RD169 - Annual Report on the Operating Plan of the Center for Innovative Technology


Executive Summary:
Introduction

Global competition for economic development fueled by technology continues to intensify as Asian nations accelerate their emphasis on innovation and the development of technologically educated workforce members. Within the United States, each state has developed and funded a sophisticated plan for securing a portion of the global technology based economy.

The Commonwealth of Virginia has chartered the non-profit corporation 'The Center for Innovative Technology' (CIT) with the mission of identifying, communicating and accelerating advanced technology and the companies that produce and use this technology. The end result of the work conducted by CIT is an increase in desired industry segments and a corresponding increase in high wage employment within the Commonwealth.

For fiscal year 2006, the Commonwealth of Virginia appropriated $6.087M for CIT to pursue its mission. This represents a 25% reduction from the previous year funding. Additionally, CIT has been requested to secure alternative sources of funding to complement the Commonwealth's appropriation.

To respond to the challenges resulting from funding reductions while staying true to the original CIT mission, management has developed a plan that streamlines current operations and expands service into new market segments.

New service offerings have been designed to deliver value as required in the original CIT mission, as well as recover all costs associated with the services. The diversification of revenue sources will enable CIT to continue to operate during periods of reduced Virginia funding, and react swiftly to address Commonwealth issues that will be funded in the future.

Annually, CIT reviews the economic climate for technology development and advancement in the Commonwealth. The following observations identified in the 2004 and 2005 CIT Operating Plans continue to be issues for fiscal year 2006. These observations include:

• There is a significant void in angel and venture investment for seed-stage technology firms in Virginia.

• The increased need for technological solutions in defense and homeland security creates opportunities for Virginia's technology researchers and businesses, whose proximity to the federal government offers a competitive advantage.

• Virginia's ability to capitalize on emerging fields and industry drivers such as nanotechnology and life sciences requires identification and pursuit of a specialized market segment.

• Access to affordable broadband is unevenly distributed in Virginia, slowing economic recovery for rural communities.

• Federal dollars playa substantial role in R&D funding for small businesses in Virginia, offering both a non-diluting source of capital as well as a validation for early-stage innovation.

These environmental observations, coupled with an increasing emphasis for funding self sufficiency have served as key considerations for the 2006 plan.

For fiscal year (FY) 2006, CIT's mission remains the same:

CIT accelerates Virginia's next generation of technology and technology companies.

2006 Goals

To continue maximizing value for the Commonwealth's technology economy, CIT has defined five specific strategic goals:

1. Create new industry clusters in Virginia
2. Make Virginia a global leader in the development of entrepreneurial technology ventures
3. Advance Virginia's technology commissions and policy initiatives
4. Solve national and regional technological challenges through world-class R&D programs
5. Deliver innovation, identification, and assimilation services

To achieve goal one, "Create new industry clusters in Virginia," CIT will continue education and advocacy for nanotechnology and establish a regional initiative to bring together Maryland, Virginia and the District of Columbia to pursue joint research and development opportunities. CIT will also continue its SmartBio program and to concentrate on educational and advocacy for growing R&D in the biotechnology-computer science field.

For goal two, "Make Virginia a global leader in the development of entrepreneurial technology ventures," CIT will continue its Federal Funding Assistance Programs to help Virginia's technology companies obtain funding through federal research programs.

Through the Capital Access Program, which is designed to help the Commonwealth's high-potential early stage companies obtain private funding, CIT anticipates assisting more than 30 early-stage technology companies. CIT will help these firms gain critical exposure to the region's early-stage investment community and contribute to the ability of Virginia's companies to raise $5M from placement of institutional and angel funds.

For 2006, CIT will restructure its current regional operations program. Instead of engaging 300 to 400 developing technology companies annually using a service intensive 'hands-on' approach, the organization will expand the number of companies reached to over 1,200 and reduce the level of service provided to referral and brokering assistance. Additionally, field personnel will relinquish their office space and replace it with a mobile working environment.

In goal three, "Advance Virginia's technology commissions and policy initiatives," CIT will continue to provide administrative and technology policy support for the Virginia Research and Technology Advisory Commission, the Commonwealth of Virginia's Information Technology Symposium, and the Commonwealth Technology Research Fund.

As part of goal four, "Solve national and regional technological challenges through world-class R&D programs," CIT will operate the Institute for Defense and Homeland Security and provide research and development services to the Departments of Defense and Homeland Security. Additionally, CIT will engage in R&D services for oceanic observation, broadband deployment, and economic development.

Goal five, "Deliver innovation, identification," and assimilation services is a new goal. In support of goal five, CIT will establish a new service line dedicated to helping large scale consumers of technology such as the federal government and Fortune 500 technology companies identify and assimilate innovation created in private sector start-up companies. This new service will accelerate adoption of new technology on a national scale and serve to diversify CIT's revenue base.

2006 Economic Impact Projection

The economic impact of the five goals of the 2006 operating plan is projected to be $45.5 million allocated as follows:

• Cash - $6.4 million in revenue for CIT
• Leveraged Cash - $12.7 million in revenue and investment for Commonwealth entities
• Economic Value - $26.4 million in wages and sales gains for Commonwealth entities