The Politechs of Innovation: Putting Weight Behind Idaho's Tech Industry 

Idaho state government gets in the R&D business

In Idaho ideas sprout as abundantly as the state's signature tuber--more so, even, since high-tech products account for more than 60 percent of the Gem State's exports, according to TechAmerica's annual Cyberstates report.

Year after year Idaho racks up accolades for its techno friendliness, a characteristic reflected by data in the most recent Idaho Patent Report released by business law firm Stoel Rives in 2011. According to the report, Idaho inventors received 974 patents from 2009 to 2010, an 18.3 percent increase over 2008-2009.

What's more, Idaho is routinely ranked among the friendliest states for small business start-ups--most recently earning an A-plus ranking from the Ewing Marion Kauffman Foundation in conjunction with thumbtacks.org. In the study, released May 8, Idaho was one of only four states to earn top marks, joined by Colorado, Oklahoma and Texas. Even better, Idaho ranked seventh nationally in the category labeled "Optimism about the future."

With international tech heavyweights like Micron and Hewlett-Packard, a national laboratory and robust research programs at three state universities, Idaho has long been regarded as an up-and-coming innovation superstar. But going from "eureka!" to a marketable product is a high hurdle in the best of times. Idaho may be rich in ideas but turning them into companies is a perennial challenge. Now it's a matter of state policy.

Think globally, invent locally

Gov. C.L. "Butch" Otter is fond of his good ol' boy mystique. Routinely seen in cowboy duds and toiling on his sprawling ranch in Star, Otter first made a name for himself working for his late father-in-law, potato magnate J.R. Simplot.

The gov is an ag man for sure, but he's also an increasingly ardent supporter of pushing Idaho's ideas out of the ground and onto the market.

Case in point: the Idaho Global Entrepreneurial Mission, or IGEM, an idea hatched by the Idaho Technology Council and which Otter helped usher through the Legislature with broad support this past session.

Though labeled with the somewhat vague tagline, "Driving industry through innovation," IGEM has a specific set of goals: increasing the amount of research being conducted at state universities, marrying the fruits of that research with private industry, accelerating commercialization into products and, ultimately, creating new home-grown businesses.

It's a public-private collaboration fueled by three pots of money from the state's general fund: $1 million to the Department of Commerce, with $950,000 earmarked for bridge funding grants to start-ups; $2 million in permanent, ongoing support for the Center for Advanced Energy Studies, another collaboration effort between state universities and the Idaho National Laboratory; and $2 million in increased research funding, which will be competed for by Boise State, the University of Idaho and Idaho State University.

Modeled after the successful USTAR program in Utah, IGEM is an effort to bring together--with funding--three legs of what Boise State Vice President for Research Mark Rudin calls the "triangle."

"Oftentimes, whether it's the university or the government or industry, they all try to figure out how to leverage their separate abilities to increase economic growth," Rudin said. "This represents the state trying to invest some money into that triangle. ...

"I believe this is the first time this has happened in Idaho, and I think it really has energized the private and public sector to take it upon themselves to accept the challenge and move development forward."

At an unveiling of the program at the University of Idaho, officials pointed to research in areas that could save commercial trout fisheries as a potential economic boon. At Idaho State University the IGEM presentation included a tour of the university's nano crystal laboratory. According to Rudin, Boise State is focused on ramping up its computer science department--specifically, turning out more CS graduates.

"We produce probably a couple dozen [computer science] graduates per year, but the work force needs are much more than that," Rudin said. "The IGEM opportunity allows us to compete for additional funds to do a couple of things: one is to propose more faculty lines within our CS department and augment graduate assistantships. ...

"Ultimately the purpose of the grant is to bring in talented faculty and grad students that can engage with industry, conduct research with industry, and really beef up the number of graduates that we produce annually as kind of a work force development initiative."

Come together, right now

Peter Midgley, a Boise patent attorney and founding member of the Idaho Technology Council, couldn't agree more that IGEM's overall purpose is to bind Idaho's tech sector stakeholders in a new way. And it's been a long time coming.

"The need for IGEM goes way back," Midgley said. "If you look historically at the tech industry in this state, it's kind of been a work in progress. The various companies and thought leaders in the industry were not necessarily coming together in a coordinated and cohesive way--especially if you compare the technology industry to other industries, like the dairy industry or natural resources industry. We didn't have Silicon Valley or the Research Triangle--there wasn't that power base that was a coalescing force."

At the same time, Midgley added, other states were being much more proactive in forging links between the public and private sectors, specifically when it came to research and development.

"The challenge of technology is there's a lot of front end-loaded costs," he said. "We need world-class research, we need to attract that caliber of researchers, and it's not just human capital, it's the physical equipment and lab facilities that are just really cutting edge. That's a very significant investment and it required significant vision on the part of the public sector."

As anyone who has watched the Idaho Legislature knows, the politics of wrangling general fund dollars for any visionary project is no mean feat. Yet IGEM sailed through with sweeping support from lawmakers.

"If the 19th century was an agrarian economy and the 20th century was an industrial economy, the 21st century is going to be an information economy. I think that's clear," Midgley said. "I think for Idaho to stay competitive with that, we need to take steps to make sure that our public policies are consistent and evolving. ... We can't just stand idly by and watch other states take steps and just remain trapped in a predominately agriculture-based economy or natural resources-based economy. That's just not a viable option going forward for Idaho.

"And even with all the difficult economic challenges, even with all the political challenges--and you'd be hard pressed to find a state that's more fiscally conservative than Idaho--even with all of that, to see this level of commitment speaks to the urgent need for this initiative."

Idaho Technology Council President and founder Jay Larsen agreed, adding that while the need has been urgent for a long time, a combination of factors conspired to delay any move to fill it. In some ways, he said, Idaho--and Boise, in particular--were victims of their own success.

"We had some tremendous business foundations in Idaho. At one time, Boise, specifically, had more Fortune 500 companies headquartered here per capita than anywhere in the nation," Larsen said.

There was a great entrepreneurial spirit, he added, but as the economy tanked and those corporate giants moved on, it became clear that Idaho had rested too much on its laurels as a low-tax, cheap-land haven.

"When the collapse took place, it peeled back the onion and allowed you to see what your strengths and weakness were," Larsen said. "We were based on land price and home construction. We didn't have the organic growth from small- to mid-size businesses, no tech transfer and very little emphasis on research. We were too reliant on the big corporations."

In that earlier climate of go-go prosperity, it was easy for the private sector to become complacent, but Larsen said those were the players who should have been working all along to push collaborative programs like IGEM.

That's what was happening in Utah, where government, education and business came together in the wake of the Dot Com Bust to diversify the state's tech sector. The result was USTAR, and the upshot was that while Idaho lost more than 4,000 jobs in the early days of the great recession (and many thousands more in the years to follow), Utah enjoyed an unemployment rate 2.5 to 3 percent lower than ours, invested $460 million over seven years into research and development and tech transfer and, according to Larsen, probably added 110 new companies and 8,000 jobs.

Today, the Milkin Institute ranks Utah as a first-tier economy and Idaho sits in the third tier--out of four.

"Its easy to do that armchair quarterback thing and look back and say what we should have done," Larsen said. "But now is the time to look forward to what we can do now to diversify our economy on the tech side, so when there's a downturn in the economy, you don't have all your eggs in one basket. IGEM represents that."

School of hard knocks

Not everyone is convinced that the need for IGEM is so urgent, however. As with any government-supported program, there are those who cast a skeptical eye on whether the state can outperform private industry. When it comes to IGEM, Rick Ritter, who has long helmed Idaho TechConnect, is one of those skeptics.

TechConnect is a statewide private nonprofit that helps start-ups with everything from raising capital to commercializing their products. It's also the organizer of events like TechLaunch, a business pitch contest on May 15-16 at the Grove Hotel in Boise.

Ritter points to TechLaunch, in its ninth year, as a prime example that Idaho's private sector is already doing a bang-up job of turning ideas into market-worthy ventures.

"We had 29 applicants to TechLaunch from around the state--almost double the best year in eight years," Ritter said, adding that number was winnowed down to 10 finalists competing for $15,000 in cash prizes.

"Clearly, there are some well-thought-out ideas and they're spread widely across the state--from Sandpoint to Rexburg and all the places in between," he said. "All of them will be top-quality ideas and most will be ready to invest in now."

Ritter, while supportive of increased investment in university research, said that IGEM runs the risk of "throwing good money after bad."

The Center for Advanced Energy Studies, which will get $2 million in permanent, ongoing support from IGEM, has received funding from the Legislature since its inception--though under IGEM, those monies will be increased and made a permanent line item--and Ritter contends that university research programs have already benefited from state support through the Higher Education Research Council, which operates under the State Board of Education (albeit, the amount of HERC funding has been smaller than that offered by IGEM).

"It's a similar program to what they've done for the past three years," Ritter said. "How many businesses have we gotten out of that? Frankly, they're giving them $2 million to continue doing what they've been doing without any evidence that it works."

Rather than focus solely on university research, Ritter said a better public-private model would be similar to what is done in Washington, where businesses and entrepreneurs seek out university partners to meet specific needs--not the other way around.

"All the money stays inside the education system, but the business gets the direct benefit of it because you're solving technical issues that they actually have, not something that some faculty member dreamed up in their head," he said. "Let's be solving business problems, not creating something we don't have a clue on."

What's more, Ritter added, it would be wiser for support to go where the start-ups already live.

"Ninety percent of all the start-ups in the state have nothing to do with the universities," he said. "Are we making an investment in 10 percent of the marketplace to somehow get higher returns? ... I understand the need to have research, but saying you're going to invest in university research and it's going to result in more start-ups--there's no evidence for that."

Bill Connors, president and CEO of the Boise Metro Chamber of Commerce, said what matters most is that IGEM is based on a good formula.

"My impression is that it doesn't happen very often, but when you can get business, government and higher ed together, it's a good thing," he said. "It's not a lot of money but the formula is good. ... If we can expand on that with more money in the future, great, but I think it's a step in the right direction. Higher ed has been taking a hit over the past couple of years, so reversing that trend is a good thing."

Midgley, meanwhile, admits that the amount of start-up activity generated by Idaho university research has been limited, but counters that it's a matter of perspective.

"When you look at our track record here in Idaho and you look at the amount of activity that we've generated based on the amount of dollars that we've spent, I think we've done as well as anybody and as well as can be expected," he said.

"The truth is that the research and development dollars spent in Idaho are historically on the low end. That's the reason you have not seen dozens or scores of start-ups spilling out of our universities and our national lab--in part the reason for that is the number of dollars being spent in the past."

Even with an upswing in funding for university research--and a $1 million slated for direct support to start-ups--Midgley urges caution when it comes to expectations.

"We are not expecting to invest $10 today and see a return of $20 by the end of the year," he said. "In order to have that kind of activity, you need to make a significant investment, and like any investment, you have to understand and expect that not every dollar spent in R&D is going to have immediate return--that's the nature of making those investments. They're forward thinking and they require risk and some of them will fail. ...

"It only takes one blockbuster drug that comes out of your chemistry department to generate millions and millions of dollars in licensing fees," he added. "That one success can cover the nine other losses. IGEM is a good first step."

Baby steps

While the idea for IGEM was born of collaboration between members of the Idaho Technology Council, now that it's a reality, the baton has been passed to the IGEM Council--a new 12-member group that replaces the former Idaho Innovation Council.

Operating under the Department of Commerce, IGEM Council members will be appointed by Otter and, according to a Commerce Department spokesperson Megan Ronk, a prospective membership list is being compiled for consideration by the governor, with a final roster planned to be announced in the next few weeks. Once the membership is finalized, the group will start establishing its meeting schedule and rules.

"Our goal is to ensure the committee gets up and running and writing rules for the program as quickly as possible so we can get the parameters of the grants established and start getting some of those funds out there," said Ronk. Though still fluid, IGEM's structure is three-fold: The IGEM Council will oversee and make final decisions related to the program, with Commerce administering the $1 million innovation grant, and the $2 million pile of university research funds managed by the Higher Education Research Council.

According to Midgley, who is also a member of HERC, the council sent out requests for proposals to the state's universities, and several projects have already been submitted for funding, though details are not yet available.

"The walls are starting to come up around this thing and it's very exciting," Midgley said. "It's absolutely happening and we've received some significant proposals. Very forward-looking, very innovative. Within the next few weeks, certainly by mid-summer, I believe those funds will be awarded."

Rudin is similarly enthused about IGEM.

"I can't be more supportive of IGEM. It really was a visionary step by the governor to propose this and the Legislature to do a lot of great work to take the necessary steps to implement it," he said.

"It's a beginning, and we need to be in this for the long haul. I think it's really initially about capacity building: recruiting and bringing in talent, setting the stage to do bigger and better things. There are different types of deliverables. If we can bring in some good talent to augment the talent we have, that's a good thing."

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