March 10, 2015
Louisiana Innovation Council Minutes, March 10, 2015, 10:00 am
PreSonus Audio Electronics, Lagniappe Room,
18011 Grand Bay Court
Baton Rouge, LA 70809
Agenda:
I. Call to Order and Roll Call
II. Update on the Angel Investor Tax Credit
III. Update from the Board of Regents Master Planning Research Advisory Committee
IV. Update on the Upcoming Legislative Session
V. Innovation Month Recap
VI. Hat Tips
VII. Public Comment
VIII. Adjournment
13 members in attendance; quorum not met
Attendees:
Quentin Messer, presiding
Sarah Turner (Governor Jindal designee)
Dr. Michael Stubblefield (Dr. Ronal Mason, Jr. designee)
David Helveston
Lisa French
Barry Erwin
Webster Pierce
Matthew Cameron
Dr. Michael Khonsari
Adam Knapp
Christine Alford
Jim Odom
Joseph Lovett
Guests:
Stephen Loy, Louisiana Technology Park
Byron Clayton, Research Park Corporation
Jenee Slocum, Louisiana Workforce Commission
Susie Schowen, LED
Russel Primeaux, Kean Miller LLP
Dean Domingue, University of Louisiana at Lafayette, Office of Innovation Management
David Claypool, Biofluidica Microtechnologies LLC
Michael Pernici, LED
Josh Fleig, LED
Kerry Davidson, Louisiana Board of Regents
I. Call to Order and Roll Call
II. Update on the Angel Investor Tax Credit
Adam Knapp (BRAC) updated the council on recent developments concerning the angel investor tax credit. The tax credit is set to expire in July 2015 unless renewed this session by the legislature. The LIC itself was vital to re-establishing the tax credit after the legislature allowed it to expire in 2009. This has allowed the state to both reap the benefits of the program and understand the effects of allowing the program to sunset without renewal. It is the only credit that focuses on early stage companies and is the driving force which allows them to move forward with funding for innovation. Mr. Knapp invited members of the council and guests to participate in the effort to lobby the legislature for passage of a bill re-establishing the program this session. Mr. Knapp outlined several slight modifications that the bill will attempt to make to the program.
First, a $5MM cap will be instituted to help make program costs predictable for legislators. Mr. Knapp stressed that program costs will likely be lower than this cap, as roughly only $2.5MM has actually been claimed in recent years. While that is not great news for innovation in the state, it will help to make the bill more viable in the legislature where the general mood toward tax credits is likely to be one of opposition.
Other modifications to the current program include lowering the credit rate from 35 to 30 percent over a period of five years and establishing a new sunset date for the fiscal session in 2019.
While the program might currently be low on the priority list for legislators, it matters for small businesses, for innovation and also for universities. Mr. Knapp noted that Andy Maas at LSU has identified the program as one of the state’s key means of spurring innovation and collaboration between business and higher education.
Mr. Knapp also took the opportunity to discuss the Research and Development tax credit. He noted that Governor Jindal is attempting to change the credit structure from a refundable to a non-refundable program and argued that this would hit hardest small companies with under 50 employees. It would also negatively affect those companies which receive federal SBIR (Small Business Innovation Research) grants. Currently, these companies receive a 40 percent tax credit to match federal funding. This program provides a significant benefit to small firms and would be rendered useless if it is changed into a non-refundable tax credit, Mr. Knapp argued.
Dr. Claypool noted that LLCs under the law are currently not able to keep the credits, which have to be distributed among partners. He requested that this be considered as a potential modification to the current program.
III. Update from the Board of Regents Master Planning Research Advisory Committee
Mr. Messer asked Dr. Kerry Davidson of the Louisiana Board of Regents and Dr. Michael Khonsari, Dow Chemical Chair and Professor of Mechanical Engineering at LSU, to update the council regarding the work of the Board of Regents Master Planning Research Advisory Committee.
Dr. Davidson noted for the council that state has seen an increase in collaboration between higher education and LED and the LIC which has been made more meaningful through the work of the Master Planning Research Advisory Committee (MPRAC). As a result of the Battelle study, the state was able to identify between five and six target areas for innovation and research, which was brought to the attention of the LIC. Based on the study, the state used the work of in-state task forces to determine the best ways to make choices within target areas which culminated in reports being issued in November. These were presented to the Board of Regents in December. The reports identified three (of the five and six suggested by the Patel study) priority areas which the state would commit to developing: manufacturing, digital media and biotechnology. The reports noted that these three areas warranted state investment. Dr. Davidson suggested that the higher education community statewide is poised to move forward to support research in these areas, but energy has been slowed due to uncertainty about state funding in the current fiscal climate.
Currently, MPRAC’s priority is to identify research at Louisiana’s universities that can successfully be brought to market. This will rely on the collaboration of business, investors and venture capital. Dr. Davidson noted that the state wanted additionally to focus on tech transfer, in addition to manufacturing, digital media and biotechnology. To this end, six to seven campuses statewide have come together and formed a group to discuss the state potentially prioritizing tech transfer as one of its research areas. Dr. Davidson was hopeful that this group would be able to successfully identify ways to target work in this area and align it with the direction of business, investment and economic development leaders. Dr. Davidson suggested that the work so far has been very productive and that now MPRAC and its allies are continuing to further target areas of research as they wait for a report from the tech transfer group.
Dr. Khonsari added that this work would not have been possible without the support of Dr. Les Guice of Louisiana Tech, who chairs both the LIC and MPRAC.
Mr. Messer added that both Susie Schowen of LED and Jenee Slocum of the Louisiana Workforce Commission did a lot of the initial work to ensure the partnership and collaboration between economic development and higher education. Mr. Messer summarized the work of MPRAC, saying that individuals conducting sponsored research are trying to be both true to their scholastic interests and also sensitive to what is productive for the state. Because of this work, universities are now much more conscious of their role in economic development. This is not solely what they exist to do, but they are seeing the possibility of greater collaboration with economic development leaders in this area. In addition, it is encouraging that these conversations led to WISE being instituted earlier than it would have without this support. Now, it is considered a priority by the Governor and this is because of the work of MPRAC and many individuals supporting business-oriented research and innovation in higher education.
IV. Update on the Upcoming Legislative Session
Mr. Messer provided a brief update on the upcoming legislative session, noting Jim Richardson of LSU and Steven Sheffrin of Tulane University and the presentation of their recommendations for state tax reform to a joint meeting of the Senate Committee on Revenue and Fiscal Affairs and the House Committee on Ways and Means. Mr. Messer noted that budget considerations will be front and center among the items considered by the legislature this session and that this will have an effect on tax credits and economic development initiatives related to innovation. Mr. Messer noted that various stakeholder groups should begin communicating and working together to address issues like the angel investor tax credit work discussed by Mr. Knapp earlier.
V. Innovation Month Recap
Mr. Messer also updated the LIC with regard to the success of Louisiana Innovation Month in November 2014. The idea to commemorate and celebrate the impressive amount of innovations and businesses that have come out of Louisiana was initially started by LED. Mr. Messer noted that the latest publication of Louisiana Economic Quarterly focused on Louisiana innovators in honor of Louisiana Innovation Month. The publication features several companies including, PreSonus, the host of this quarter’s LIC meeting.
VI. Hat Tips
Mr. Messer noted that the folders handed out at the meeting contained articles and press releases highlighting the success of LIC initiatives or members. Mr. Messer highlighted the recent ranking of Louisiana Tech as one of America’s “most underrated” universities by Business Insider. The most recent publication of Louisiana Economic Quarterly and an LED press release celebrating Louisiana Innovation Month were also included. Finally, Mr. Messer highlighted LSU’s increased funding of its LIFT fund which provides grants to faculty members on the basis of the market value of their inventions.
VII. Public Comment
Mr. Messer opened up the meeting for public comment from both members and guests.
Mr. Byron Clayton, CEO and President of Baton Rouge’s Research Park Corporation discussed his willingness to assist in lobbying the legislature to renew the angel investor tax credit program since it is a driving force in accelerating innovation. He noted that venture capital investors are increasingly becoming more risk averse and that there is a gap between companies that are able to obtain federal seed money and companies that are able to receive venture capital investment. He noted that it was troubling that one of the most vital tools the state currently has available to fill this gap is in danger of going away. Mr. Clayton noted that the same was true of the SBIR tax credit and that other states are very jealous of what Louisiana has, a strong reason to keep the program.
Mr. Clayton discussed the Battelle study and pointed out that federal money has been focused in cluster initiatives and tangible technologies. Millions of dollars, for example, have funded projects in Ohio, where he lived most recently.
Mr. Lovett also discussed the angel investor tax credit, specifically noting that the statute currently excludes venture capital investment. He stressed that this should be changed. He noted the existence of an active angel investor network in New Orleans, composed of individuals with high net worth. These individuals work together to look at deals and invest money in early stage technology. Mr. Lovett argued that similar networks should be started in Baton Rouge and in north Louisiana. When investors work together as a network, they can help to evaluate which projects and technologies are most likely to succeed if funded. Having an organized, connected network is key to the success of such angel investment programs, however.
Mr. Knapp urged that the LIC and LED begin to champion this issue and suggested that this could be a good role for both entities to take on.
Mr. Messer agreed that, at this juncture, the LIC is looking for other focal points after concluding the Battelle study and other LIC-sponsored research-oriented projects.
Mr. Clayton noted that the Research Park Corporation, Louisiana Technology Park’s parent company, is supported by portion of a Baton Rouge hotel tax and that it uses this to turn around and invest statewide in early stage research and collaboration. Recently, Louisiana Technology Park has been trying to spend more time expanding its focus and pulling together support from stakeholders and other groups who could be a source of investment in innovation. Mr. Clayton stated that the more that people in Louisiana collaborate, the more successful it will be in accelerating innovation.
Mr. Lovett noted that perhaps LIC could rely on its higher education partnership in establishing networks of investors as well, since universities already possess strong networks within their alumni associations. In this way, established LSU alumni can help to fund LSU start-up projects.
Mr. Clayton noted that there are many conversations similar to this one occurring around the state and that, to the extent that the LIC can help support and unite these conversations, Louisiana will move closer and closer to a successful model of connecting potential investors with potential projects. Mr. Clayton noted as well the advantages of clustering, using the example of a recent NSF $20MM grant for advanced manufacturing that could be obtained and used by a multi-university partnership across the state.
Mr. Messer concluded the discussion by announcing that the LIC’s next meeting would be in Ruston and stressing the importance of members and guests being willing to make the effort to attend this meeting.
VIII. Adjournment
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