RD128 - Center for Innovative Technology (CIT) Operating Plan Fiscal Year 2012


Executive Summary:
Fiscal Year 2012 Funding

CIT’s FY 2012 revenue will rank 3rd highest in CIT’s 27 year history. Revenue of $13.7 million represents growth of 67% over FY 2011 and results from these increases:

• Increased Commonwealth appropriations for the GAP Fund from $500,000 for FY2011 to $5 million for FY2012. This increase was provided by the Commonwealth as part of the Governor and Lieutenant Governor’s job creation initiatives and the legislature’s new emphasis on research and technology company formation
• Federal grant revenue of $555,000 for new broadband program funding secured by CIT from the National Telecommunications Infrastructure Agency
• Federal grant revenue of $2M for seed stage energy company investment secured by CIT and DMME from the Department of Energy.

In addition to funding CIT will receive directly, CIT is designated as the operating agent for $6M of new funding for the Commonwealth Research and Commercialization Fund (CRCF). The combined revenues of $13.7 million for CIT funding and $6 million for CRCF funding provide CIT with fund deployment capability of $19.7 million to facilitate technology programs for the Commonwealth in 2012.

Fiscal 2012 Operating Plan

For 2012, CIT’s mission will continue to be “accelerating the next generation of technology and technology companies” coupled with the objective to “achieve national recognition as the premier services provider engaged in technology company creation and company growth”.

To achieve this mission, CIT will operate five service lines each under the leadership of a vice president. These service lines are:

Service line: Research and Development, Responsible Executive: Nancy Vorona
Service line: Entrepreneur, Responsible Executive: Thomas Weithman
Service line: Connect, Responsible Executive: Paul McGowan
Service line: Broadband, Responsible Executive: Karen Jackson
Service line: Commonwealth Support Programs, Responsible Executive: Bob Stolle

The 2012 CIT Operating Plan provides a complete description of the goals, objectives, plan of work, value proposition, program impact and milestones for each service line. The following sections provide a summary of the Plan and funding by service line.

Research and Development service line

For 2012, the Research and Development service line will execute the following programs:

1. Establishment of the Commonwealth Research and Technology Roadmap as defined in legislation from the 2011 legislative session.
2. Establishment and execution of the Commonwealth Research and Commercialization Fund (CRCF) post acceptance of the Roadmap.
3. Ongoing execution of the federally funded Over-the-Horizon Vessel Tracking project, which is designed to strengthen physical defenses at Norfolk Naval Station.
4. Ongoing execution of the federally funded Mine Safety project in which CIT teamed with two small Virginia businesses to develop and deploy a wireless environmental monitoring system for use in underground mines.

To execute these programs, the Research and Development service line will expend $1.2 million as outlined in the funds usage chart below.

Entrepreneur service line

For 2012, the Entrepreneur service line will execute the following programs:

1. Continued execution of CIT’s Federal Funding Assistance Program which helps Virginia companies secure SBIR/STTR funding and ensures that the Commonwealth preserves its top 5 national ranking for total SBIR/STTR awards.
2. Accelerate seed stage funding for Virginia’s technology startup companies by operating the GAP Fund family of funds. New funding for 2012 will allow the GAP Fund to (1) increase the number of new startups funded from 5 in 2011 to 13 in 2012, (2) fund new university startups through the GAP Innovation Fund and (3) support second round funding for existing high growth portfolio companies.
3. Accelerate seed and growth funding for Virginia’s energy companies by operating the Commonwealth Energy Fund. New federal funding for this fund will enable the creation or growth of 6 energy companies.

The combination of the GAP Fund and Commonwealth Energy Fund will produce a projected 30 investment transactions for 2012. To execute these programs, the Entrepreneur service line will expend $10.3 million as outlined in the funds usage chart below.

Connect service line

For 2012, the Connect service line will execute the following programs:

1. Ongoing execution of the Virginia Regional Extension Center contract with the Virginia Health Quality Consortium to assist physicians with the implementation of electronic medical records. The Virginia target for implementation is 2,300 physicians.

2. Ongoing execution of the Virginia Department of Education (VDOE) Longitudinal Database System contract to assist VDOE with the design and approach for the establishment of a student database.
3. Pursuit and closure of $1.5 million of new consulting business with emphasis on electronic medical records exchange programs.

To execute these programs, the Connect service line will expend $255,000 as outlined in the funds usage chart below.

Broadband service line

For 2012, the Broadband service line will execute the following programs:

1. Operate the Office of Telework Promotion and Broadband Assistance to encourage the usage of telework alternatives for public and private sector employees.
2. Execute programs to support the efforts of public and quasi-public bodies within the Commonwealth to enhance availability of and access to affordable broadband services throughout Virginia. These programs include:

a. Mapping and Planning programs to refine the Commonwealth’s broadband availability map and establish plans and an approach for adopting broadband applications and infrastructure.
b. Application Development and Deployment to stimulate usage and demand for broadband applications in areas including telemedicine and telework.

To execute these programs, the Broadband service line will expend $2.0 million as outlined in the funds usage chart below.

Commonwealth Support Programs service line

The Commonwealth Support service line is new for 2012. This service line has been established to facilitate the development of region-specific technology growth programs. As an outgrowth of CIT’s Innovation Index program, this service line will evolve the Innovation Index project into the community portion of the Commonwealth Research and Technology Roadmap. Throughout the development of the Roadmap, leadership of this service line will examine opportunities to modify existing CIT programs to better fit regional requirements and propose new CIT programs to address current growth inhibitors. To execute these programs, the Commonwealth Support service line will expend $486,000 as outlined in the funds usage chart below.

Corporate Support Groups

In addition to the operating service lines, CIT is supported by the Finance and Administration group under the leadership of the Chief Financial Officer, Linda Gentry. CIT’s F&A group is responsible for all financial, legal and administrative functions of the corporation including the design and operation of a federal and state compliant financial management system.

Also, CIT is supported by the Government and Public Relations group under the leadership of Vice President Hap Connors. The Government and Public Relations group is responsible for state, federal and public relations functions.

Operating Budget

The 2012 budget, summarized below, reflects significant new funding and the controlled use of net assets to achieve impact in all service lines. The projected year end net asset position of $1.6M ensures our ability to bridge fiscal year commitments and manage operating adjustments throughout the year.

President’s Perspective

Fiscal year 2012 represents an inflection point for CIT that is grounded in three areas. First, significant new Commonwealth revenues have been secured as a result of CIT’s advocacy for high growth company formation, research investment and our operation of the GAP Fund. Our efforts have produced the confidence necessary for appropriators to further invest in CIT and embark on a strategy that balances economic development between traditional company attraction projects and high growth company formation based on scientific discovery and engineering creativity present in the Commonwealth. Our challenge with this new emphasis is to operate the GAP Fund in a manner that facilitates the highest degree of private investment possible while preserving our invested capital for reinvestment.

Second, due to tax revenue reductions and differing priorities, emphasis on technology based job creation in the Commonwealth has been minimal since prior to the start of the Great Recession. Because of this, CIT reduced the scale and scope of its programs. Essentially, our emphasis was focused on preventing deterioration of our assets instead of expansion into emerging areas. The recent renewed emphasis on innovation and job creation are enabling us to transition from a preservation mindset to an exponential growth mindset. Our challenge in this regard is to resist advancing older economic development initiatives that are embraced by our competitors, but unproven in their effectiveness and deliver programs that are highly capital efficient and exhibit laser-like precision in their measured impact. New initiatives designed to accelerate Virginia’s core strengths in areas like cyber security, personalized medicine and energy technologies represent new targets of opportunity for Virginia’s technology industry development.

Third, while we celebrate the new emphasis on innovation and job creation, we are careful to remember that funding that supports these programs is aligned with political and economic conditions. Therefore, we must design and implement programs that include the ability to self-fund or transition to self-funding structures within a realistic period of time. Essentially, public sector investment should serve as seed investment to facilitate the development of a self sustaining enterprise. Our M2 project, a hybrid professional service and investment fund represents an opportunity to capitalize on CIT’s strengths and past performance to create a self sustaining entity with significant value for the Commonwealth. In 2012 we will place additional emphasis on the M2 project and other similar opportunities.

Fiscal Year 2012 holds significant opportunity and potential for CIT and the entire team is energized for the challenge.