Growth 2001  Future 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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