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

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The Ben Franklin ExperimentTwo Decades of
InnovationbyRoseAnn B. RosenthalPresident
CEO
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We are, I think in the right Road of
Improvement, for we are making experiments.
Ben Franklin
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Quick Overview

• Walk Through Three Phases
• Environment
• Response
• Results Lessons Learned
• Your Portrait of Ben (Team Strategizing Session)

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The view from 20,000 feet

• Legislated in December 1982 most continuous S
  T economic development program survived 2 sunset
  reviews (1988 and 2000)
• Regionally based 4 centers
• Statewide overseer board
• Funding relatively consistent

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Statewide Impact

• 60,190 High Value Jobs Created and Retained
• 1,556 New Technology-Driven Businesses Created
• 1,842 Products Processes Developed and
  Commercialized
• 1.01 Billion in Private Sector Match
• 90 Million in Federal Match
• 171.3 Million in College/University
  Contributions
• 168.8 Million in Other Resources Leveraged

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Statewide Impact (cont.)

• BFTP clients grow fasteradding 5 more jobs/year
  than non-clients
• 2.9 billion increase in gross state products due
  directly to BFTP
• A 141 return on the states investment

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Three Phasesof Ben

• Start Up 1982 1988 - Ben Franklin Partnership
  Fund
• Advanced Technology Centers
•  
• Incorporation 1988 2000 - Ben Franklin/IRC
  Partnership
• 1988-1995 Ben Franklin Technology Centers
  Industrial Resource Centers
• 1995-2000 Ben Franklin Technology Partners PA
  Technology Investment Authority
• Growth 2001 - Ben Franklin Technology
  Development Authority

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Phase 1 Start Up (1982 1988)

• The Environment
• An economy in transition industrial?post-industr
  ial
• Recession
• Manufacturing decline
• 21.5 mfg jobs lost 14/9 unemployment 400,000
  jobs lost
• 40 largest corp employment cut by 50
• 1.29 million in 79 to 600,000 in 86
• Traditional economic development approaches
• Smokestack chasing
• Gov. Shapp (D) Volkswagen Rabbit 40 M
  subsidies closes in 9 years
• Social welfare spending
• Role of venture capital emerging
• Change in Administration 1978 Gov. R. Thornburgh
  (R)

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Phase 1 Start Up (1982 1988)

• The Response
• Choices for Pennsylvaniansstudy of States
  economy
• Importance of small businesses
• Modernize manufacturing base
• Diversify economy through innovative, advanced
  technology companies
• New partnerships public/private state/local
  government
• Identified strong intellectual infrastructure
• 4 universities among top 50 graduate research
  institutions
• 5th among states scientists/engineers workers
  in adv tech spent on R D

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Phase 1 Start Up (1982 1988)

• The Response (contd)
• 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
  Pennsylvanias economy and the States economic
  growth.

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Phase 1 Start Up (1982 1988)

• The Response (contd)
• 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 gt 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

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Phase 1 Start Up (1982 1988)

• The Response (contd)
• University governance
• Board of regional leaders
• State overseer board
• Full project plan submitted annually to state
  board
• Approved all projects and technology sector focus

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Phase 1 Start Up (1982 1988)

• The Response (contd)
• ATP of Southeastern PA
• Seed funding for start ups
• First incubator
• Centers of Research Excellence Network
• gt80 thru universities

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Phase 1 Start Up (1982 1988)

• Results Lessons Learned
• National Model
• 1986 Presidential Commission on Industrial
  Competitiveness Award
• Small Business High Tech Institute State Award
• David Osborne INC and Laboratories of Democracy
• Economic Impact
• 523 new start up companies
• 400 M non-state support
• 3,283 jobs created
• 1,209 companies assisted w/8,649 jobs created
  6,914 jobs retained

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Phase 1 Start Up (1982 1988)

• Results Lessons Learned (contd)
• Programmatic
• From University Lab to the Marketplacetougher
  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 imagefew jobs to underprivileged

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Phase 1 Start Up (1982 1988)

• Results Lessons Learned (contd)
• Structural
• Competitive funding process for ATPs
  counterproductive time consuming
• Annual project funding cycle unresponsive to
  customers
• State-directed regional technology focus
  unresponsive to changing economic/sector
  conditions
• State approval of all projects slows process

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Environment 1988-1995
• PA economy still contracting job retention vs
  strategy creation
• Manufacturing competitiveness a national issue
  mfg losses in PA to offshore and Mexico
• Small businesses proliferating nationally not in
  PA
• David Birch era
• Defense downsizing hits PA, particularly SE PA w/
  4 installation closures
• Jobs, jobs, jobs..any job a good job
• Role of technology not central to local
  strategies tech job growth too slow not across
  all constituencies
• Little understanding/policy attention to
  electronic-based communications and IT sector
• Universities pursuing traditional role

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Environment (contd)
• Shift in role influence of city vs. suburbs
• Growth in suburbs decline in city
• Varying rates of tech adoption, city vs. suburbs
• Tech sector taking root in suburban ring
• Focus on service sector as economic driver for
  city
•  

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Environment (contd)
• New federalism
• Focus on market solutions
• Search for non-bureaucratic methods Reinventing
  Government theme
• Fiscal moderation
• Investment vs. spending
• Redistribution of opportunities vs. outcomes
• State Administration changes
• Gov. Casey (D)
• Labor backlash to perceived neglect of
  traditional industries  

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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

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• 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)

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Criteria for Projects
• Balanced portfolio
• Support consortium activities
• Leverage other funding
• Add value through joint ventures with strategic
  partners
• Focus on extending benefits to disadvantaged
  communities
• Coordinate with state and regional development
  strategies
• Seek potential for ROI or sustainable asset

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Job Creation Via Entrepreneurial
  Development
• Provides royalty-based investments - 25,000 to
  100,000
• Initiates effort to form privately-managed seed
  fund
• Invests in regional seed funds
• Supports regional venture entrepreneurial
  organizations
• Founds Business Information Center for small
  company access to on-line business information
• Via SBA/NIST/foundation grants, expands to target
  minority enterprises and community outreach in
  collaboration with SBDCs
• Launches SBA-funded micro-loan program

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Regional economic diversity via
  educational and research infrastructure
• Centers of Research Excellence restructured
• START Technology Partnership to commercialize
  university technologies(international technology
  licensing organization, multiple universities
  venture firms)

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Productivity improvements in existing
  sectors
• Technical assistance to mfg companies RPDC w/IRC
• Creates Technology Investment Fund product
  development in established enterprises
• Partners with region on defense adjustment
  strategies
• Technology Reinvestment Partnership grant
• On-line defense procurement
• SBIR technical assistance
• Federal Technology Assistance Program w/federal
  labs

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• 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, regions first
  internet community

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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

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Phase 2 Incorporation(1988-1995 1996-2000)

• Results Lessons Learned (contd)
• Pressure to keep administrative costs low limits
  programmatic options
• Traditional economic development metricsshort
  term jobsa 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 economyimpact and visibility
• Functioned as a facilitator, reacting creatively
  to variety of situationsnecessary to shift to
  catalyst, creating reactions

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Phase 2 Incorporation(1988-19951996-2000)

• The Environment 1996-2000
• Unparalleled national economic growth
• Recognition of technology as economic engine of
  the future
• Competition for gazelles replaces focus on
  corporate recruitment rise of the tech
  entrepreneur
• The competitive advantage of regions frames
  discussions

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Phase 2 Incorporation(1988-19951996-2000)

• The Environment 1996-2000 (contd)
• Recognition that competition is global
• Pace of economic transformation accelerating
• Positive press attention to technology
  entrepreneursfinally
• 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/ST/community
  economic development

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Environment 1996-2000 (contd)
• Private sector incubators/accelerators emerge
• Universities defining new role in Knowledge
  Economy
• Venture philanthropy emerges
• Federal attention to technology development
  (NIST, MEPs, SBIR, ATP, EDA, etc)
• New Administration in PA Gov. Ridge (R)
• Ben Franklin Partnership sunset in 2000

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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

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Phase 2 Incorporation(1988-19951996-2000)

• The Response (contd)
• BFTCs engage Battelle 10 year strategy
• Constituent self assessment
• Best practices survey, natl intl
• Integrates Tech 21 objectives
• BFTCs form stronger network
• Single identity Ben Franklin Technology
  Partners
• State-wide coordinator
• Produce Tech 21 Cluster reports
• Common web site marketing materials
• Commission Nexus Associates to produce
  independent economic impact report

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Adopts Expanded Vision
• Ben Franklin will be the primary economic
  development catalyst helping the region
  transition to a knowledge-based economy.

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEP Approves Strategy Based on 4 Objectives
• BFTP as integral, pivotal link in the regions
  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
  regions understanding of technology as an
  economic driver
• BFTP as an enabler, intervening strategically to
  be a change agent in areas basic to creating the
  infrastructure for a new economy.
•  
• Transform organization? growing, sustainable
  regional institution, with an innovative,
  entrepreneurial, performance-based culture.

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Entrepreneurial Development
• Shift from transaction orientation to
  relationship development
• Emphasis on incubation vs. incubators
• MOUs with physical incubators
• Increased funding levels to 500,000
• New investment vehicle subordinated debt
  w/detachable warrants

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Entrepreneurial Development (contd)
• Larger resource commitment for support to
  portfolio companies
• New models of entrepreneurial support Success
  Teams mentors
• Streamlined and improved investment assessment,
  documentation and management processes
• Lead partner in 3 specialty capital funds
• Restructured and refunded micro-loan program
  focus on The Competitive Edge through
  technology services

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Technology Solutions
• Creation of EDA-supported Technology Extension
  Services
• Professional field staff co-located with county
  economic development staff
• Call agents to existing technology companies
• Technology engagements with University Centers of
  Excellence
• Federal research labs and private research
  companies, institutions
• Product Development Consortium in inner city
  Philadelphia
• Technology expertise to portfolio companies
• Refers 25 of successful investment candidates

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Information 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

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Infrastructure
• Management of Regional PTIA process yielding gt
  25M for region
• Nanotechnology Institute 10.8 M new model
• Ben Franklin Gateway Partners 4.5M to create
  30M guarantee program w/area banks
• IT Metrics report
• R2C Alliances multi-institutional/industry
  consortia for technology diffusion and
  application
• Two private venture funds

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Infrastructure (contd)
• Ben Franklin Innovation Center COE incubator
• Research commercialization
• Company formation
• Magnet for company attraction
• Educational symposia
• Fostered biotech consortium
• New anchor for technology development

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Phase 2 Incorporation(1988-1995 1996-2000)

• The Response (contd)
• BFTP/SEPs Infrastructure (contd)
• Restructured export consortium?World Trade Center
  announced
• Modeled biomedical technician training Wistar
  Institute and Community College of Philadelphia
• Incubated regional consortia
• Womens Investment Network
• Greater Philadelphia Collegetown Project

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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

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Phase 2 Incorporation(1988-1995 1996-2000)

• Results Lessons Learned (contd)
• Tension between resources for new investments vs.
  portfolio management services
• Improved returns from increased services
• Investments greatest revenue generator
• Operational strength and systems to support new
  strategies provide the foundation for change
• Incentive-based approach focuses efforts drives
  performance
• Active, engaged board an asset refocus as needed

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Phase 3 Growth 2001 ? Future

• The Environment
• Senate Bill 876 creating the
• Ben Franklin Technology Development Authority
  to
• Serve as the Commonwealths key regional
  partners in identifying, developing, adapting and
  implementing advanced technologies.
• Act as regional facilitators and managers for
  interactions, programs and initiatives.
• Establish partnerships.
• BFTP/PTIA merge BFTPs on governing board
  IRCs independent network regional system in
  tact

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Phase 3 Growth 2001 ? Future

• The Environment (contd)
• Altered, slowing economic environment BFTP
  resources in greater demand
• Many regional orgs. seeking role in creating
  the New Economy
• Lead universities launching tech. enterprise
  development initiatives
• Growing attention to value of federal/state
  alliances
• Technology strategies in vogue nationally
  tobacco settlements provide added resources
• Legacy phase of state administration new
  governor in 2003
• Public school funding performance, stadiums,
  land use, city blight and inner-suburban ring
  deterioration, population loss, state/local
  political power plays the key topics

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Phase 3 Growth 2001 ? Future

• The Response
• BFTP/SEP Adopts New 5 Year Strategy
• Regional Vision
• BFTP/SEP Vision
• Mission
• Key Strategic Goals
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•  

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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.
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•  

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Phase 3 Growth 2001 ? Future

•  
•  

Regional Vision To see the region achieve
international stature and recognition as a model
for technology, innovation and entrepreneurship.
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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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Phase 3 Growth 2001 ? Future
BFTP/SEP Mission BFTP/SEP stimulates economic
growth and competitiveness in the region through
initiatives and partnerships that nurture
innovation, accelerate the development and
adoption of technology by companies and
communities, and promote the growth of
technology-based entrepreneurship.

•  
•  

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Phase 3 Growth 2001 ? Future

• BFTP/SEP Our Plan  
•  
•  
•  
•  
•  

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Phase 3 Growth 2001 ? Future

• Key Strategic Goals
• A leader partner in the development and
  implementation of large-scale regional
  initiatives
• The undisputed leader in the provision of capital
  and development services to pre-seed seed stage
  technology enterprises
• A nationally renowned organization for product
  development commercialization
• A contributor to regional understanding of the
  technology sector, through focused economic
  research that informs policy and program
  decisions
• A bridge linking minority and underserved
  populations to the tech-sector
• An acknowledged international leader in
  technology-based economic development.

•  
•  

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Phase 3 Growth 2001 ? Future

• Achievements/Lessons
•  
• News film ? 2006!