Information Report on

							CITY CLUB OF PORTLAND BULLETIN                                                             29

                               Information Report on
                                                       N
            STATE SUPPORT OF TECHNOLOGICAL INNOVATION A D
                           APPLIED RESEARCH
To t h e Board of G o v e r n o r s ,
C i t y Club of P o r t l a n d :

                                  I.       INTRODUCTION

    On J u n e 1 9 , 1 9 8 5 , t h e Oregon l e g i s l a t u r e p a s s e d House B i l l
2937,   which     established           t h e Oregon Resource and Technology
Development     C o r p o r a t i o n (ORTDC). The m i s s i o n of t h e ORTDC i s
to foster innovation and assist in developing new products and
processes in Oregon's advanced technology industries and in
existing     resource-based            industries.         RD
                                                        O T C i s financed by an
allocation     of    funds made available from the Oregon Lottery.
 RD
O T C i s expecting an estimated $5.5 million from lottery pro-
ceeds in the 1986-87 biennium.

       Creation of                 RD
                            the O T C allowed Oregon to play a role in
funding s c i e n t i f i c and technical research.        RD
                                                      The O T C also in-
volved the S t a t e ' s higher education system in f a c i l i t a t i n g in-
dustry use of ideas developed in academic settings (Section 9,
 B
H 2937). Since the issue of setting research and development
p r i o r i t i e s i s closely tied to economic development, one of the
Club's premier issues, your Committee believed i t could play a
                                                        RD
valuable role by giving the efforts of the O T C more public
visibility.              The following Information Report describes the
structure and functions of the O T C      RD .

                                   II.       AK R U D
                                            B C GO N

        In September           1 9 8 5 , then-Governor Atiyeh appointed a t e n -
member Board of D i r e c t o r s of t h e ORTDC. In l a t e s p r i n g 1986,
the        Board     selected          John B e a u l i e u a s P r e s i d e n t  of t h e
Corporation.             Mr. Beaulieu h a s served a s General Manager for
American S t a n d a r d ,        h a s had e x p e r i e n c e in investment banking
and was founder of a mid-tech s t a r t u p company.                      By f a l l 1986,
the       Corporation         developed t h r e e major programs t o meet i t s
mission.         The t h r e e         programs i n c l u d e :    (1) a "Seed C a p i t a l
Fund" or "Early                Round Financing" i n t h e $50,000 t o $250,000
r a n g e ; (2) an Applied Research Grant and C o n t r a c t Fund r e q u i r -
ing one t o one matching for p r i v a t e e n t e r p r i s e s or e d u c a t i o n a l
institutions;          and (3) a Technical                    Information and Support
Program.         Funding c r i t e r i a and a review p r o c e s s for a p p l i c a -
tions       have been e s t a b l i s h e d and p r o p o s a l s for funding a r e now
under c o n s i d e r a t i o n .

     In March 1 9 8 7 , t h e f i r s t v e n t u r e c a p i t a l awards were an-
nounced.       As of March 5 , 1987, ORTDC h a s reviewed 151 a p p l i c a -
tions    for t h e Seed C a p i t a l Fund (88% of t o t a l a p p l i c a t i o n s )
and Applied         Research         Fund       (10% of t o t a l a p p l i c a t i o n s ) . Of
that   t o t a l , 33% r e p r e s e n t s r e q u e s t s from t h e high tech i n d u s -
try,   15% from                                                                  %
                       t h e wood p r o d u c t s i n d u s t r y , and 3 from t h e
30                                        CITY CLUB OF PORTLAND BULLETIN


agricultural    products         industry.                   6
                                             A t o t a l of 5 % of these ap-
plications were generated by firms in the Portland area, 21%
from                                          3
       the Willamette Valley, and 3 % from the balance of the
State.     Eighty-nine          applications, or 59%, already have been
rejected   with   the remainder funded or in process of evalua-
tion.   Six Seed Capital Fund projects have been funded:               Esam,
Inc./$250,000    for operations, marketing, and product develop-
ment of computer products for severely communications and mus-
cular   control-disabled          individuals; and Ralin, Inc./$250,000
for manufacturing and marketing pulse meters to monitor heart
rate during exercise; Natural Technologies, Inc.,/$100,000 for
research and development of an e l e c t r i c breast pump for l a c t a -
ting mothers,     with        related medical        supplies;   Hood River
Brewing/$250,000 for new f a c i l i t i e s to produce and market spe-
cialty   ales;   Pace Ventura International/$250,000 for devel-
opment of    business English            training      videotapes for USIA:
         V
Cabana R Inc./$50,000 for fifth wheel t r a i l e r with expandable
pods.   In addition, two grants have been made from the Applied
Research   Fund:     Drs. Hian Lauw (OSU) and Ben Klassens (Delft
University,    Holland)/$100,000 for research and development of
a laboratory prototype power converter and e l e c t r o n i c control
system; and A n t i v i r a i s , Inc./$100,000 for research and devel-
opment of a genetic probe for diagnosing v i r a l infections.

                              III.   DISCUSSION

    Several        s t a t e s have established agencies designed to sup-
port and encourage the startup of new technology-based indus-
tries:      Connecticut           Product Development Corporation (1975);
Massachusetts            Technology     Development   Corporation   (1978);
Tennessee        Technology        Foundation   (1982);  Michigan Venture
Capital   Fund          (1982); Ohio-Thomas Alva Edison         Partnership
Program   (1983); Virginia-Center             for   Innovative Technology
(1983);   I l l i n o i s Venture Capital        Pool; Wisconsin Community
Capital   Corp.; Pennsylvania-Ben Franklin Partnerships (1983);
and Arkansas Science and Technology Authority (1984) . De-
scriptions       of      several of these programs are available in the
City Club office.

                                                                     RD
     As mandated by the enabling l e g i s l a t i o n , O T C will be
supporting technological innovation in the S t a t e ' s established
industries of a g r i c u l t u r e , forestry, f i s h e r i e s and metallurgy.
 RD
O T C also will support the development and implementation of
innovations or new technologies in e x i s t i n g resource, tech-
nology-based and emerging trade-sector i n d u s t r i e s .               RD
                                                                          O T C is
taking an active approach to funding by encouraging the pur-
suit   of  business ventures by individuals who have created
technological   innovations.             RD
                                        O T C i s planning to provide ven-
ture capital    support           in the    range of $50,000 to $250,000,
whereas typical       private sector venture c a p i t a l investment i s
over a million d o l l a r s .             RD
                                      The O T C i s required to maintain a
self-perpetuating      fund;         therefore, a necessary c r i t e r i o n for
all   seed capital       financing i s the economic v i a b i l i t y of the
business to be supported.               Trade-sector i n d u s t r i e s are to be
CITY CLUB OF PORTLAND BULLETIN                                    31


supported over service-sector industries and the jobs to be
created are to be located in rather than out of state. Since
the State is not permitted to acquire private equity and se-
          RD
curity, O T C has purchased stock conversion rights, will use
royalties, and may use other transaction forms.(1)
   Several    issues continue to warrant attention by City Club
members:
              RD
    Is the O T C funded at a level sufficient to accomplish
    the charge given i t by the legislature? For example,
    should there be biennial appropriations for staff support
    to create a one-stop research and technology information
    center for entrepreneurs? Such a center could serve as a
    clearing house to provide information about human and phy-
    sical resources which might be of assistance to an embry-
    onic company.     Under the present single appropriation,
    funds for staffing must come from the same pool as the
    funds to be used for venture capital.
    Is there sufficient    recognition in Oregon of the impor-
    tance of investment in higher education which generates
    technological innovation and creates a supportive environ-
    ment attractive to technology-based companies?
                                Respectfully submitted,

                                Margery Abbott
                                Phil Adamsak
                                C.W. Corssmit
                                Nancy Duhnkrack
                                Michael Hoffman
                                Gretchen Lashley
                                Marshall Parrott
                                Michael Sommers
                                Vicki Tagliafico, and
                                Marshall Cronyn, Chairman
                                     a
Approved by the Research Board on M y 14, 1987 for submittal
to the Board of Governors. Received by the Board of Governors
      a
on M y 18, 1987 and ordered printed and distributed to the
membership. NOTE: BECAUSE THIS REPORT CARRIES NO CONCLUSIONS
OR RECOMMENDATIONS NO OFFICIAL   ACTION  I S REQUIRED OF THE
MEMBERSHIP.


1.    Response t o opinion request OP-5930 from Larry D.
Thompson, General Counsel, Attorney G e n e r a l ' s office t o Stan
Timmerman, Chairman, Legal Subcommittee, ORTDC, 2/21/86.
32                                              CITY CLUB OF PORTLAND BULLETIN

                                      APPENDIX A
                               Persons Interviewed
Wayne Embree,           formerly with t h e S t a t e Economic Development
    Commission, now with O T C             RD
                                            RD
John B e a u l i e u , P r e s i d e n t , O T C
Dr.  Michael C. Mulder, D i r e c t o r , Applied Research Center,
                                                          RD
    University of P o r t l a n d , and Board member, O T C
George F o r e s t e r , Chairman, S.E.E.D.S.


                                      APPENDIX B
                                     BibliQ.gxap.hy

"Managing        for      Challenging        Times:          A   National       Research
      strategy",       Eric      Bloch, issues in science and technology
   Winter 1986.
"A National Research S t r a t e g y " , H.T. S h a p i r o , J . Doebold, S.
   Gorton,   W. E. Massey, Xasjies in .science and technology
   Spring 1986.
"Cooperative R & D: A New S t r a t e g y " , W.C. N o r r i s ,issuesin
     science and technology, Winter, 1985.
"Brains and Biotech for             Oregon's Natural Resources", D.L.
    Goldy, .Yi.si.Qns, Fall 1986.
"Emerging Trends-New Oregon Perspectives for the Year 2010",
    Commission on Futures Research, Progress Report, 1986.
"Ohio Program Works on Developing Home-Grown I n d u s t r i e s " ,
    oregonian-t E4 , Feb. 7, 1987.
"Technology     Transfer      and the Basic I n d u s t r i e s " , R. R. Harmon,
    Visions, Spring 1986.
"States'     Plans     Link       Small Business and U n i v e r s i t i e s " ,
    chronicle of higher education Pg. If June 23, 1986.
"States Back Risky Ventures in Effort to Create New Jobs", new
    york times Pg. 1, June 23, 1986.
"National    R & D Policy:             An I n d u s t r i a l P e r s p e c t i v e " , R.W.
    Schmitt, .Science.! 224, 1206 (1984).
"Europe Pushes Ahead with Plans for J o i n t P r o j e c t s " ,                     science
    233, 152 (1986).
63rd Oregon L e g i s l a t i v e  Assembly, House B i l l 2937, June 19,
    1985.
"Report     of    the     Chairman and P r e s i d e n t " ,            Massachusetts
    Technology Development Corporation, June 30, 1985.
"Fostering     Capitalism:         The Massachusetts Venture Capital
    Fund",     J.E.   Jarrett,       innovations.,          The Council of S t a t e
    Governments.
"Seed     Capital   Investment        Program",         Arkansas Science and
    Technology Authority.