Dallas Morning News
The critical importance of Texas' Emerging Technology Fund
By Kowalski, Clark, Hammond and Bellsnyder:
October 16, 2010
 

Texas is clearly a leader in the global economy, and critical to maintaining our position of leadership is keeping our intellectual and financial capital – and the jobs for Texans that they create – here at home.
Texas consistently ranks second in the nation in the creation of intellectual ideas, basic research and research publications in its private and public institutions of higher education. However, Texas does not break the top 15 in the country in transferring or commercializing those ideas into market driven products for Texas, making us effectively a net exporter of intellectual capital.

We also face, as do other states and countries, a shortage of capital for the small businesses that create the vast majority of new jobs in Texas and the U.S. According to the Ewing Marion Kauffman Foundation, virtually all net job creation between 1980 and 2005 took place in start-ups and young firms. Even in the current economic downturn, nearly two-thirds (66 percent) of all net job creation in 2007 occurred in young firms.

Financial capital is scarce for all businesses, but small businesses face a particularly acute need for funding. While small business credit lines have become more difficult to secure, venture capital investment in young, promising companies is being attracted to competing locations around the world. Venture investment in U.S. companies was down 8 percent from 2008 to 2009, while during the same timeframe, venture capitalists put more than $13.4 billion into 1,416 deals with emerging companies in Europe, Israel, China and India – a 5 percent larger investment than they made in U.S. companies and despite a 15 percent drop in annual venture investment in Europe.

The program most critical to keeping Texas competitive in increasing our intellectual and financial capital is the Texas Emerging Technology Fund. Since the fund's inception in 2005, it has proven a success in cultivating research ideas from our world-class universities, creating new companies with global impact and accelerating the next generation technology economy in Texas. To date, the ETF has made an equity investment in 114 small businesses across the state, from a diverse array of industry sectors, and has contributed another $161 million in grant matching and research superiority funds to our Texas universities and non-profit organizations in order to bring world class researchers to our state.

The University of Texas at Austin has received $13.5 million to help create the Neuroscience Imaging Center and the Southwest Academy for Nanotechnology. Texas State University in San Marcos received a $4 million grant to create a Center for Multifunctional Materials. A recent grant of $8 million to Texas Tech University will create a national wind institute to make Texas a flagship for wind-power research.

To keep Texas at the forefront of job creation over the next decade and beyond, the companies in which the ETF invests represent every area of cutting-edge technologies and are located in every region of the state. Each company selected for ETF investment is rigorously studied through a multi-step vetting process, and those that show the greatest potential for long-term success are selected for investment. To ensure that the fund's investments are well placed, the ETF seeks out those companies that demonstrate the ability to innovate and to raise further investment.

Device Fidelity, a Richardson company started in 1997, has patented a next-generation point-of-sale payment technology, connecting the user's financial institution to their mobile device to provide payment information. A recent partnership with the largest retail electronic payment company, Visa Inc., will enable a mobile phone with a memory card slot to be used as a Visa mobile payment device. Being selected as a technology partner for Visa will launch the company worldwide right here in Texas.

Dallas-based Syndiant provides viewing technology for personal devices. Syndiant is advancing liquid crystal on silicon technology to capture the emerging pico-projector market. This technology will lead the way for future projection of images from handheld electronics, such as smart phones, notebook computers, portable media players, video game consoles and cameras. Being located in the heart of one of Texas' technology corridors – Dallas-Fort Worth – has helped the company identify a promising path for success. Despite being a start-up company in today's challenging economy, the company raised more than $19.6 million in investment capital (including $3.5 million from the ETF). In 2010, Syndiant secured its first customers, globally and nationally, proving it can compete with market leaders Texas Instruments and Micron.

While the ETF's benefits to Texas are significant, its impact extends well beyond our state's borders. The fund has grown into the most active early stage investment fund in the country and today provides the foundation for innovation, transitioning ideas into the marketplace by helping companies secure solid management and raise private capital.

The program's eight Regional Centers of Innovation and Commercialization also represent the economic and technological diversity of their regions. Today, more than 500 seasoned experts (investors, entrepreneurs, economic developer, researchers and academics) volunteer their time to evaluate, coach, mentor and select quality investment opportunities. Importantly, the regional centers build the innovation capacity in rural areas of our state. Rural Texas has seen significant success through investments in multiple companies and universities in Texas' mid-markets.

The chancellors of the University of Texas, Texas A&M, and Texas Tech recently commented on the impact of the ETF program on our institutions of higher education, noting that ETF dollars make Texas more competitive and create what some call an "idea infrastructure" that is positioning the state to lead the next wave of technological innovation.

The Texas Emerging Technology Fund program is serving Texas well by providing our state a greater ability to develop and grow our financial and intellectual capital, to improve our first-class research capability, and to grow our small technology-based businesses, so that all of our state's citizens can benefit from the employment opportunities and the competitive economic advantage Texas will enjoy around the globe.

Tom Kowalski is president of the Texas Healthcare and Bioscience Institute; Jeff Clark is regional vice president of TechAmerica (Technology Association of America);Bill Hammond is president and CEO of the Texas Association of Business; Luke Bellsnyder is executive director of the Texas Association of Manufacturers.