Archive for Tech Ecosystem Update

First Quarter 2017 Venture Capital Investments Grow

Access to venture capital is a critical measure of a region’s success with technology based economic development as early stage technology companies struggle to gain funding from traditional sources such as banks. U.S. venture capital investments saw signs of growth in First Quarter 2017 versus investments in Fourth Quarter 2016 based upon reports from PricewaterhouseCoopers LLP, the National Venture Capital Association, and PitchBook.

In Quarter 1 2017, venture capitalists deployed $13.7 billion to start-up companies through 1,104 deals, up fifteen percent in dollars and two percent in deals over Quarter 4 2016. An increase in mega-round funding (investments over $100 million in size) helped contribute to the growth in quarterly dollars invested, although the $13.7 billion is the second lowest quarterly total over the past two years. Regional trends were mixed, with LA/Orange County being one of the few major hubs experiencing an increase in both dollars and deals from Quarter 4 2016. Seed investments continued its two-year decline as a proportion of all deals, coming in at 25% of all deals in Quarter 1 2017, while later-stage deals were at eleven percent of all deals. Additionally, the Internet sector deal share decreased to a two-year low of forty-four percent during Quarter 1 2017 while Healthcare increased to a two-year high of seventeen percent and surpassed Mobile and Telecommunications as the second place sector for deal activity.

A summary of Quarter 1 2017 shows:

  • Regions – The Midwest came in eight out of the eighteen regions, preceded by San Francisco in first ($3.47 billion), Silicon Valley, New England, New York Metro, LA/Orange County, Southeast, and the DC Metroplex. In order, Colorado, Northwest, Southwest, Texas, San Diego, North Central , Upstate New York, Philadelphia Metro, Sacramento/Northern California, and South Central rounded out the rest of the regions.
  • Sectors – Internet, Healthcare, Mobile and Telecommunications, Industrial, and Computer Hardware and Services comprised the top five investment sectors. The additional twelve investment sectors include Business Products and Services, Software (non-internet/mobile), Electronics, Automotive and Transportation, Consumer Products and Services, Energy and Utilities, Food and Beverages, Leisure, Financial, Media, Agriculture, and Risk and Security.
  • Development Stages – Expansion Stage led with investments of $5.352 billion followed by Later-Stage ($4.844 billion), Early-Stage ($2.47 billion), Other ($760 million), and Seed ($433 million).
  • States – Top 10 investment states were California ($7.379 billion) followed by Massachusetts, New York, Colorado, North Carolina, Maryland, Texas, Washington, Virginia, and Utah. Ohio came in at nineteenth, with $81 million (down from $142 million in Quarter 4, 2016).

Exit activity continued to be slow, with 169 VC-backed exits during Quarter 1 2017, with corporate acquisitions and buyouts continuing to be the leading exit routes. Software, biotech, and commercial services sectors accounted for approximately seventy-three percent of the total exits. Finally, venture capitalists raised $7.9 billion across 58 funds in Quarter 1 2017, down approximately twenty-four percent from last year’s Quarter 1. Nine first-time funds were closed during this quarter, the most in the last five quarters.

Smart Transportation at the Centerpiece of Governor’s ODOT Budget Line Item Veto

Ohio House Bill 26, the Ohio Department of Transportation’s bi-annual budget bill was passed by both houses of the General Assembly and signed into law by Governor John Kasich.  Under the Ohio Constitution, the Governor has the authority to “Line Item Veto” individual provisions from state appropriations legislation.  House Bill 26 is the product of a joint House-Senate Conference Committee. Several controversial provisions were vetoed by Governor Kasich that included language that would have created a Smart Transportation Action Advisory Team that would have provide advice to ODOT and JobsOhio on the development of smart transportation initiatives.  Kasich’s veto message stated the provision was “well intentioned” but would create a “bureaucratic barrier” and harm efforts to implement future smart transportation projects.  Senator Matt Dolan from Cleveland lead the charge on the insertion of the Smart Transportation Action Advisory Team in what appears to be some concern related to state spending on these type of high-tech, transportation projections.  Kasich also vetoed provisions that would have changed the frequency of local bridge inspections, required the Ohio Department of Transportation to install interchanges on limited access highways every four miles in certain urban areas; and a requirement for a second observer on ski boats.

HB 26 highlights include:

  • Permitting pilot programs that will allow the ODOT director to vary speed limits during peak traffic times on Interstate 670 in Columbus, I-90 in Cleveland and I-275 in Cincinnati;
  • Funding an additional $10 M for public transit over each year of the biennium – bringing the total to $33 M;
  • Increasing the portion of a district public works integrating committee’s allocation that can be used for grants from 85% to 90% freeing up $7.85 M for infrastructure projects across the state;
  • Permitting the proceeds of the sale of timber from national parks to be distributed to county from which it is derived, 50% of which must be used for maintaining roads and bridges;
  • Requiring that the Registrar establish by rule the service fee that is paid to a deputy registrar;
  • Creating a six-county pilot program to lower commercial vehicle registration fees from $30 to $15;
  • Funding an additional $1 million in funding each year earmarked for Transportation Improvement Districts;
  • Increasing the current limit for a natural gas company infrastructure development rider for economic development projects from $3 per calendar year to $1.50 per month; and
  • Granting townships and municipalities the authority to enter into an agreement to jointly provide for the maintenance, repair, and improvement of township and municipal roads.

HB 26 is an important source of infrastructure funding for roads, highways, bridges, airports and mass transit but it lacks true and substantial direction on promoting Ohio as a leader in the autonomous vehicle marketplace.  That leadership will come through other planned legislation.

 

Venture Capital Investments Decline in 2016 But Ohio Continues Progress

According to preliminary venture capital investment results compiled by Pitchbook, a company that provides comprehensive mergers and acquisitions, private equity and venture capital data and analyses, 2016 investments saw a decrease versus investments in 2015.  According to Pitchbook, approximately $68.3 billion was invested in 2016 across 7,966 deals.  Funds invested were down 14 percent versus 2015’s high of $79.2 billion across 10,486 deals.  Funds invested in 2015 were the second highest full year total in twenty years, while 2016’s deal count is likely to be the lowest since 2012.  Also, the number of venture capital backed exits were down almost 25 percent (719 in 2016 versus 935 in 2015) while nearly $40.5 billion was raised, an increase of 16 percent over 2015.  A majority of the new funds raised were by mega-funds for large, later-stage investments.

Looking ahead in 2017, analysts are indicating a potential upswing in venture capital investments likely mainly driven by the initial public offering (IPO) market.  Potential factors impacting analysts’ outlook include companies that have continued to mature in the deal pipeline, increased calls by investors for companies to go public, and the slowing down of late-stage start-up financings by hedge and mutual funds.  Also, many venture capital firms are well capitalized and will likely take a more cautious approach of investing in smaller, early-stage start-ups instead of start-ups that have received valuations at $1 billion and higher.

Concerns for venture capital investments in 2017, though, are present and focused more towards the industry’s congestion, fundraising efforts being lessened by a challenging deal environment, the worthiness of companies designated as IPOs, and continued emphasis on mergers and acquisitions of young start-ups by Fortune 500 companies for augmenting and growing their current business and technology strategies.

Ohio Third Frontier’s Focus on Venture Capital

Ohio Third Frontier, the state’s $2.1 billion technology-based economic development initiative to create high-wage jobs through the accelerated growth of high-tech start-up and early-stage companies, has maintained a strong focus on providing venture capital funding to organizations and companies across Ohio for nearly fifteen years.  Third Frontier’s Pre-Seed Fund and Seed Plus Fund Program has been designed to increase Ohio’s number of professionally managed Pre-Seed Funds, create additional support for developing, retaining and attracting technology companies, increase early-stage capital investments in tech-based Ohio companies, accelerate the growth of high-potential tech companies as well as high-paying tech jobs, and continue building a deal flow pipeline that attracts venture capital firm resources from both within and outside of Ohio.

In 2015 and 2016, a total of $74.1 million was awarded through the Pre-Seed Fund and Seed Plus Fund Program for increasing the availability of professionally managed capital and associated services to accelerate the growth of early-stage Ohio technology companies.  Investments are supporting accelerated growth of high-tech start-up and early-stage companies across multiple technology industries, including Third Frontier’s preferred sectors of Software/Information Technology, Biomedical/Life Sciences, Advanced Materials, Sensors, Energy, and Advanced Manufacturing.

Ohio Third Frontier has invested in the following Pre-Seed Fund organizations:


Northeast Ohio

  • JumpStart – focuses on an array of technology sectors, including companies founded and led by women and minority entrepreneurs
  • Cleveland Clinic – focuses on medical devices, products and companies spun out from the institution’s researchers
  • Lorain County Community College – focuses on tech-based companies that are in the imaging or incubating phase of development  with special focus in the Northeast Ohioregion
  • LaunchDen Capital Fund – primary focus on orthopedic companies
  • North Coast Angel Fund – focuses on healthcare (medical devices and diagnostics), biotechnology and software sectors
  • Bizdom – focuses on web- and tech-based start-up companies
  • Case Western Reserve University – focuses on medical technology, business software, advanced materials, fuel cells, and energy storage
  • Impact Angel Fund – focuses on bioscience/medical, advanced materials, automation, energy and power management, surveillance, and information technology sectors
  • Mutual Capital Partners – focuses on healthcare (medical devices and diagnostics) and information technology (business-to-business and mobility software) sectors
  • North Coast Venture Fund – focuses on biomedical, pharmaceutical, and software sectors
  • Valley Growth Ventures – focuses on software, energy, advanced materials, and additive manufacturing sectors

Northwest Ohio

  • Rocket Ventures – focuses on medical technologies and software applications which include imaging, surgical  instruments/equipment, implant devices, regenerative medicine, and software applications developed for business and healthcare

Central Ohio

  • Ohio Tech Angels – focuses on information technology, advanced materials and life sciences sectors
  • NCT Ventures – focuses on adtech, big data, enterprise software, heath information technology, logistics, and marketplace and retail technology sectors
  • Rev1Ventures – focuses on life sciences (specifically in the areas of pharmaceutical, biological and gene therapies and spin-out companies from Nationwide Children’s Hospital’s Research Institute), software, information technology, additive manufacturing, alternative energy, and other sectors

Southeast Ohio

  • TechGROWTH Ohio – focuses on digital interactive media, biosciences, bio-agriculture, and advanced energy sectors
  • East Central Ohio Tech Angel Fund – focuses on companies in rural Southeast Ohio with new proprietary, barrier-to-entry technologies

Southwest Ohio

  • CincyTech – focuses on a variety of Ohio Third Frontier targeted industries, including software, medical technology, life sciences, consumer digital, and other aligned sectorsin the region
  • Cincinnati Children’s – focuses on the biomedical sector
  • Queen City Angels – focuses on advanced materials, aeropropulsion power management, fuel cells and energy storage, medical technology, business and healthcare software, sensing and automation technologies, solar photovoltaics, situational awareness, and  surveillance systems sectors

West Central Ohio

  • Accelerant – focuses on advanced materials, advanced manufacturing, sensors, healthcare, information technology, aerospace,  situational awareness, and surveillance systems sectors

Listen and Learn: Autonomous Vehicles Policy and Development

podcast-episode-2

Columbus Smart City Award Creates $90 M Opportunity to Build a National Tech Model

Anthony Townsend defined “smart cities” as places where information technology is combined with infrastructure, architecture, everyday objects and our bodies to address social, economic and environmental challenges.  Just the name makes everyone want to be a “smart city”- who would want to live in a “dumb city”?  Creating that smart city is not as easy as it sounds as the technology investments often bring along substantial costs and impose dramatic changes in transportation, development and government delivery services.

Columbus, Ohio gets a chance to be a pioneer in the development of smart city infrastructure.  Columbus was awarded the Smart Cities grant from the U.S. Department of Transportation. Columbus beat out six other finalist cities to receive $50 million in grant funding from the federal government to develop Columbus into the nation’s leading example for intelligent transportation systems.  Local private sector matches and funding from the Vulcan Foundation shot this investment up to $90 M.

This $90 M project offers opportunities for technology and construction companies not just for one contract but to be on the ground floor in the development of a new transportation and development model for American cities.  The Columbus Smart City Program uses tools ranging from “big data” application as well as a range of cutting edge technology revolutionizing the transportation industry in mass transit as well as with the logistic industry.

Columbus’ application focused on the partnership and collaboration between the organizations, private and public, that are going to support and implement the Smart Cities grant. Autonomous vehicles are a major theme of the Smart Cities Grant however, Columbus’ application focused on other attainable programs that can be implemented to make an immediate difference in the community. The application focused on the following 5 strategies:

  • Smart Corridor to Provide Access to Jobs;
  • Real-time and Integrated Data for Smart Logistics;
  • Connected Visitors;
  • Connected Citizens; and
  • Sustainable Transportation Options.

The first smart corridor will be along Cleveland Avenue in Northeast Columbus. “With a network of integrated electronic signs, sensors, and other state-of-the-art elements this project will enhance safety for all road users, improve travel time reliability and reduce accidents and associated congestion.” The Central Ohio Transit Authority is working on expanding its onboard Automated Vehicle Location technology to provide accurate real time location data for its busses. To address the last mile connection issue from transit centers, self-driving vehicles will be implemented at Easton to take riders to their final destination.

Real-time and integrated data for smart logistics is focused on helping the Rickenbacker Inland Port use technology and data to become the leader in logistics innovation. The projects that will support this effort will provide real time regional traffic conditions and truck routing data via smart phone apps and current routing services. This will help improve routing service for trucks in the region. This real time data will help provide, via smart phone apps, delivery site locations for reserving sites in select dense locations in Columbus.

Columbus is a regional destination for sporting events, shopping, medical services, arts and cultural events. The Smart City Grant application made sure to address the improvements that are going to be made for the visitors of Columbus. The City plans on developing a smart phone app that provides traffic conditions and routing information, transit options, parking conditions and availability, and event information, all in real time. This app will be promoted to visitors as an added benefit to help them discover Columbus.

The underlying driver of Columbus’ application is helping to improve the isolated neighborhoods that have endured economic and mobility challenges that limit residents’ ability to access jobs, health care, and education. The projects that are proposed in the Connected Citizens section of the application address cash based citizen access to mobility services. The solution is to work with debit card type service offering while understanding other barriers such as smart phone ownership and WiFi availability.  The focus area has a low number of car dependent households, so increasing and/or introducing personal transit (Uber, Car2Go) service offerings is a proposed solution.

Lastly, the application highlights what Columbus will do to address sustainable transportation options. The city will encourage electric vehicle (EV) usage while working with the current car sharing service providers to convert to EV fleet by installing EV recharging stations. The city wants to expand AEP’s Smart Grid to other parts of the City. This Smart Grid project will incorporate EV storage capability. Columbus wants to make having an electric vehicle as convenient as possible to encourage citizens to make the change.

An additional focus of other smart cities programs have focused on the delivery of government services to promote efficiency in the use of information technology.  E-commerce for governments is a struggle in the age of Amazon as taxpayers have high-expectations for the web based government transactions.  Government struggles with security, privacy and public record laws that impact that operation.

The Columbus Smart City Program is an opportunity to learn how transportation, development and government will operate in the 21st Century and could prove an interesting model for cities across the United States.

Making American Great Again in Five Steps

Donald Trump’s surprise victory was driven in large part with a frustration that Washington is not doing its part to improve the American economy. As the Trump campaign noted, the growth in any nation’s gross domestic product is driven by four factors: consumption growth, the growth in government spending, investment growth, and net exports. By most measures, the growth of the American economy in the last 15 years has slowed substantially compared to the Post World War II Era. In part, the slowdown in the American economy is connected to deindustrialization—only 10% of American jobs are in manufacturing compared to 15% in 2001 and over 30% in the 1970s. America is losing high-wage manufacturing jobs and many regions have not found a worthy substitute for these lost jobs.

Reviving the American economy in many ways depends on recharging the Great Lakes region. Southern states have experienced much stronger economic growth than Great Lakes states over the past quarter century. Faster population and market growth, greater business investment, and greater Federal spending have accelerated this growth in the South. Trump’s victory was clinched by the Industrial Great Lakes as he captured the growing frustration that Washington D.C. is hurting not helping the manufacturing heavy Great Lakes States. The economic facts illustrate a steep decline in high-wage manufacturing jobs in the key battleground states of Ohio, Michigan, Wisconsin and Pennsylvania. These four key battleground states have lost 855,025 manufacturing jobs from 2001 to 2015.

decline_of_mfr_jobs_2015

As the chart above illustrates, the United States and the Great Lakes region have seen their share of its manufacturing economy decline steeply over the past decade and a half. Donald Trump’s promise to “make America great again” really hinges on redeveloping the Industrial Great Lakes.

However, reviving the Great Lakes economy cannot be done by developing more manufacturing jobs alone—building a more diverse and globally competitive regional economy is essential. Revitalizing the Great Lakes economy needs to center on developing high-wage jobs and capital investment in advanced services such as financial services and healthcare, high-technology such as information technology and bio-tech, global firms through foreign direct investment and exports, energy-led economic development, and manufacturing. These are the industries producing the high-wage jobs that can create a stronger, diversified American economy.

In five strategic steps, we can make American great again!

1. Reduce Corporate Taxes and Reward Domestic Investment.
The federal government operates a $4 trillion-dollar budget, funded primarily by income taxes on individuals and businesses.

fed_
The topic of tax reform often focuses primarily on tax rates, and not shifting what we tax. The Trump Tax Plan is focused on reducing the U.S. tax on corporate profits for all companies from an industrial world high of 35% to 15%, but companies would no longer be able to defer taxes on overseas profits, and he would cap business interest deductions and charge a 10 percent repatriation tax for overseas earnings. Reducing corporate tax rates paid by large and small companies alike and driving global investments back into the United States are good economic development policies.

Big Tax Idea. The federal government can learn a lesson from its state government partners about how high-wage job production is spurred when companies receive tax incentives. All fifty states provide tax credits, abatements, grants and/or loans to companies that agree to create jobs and make capital investments. A federal job creation tax credit could provide a similar incentive to companies choosing to invest in the United States and create high-wage jobs.

 

2. Build a Budget that Addresses the Infrastructure & Workforce Gap. The federal government operates primarily a social service agency. As the chart below illustrates, Social Security, Medicare, Medicaid and other social service programs dominate the federal budget. While the American economy is likely too big for the federal government to influence through its government programs, federal government programs can have a major impact on regional economic development. Two areas that need attention include federal government spending for infrastructure and workforce programs.

fed_govt_funding_categories

Private sector leaders considering business expansion need the infrastructure in place at the site and skilled workers ready to work. Yet, these top business issues constitute a very small portion of the federal budget. The United States today invests in infrastructure about half of what it did at the beginning of the 1980s, and economic development projects that need roads, water, sewer, environmental contamination, power and other critical infrastructure are needed the federal government to fill the infrastructure funding gap. Donald Trump $1 trillion infrastructure proposal would be a catalyst for greater private sector investment. It is important that this massive new federal infrastructure program not just fund highways, roads, and bridges but also create a site development program that provides funding for infrastructure, including the delivery of power, to sites planned for development.

Big Infrastructure Idea. The federal government could create a program to set up mega sites prepared for development similar to Tennessee’s to develop large-scale sites ready for high-wage job development in partnership with private sector developers. This program could create a large funding stream to prepare for large scale developments at rural and urban sties to recruit a range of industries including manufacturing. The Tennessee Mega Site Program has lured several global auto manufacturers to the Volunteer State and served as a major driver of high-wage job creation

Addressing the workforce challenge is another critical piece in the Make American Great strategy. The federal government’s 47 workforce development programs have too little money and the sheer number of them illustrates their lack of focus on developing high-wage jobs. More importantly, trillions in welfare spending needs to shift the workforce development focus from the welfare recipient to the companies searching for workers.

Big Workforce Idea. The federal government should create one workforce development program and shift the funding to the states to operate their own workforce development program that funds employers who train their existing and new workers. North Carolina has a workforce training program that prepares workers in targeted industries, such as bio-manufacturing, to be certified and prepared for work with companies in those industries. This permits North Carolina to recruit global companies with the promise of workers ready to work in their industry.

 

3. Capitalize on All Sources of Energy. No sector illustrates current or future economic growth capacity more than the energy sector. Too often, Washington has made energy an ideological issue picking winners and losers among sources of energy. From small towns in South Dakota to the Appalachian Hills of Ohio and Pennsylvania to sundrenched Arizona and rainy Oregon, energy is a leading source of growth. The Make America Great strategy needs to embrace all sources of energy as needed and help regions and communities capitalize on whatever source of energy they possess. As the chart above illustrates, America has a diversified pool of energy sources. Natural gas and renewable energy has grown in recent years with increased domestic production driving down the costs for American consumers.

energy_consumption_sources

Federal regulatory policies attacking domestic energy sources such as coal cause substantial economic harm and should be stopped. For too long, the federal government has been driven by energy ideology. Federal environmental regulation has been designed recently to benefit certain sources of energy over others. American industry cannot run without a reliable and affordable source of energy. However, American energy policy ending the war on coal is not enough. Market realities make the short term domestic use of coal unlikely—shale developments have driven the price of natural gas to amazing lows.

Big Energy Idea. The federal government should be in the business of encouraging that energy production and distribution growth but also supporting the development of critical infrastructure needed to connect those energy sources to energy intensive businesses looking for power access. It should be the national energy policy to develop an energy-led economic development strategy using all sources of domestic energy focused on retaining and attracting energy intensive industries such as steel, chemical, paper, aluminum, data centers and others to the source of electricity or natural gas. Too often in many deregulated utility marketplaces, energy intensive businesses struggle to gain access to power because the utility companies lack a funding guarantee. A large portion of the federal government infrastructure program should provide funding to build the “last mile” of energy infrastructure to enable high-wage job creation. Federal matching funds could provide support for the last mile of energy pipeline and transmission line connections to energy intensive industries.

 

4. Address the Health Care Challenge. Few topics have as much political energy as does the repeal of the Affordable Care Act. The Trump healthcare plan not only calls for the repeal of Obamacare but calls for legislation to give tax credits to the uninsured to pay for health insurance, allow insurance companies to sell health insurance across state lines, and allow people to deduct the cost of their premiums from their taxes. Trump has also proposed transforming the federal-state Medicaid program for the poor by giving block grants to the states, which would have flexibility to develop their own programs.

The direction of federal health care policy may also be driven in large part by the thinking of U.S. House Speaker Paul Ryan. Speaker Ryan proposed a comprehensive health care reform initiative rejected by the Obama Administration that could well reappear. Ryan’s health care plan in part proposes to make health insurance portable and sales open across state lines, create a tax credit to support health insurance purchases by the uninsured, enhance health care pooling, reward employees for healthy choices, continue tort reform, mandate coverage for pre-existing conditions and permit young adults up to 26 years old to remain on their parents health insurance, and block grants funding for Medicaid to the states to permit them to determine how best this program should cover their citizens.

Big Health Care Idea. Federal funding for Medicaid needs to be turned into a block grant program for the states and states must be given the leeway to operate the health care program for the poor as they wish. A healthy population is a productive population and states need the flexibility with Medicaid funding to address this issue.

 

5. Build a High-Tech Midwest Economy. Donald Trump tapped into voter unrest about the underlying struggle of an economy that has been losing high-wage manufacturing jobs since the 1970s. The Industrial Great Lakes reflects this struggle. While regions such as Columbus, Indianapolis and Chicago grow as centers for highly educated, advanced services centers, too many other regions who were once industrial leaders in big towns and small are struggling. The Trump campaign recognized this challenge and pointed out that manufacturing as a percent of the labor force has steadily fallen from a peak of 22% in 1977 to about 8% today while competitors such as Germany and Japan still have 20% and 17% respectively of their workforce engaged in manufacturing. Furthermore, Trump identified further challenges with current trade policy in that Trade policy factors identified by the Trump that permitted currency manipulation, the equally widespread use of mercantilist trade practices by key US trading partners, and poorly negotiated trade deals that have insured the US has not shared equally in the “gains from trade” promised by textbook economic theory.

To address the trade challenge, Donald Trump became the most anti-free-trade GOP candidate since World War II. Trump advocated canceling the United States’ trade agreements if countries do not agree to renegotiate them, applying a 35% tariff on Mexican goods and a 45% percent tariff on Chinese goods and he opposes the Trans-Pacific Partnership. Trump also advocated major tax reform changes to make America a more attractive market. Donald Trump’s economic plan also promises to dramatically reduce the regulation on business and the financial services sector to spur economic growth, cut taxes and spend big money on infrastructure.

However, addressing trade issues to increase America’s manufacturing sector back up 20% alone will not solve the economic dilemma of the Industrial Great Lakes. America has the most productive manufacturing workforce in the world and it only takes 170 people to manufacturing what it took 1000 in 1950. Lima, Ohio offers an illustration. Lima actually has 26% of its residents working in manufacturing but negative population growth, a vastly lower homeownership rate, median home value, bachelor degree attainment rate, and median household income but a poverty rate almost three times the national average as the chart below illustrates.

lima_ohio_snapshot

What Lima and many former industrial regions lack is a large quantity of skilled and college educated workers primed to succeed in the advanced services and high-tech jobs driving growth in neighboring Findlay and other successful small towns.

Big High-Tech Ideas. The Trump economic agenda needs to focus on diversifying the Great Lakes’ economy through the creation of high-tech jobs. First, these high-wage industries need skilled labor with a college degree. The Trump economic agenda needs to increase the number of skilled workers but also the college educated workers in the critical Science, Technology, Engineering and Mathematics (STEM) fields that are high demand and produce higher wages. The creation of these STEM workers begins by addressing the crisis in America’s urban schools through funding to high-performing charter schools and promotion of shared services among America’s schools. Next, the federal government needs to shift funding priorities to encourage students to enter these STEM fields that the nation desperately needs.

However, support for STEM workers is not enough to transform the Midwest economy into a high-tech Mecca. Global Innovation Centers need to be created by the federal government through public-private-partnerships with states, regions and private companies to accelerate broadband services, create venture capital pools and provide funding for critical equipment at incubators, accelerators & research parks that spur technology commercialization. Ohio’s Third Frontier Program offers a strong national model for how the federal government can turn research into early-stage company startups as well as support larger scale research institutions such as the Cleveland Clinic to create products and services in growing markets.

Conclusions

The Trump Agenda is an opportunity for the transformation of the American economy by.

  1. Making tax reform a reality by rewarding domestic investments;
  2. Addressing the infrastructure and workforce gaps through smart budget decisions that devote public and private capital into these two critical areas.
  3. Implementing a national energy policy focused on all sources of energy focused on retaining and attracting energy intensive companies;
  4. Fixing the health care system without killing what is working; and
  5. Bringing the benefits of the tech sector to all parts of the U.S.

How this gets done is another matter. The Trump Agenda is clearly being hashed out all over the United States. Three clear steps exist to move this agenda forward:

  1. What are now bullet points on a Trump Agenda website need to be transformed into substantial policy proposals with the development of policy papers, budget and policy proposals and ultimately legislation.
  2. The leaders of the Great Lakes, both public and private, should gather to reach consensus on how the Trump Agenda can transform their economy based upon these policy proposals; and
  3. Driven at the local level, economic development, public policy and private sector leaders of the Great Lakes region need to connect with the Trump Transition Team, lead on domestic issues by Ohio’s own Ken Blackwell, to support the Trump Agenda and promote dramatic change in Washington’s economic development policy that returns manufacturing to its previous glory but also supports the growth of energy, advanced services, global firms and high-tech industries.

 

Autonomous Vehicles and Economic Development

Autonomous Vehicles (AVs), or self-driving cars, are seen by many as the future of mass transit in the United States and as the technology increases, so does investment in AVs on a federal, state and local level. As of 2015, sixteen states have introduced legislation related to autonomous vehicles, all of which were passed by state general assemblies or by gubernatorial executive order (NCSL). These pieces of legislation generally allow for the safe usage and testing of autonomous vehicles along state roads and highways. In addition to passing legislation, states are also researching the economic development benefits of AVs.

Columbus, Ohio is home to a recent substantial federal U.S. Department of Transportation grant to create a Smart City tied in part to the development of AVs. The Columbus proposal ties the $90 M in federal, state and private sector funding raised for the project to addressing transportation issues in a 21st Century concept. Partners such as the Ohio State University Center for Automotive Research, Battelle Memorial Institute and the business leadership of the Columbus Partnership are hoping to leverage this federal grant into a substantial AV economic development initiative that attracts automotive and high tech companies to Central Ohio.

Pennsylvania is also battling to be at AV center. Ride sharing companies, such as Uber, have started the implementation process of self-driving cars in cities throughout the nation, starting with Pittsburgh. As Pittsburgh is home to Carnegie Melon’s Robotics Department, Uber decided that it would be an ideal place to begin their autonomous vehicle implementation. As the technology continues to improve, other states have started marking themselves to compete to be the next city to implement autonomous vehicles, particularly Nevada, Massachusetts, and Michigan (IEDC).

Las Vegas hosted the 2016 Consumer Electronics Show that heavily focused on AVs, which enabled city and state leaders to see an opportunity to diversify the city’s economy and attract the tech industry to Sin City. After the Show the city council passed an initiative to turn the city’s downtown and the strip into an innovation district. In addition, the city also outfitted a small portion of traffic lights with the ability to communicate with smart cars. This was done in an attempt to create a place to test AVs in a highly dense area and to create an incentive for self-driving car manufacturers to relocate to the state (govtech.com).

As autonomous vehicle technology has advanced, so has Massachusetts interest in incorporating them into everyday life. To research how AVs would be incorporated in the City of Boston and throughout the entire state, Massachusetts Institute of Technology’s Computer Science and Artificial Intelligence, in partnership with Toyota have announced that they will be opening an AV research facility. In addition, Audi has signed a contract to test its self-parking abilities in the city of Sommerville (govtech.com).

Finally, Michigan has positioned itself to be on the forefront of the AV technology boom, by continued investment in the American Center for Mobility. The center is home to a large-scale AV testing facility that features a “fake city” that automakers can use to test their vehicles. The Michigan Economic Development Corporation recently invested $17 million in the project and is confident that the center will maintain the state’s grip on the auto industry (govtech.com).

Federal Automated Vehicles Policy

Autonomous vehicles will need regulatory approval from both the federal and state government to become an economic reality. The Federal Government has taken its first steps in regulating the ever-changing autonomous technology industry with the publication of new guidelines in the Federal Automated Vehicles Policy. Automakers can now expect a more aggressive inspection of their cars that utilize autonomous technology.

The automotive industry is no stranger to working within the Department of Transportation (DOT) and National Highway Traffic Safety Administration’s (NHTSA) regulations for consumer safety. These policy shifts are the first attempt at the federal level to address autonomous technology in the automobile industry. Automakers will be asked to voluntarily submit a safety assessment of the design, development, testing and validation plans for autonomous vehicles to the NHTSA before they can be put up for sale or put into service on public roads.

autonomous-vehicle-safety-sae

The safety assessment outlines what automakers must address to receive approval from the NHTSA to have highly automated vehicles on the road. The NHTSA is asking automakers to provide documentation and reports covering 15 specific topics, such as how automated systems detect pedestrians in the road, how they are addressing the cybersecurity of the vehicle, how are they educating and training the consumer and what type of testing and validation methods are in place. The details of these topics are spelled out in the section, Vehicle Performance Guidance for Automated Vehicles. This section of the policy lays out best practices for the safe pre-deployment design, development and testing of HAVs prior to commercial sale or operation on public roads.

Outlined in the policy is a comprehensive ranking system for the level of autonomous technology. The levels range from Level 1 where the driver is fully responsible for the vehicle to Level 5, a fully autonomous vehicle. The Safety Assessment Letter to the NHTSA is needed for vehicles in level 2-5. The table below simplifies what is required in the safety assessment. For automakers such as Mercedes-Benz and Tesla, that currently have highly automated vehicles on the road that fall into Level 2, this means assessing vehicles that are already in the hands of consumers by new standards.

The DOT recommends careful documentation of all testing stages. It is encouraged that the developers of autonomous technology share data gathered during testing stages to accelerate the innovation of this technology. This practice is unprecedented for the highly competitive auto industry however, sharing of data and information is recommended amongst automotive companies for consumer safety. The DOT encourages this with the hopes it will help accelerate the knowledge of highly automated vehicles and could speed up consumer confidence in the technology.

Due to the evolving nature of this technology, the policy states the need for continued research and discussion to stay relevant. This policy is merely a starting point but with advancements in the technology will come modifications of this policy.

Autonomous Vehicle State Policy

As technology trends towards automation, the automotive industry is no exception. In anticipation, state governments are quickly moving to get ahead of the trend towards autonomous vehicles. At this time, nine states have legislation in place to address the ever-changing autonomous technology and another seven states have legislation pending a vote.

Nevada was the first state to implement policy to allow autonomous vehicles on the road. Since then, eight other states—California, Florida, Louisiana, Michigan, North Dakota, Tennessee, Utah, and Washington D.C. have passed legislation related to autonomous vehicles. Arizona and Massachusetts Governors have issued executive orders related to autonomous vehicles.

Because the technology is still in developmental stages, the legislation pertaining to it is limited. Ranging from defining the term, “autonomous technology,” to describing the limitations of passenger activity in autonomous vehicles, such as the use of mobile devices. Though the debates differ from state to state, other heavily debated topics in state legislature are the level of autonomy allowed on the roads and the practices allowed in testing the technology. For instance, states like Florida have added legislation that eliminates the requirement of a driver present in the car for testing purposes.

autonomous_vehicle_legislation_by_state

Though some states have taken a primarily regulatory approach, others, like North Dakota, Utah, and Florida, have legislation in place that activates a study of autonomous vehicles that focuses on best practices, evaluating appropriate safety features and regulatory strategies and have even gone as far as to seek development recommendations. Because these studies are in their grassroots phase, it is expected that new legislation will be proposed in the near future.

Since 2015 twenty-seven bills addressing autonomous vehicles have been proposed but failed to pass across sixteen different states. Nineteen bills are currently pending a vote including a bill in Ohio that would authorize a manufacturer of autonomous vehicles or autonomous technology to operate autonomous vehicles on public roads and highways in accordance with specified requirements.

As of now, the legislation in place is based around the study and testing of autonomous technologies. Since autonomous technology is in its developmental stages, legislation addressing it is much the same. Bills have yet to be written that would concern and address the impacts that this technology will have on the consumers. On a federal level, The Department of Transportation along with the National Highway and Transportation Safety Administration released the first federal guidelines concerning the
development of autonomous vehicles in September of this year.

The Department of Transportation included sample state policy in its guidelines for autonomous vehicles, Federal Automated Vehicles Policy, published September 2016. The sample policy states: “The goal of State policies in this realm need not be uniformity or identical laws and regulations across all States. Rather, the aim should be sufficient consistency of laws and policies to avoid a patchwork of inconsistent State laws that could impede innovation and the expeditious and widespread distribution of safety enhancing automated vehicle technologies.” The sample state policy is intended to make it so the vehicles technology can work across state lines.

With this rapidly changing technology, states are addressing the need to have regulations in place. The states that want to reap the benefits from this technology are implementing legislation to protect their citizens while encouraging innovation.