Technology proposals get business focus: IEDC requests new 21st Century Fund applications

It’s been 18 months since state government requested new technology proposals from startups or academics. The days of waiting are now finished.

“We’re in business,” said the Indiana Economic Development Corp.’s new director of entrepreneurship, Bruce Kidd. “The open sign is in the window. We want to start accepting applications again.”

On Nov. 16, the IEDC issued a request for applications to its $75 million 21st Century Research and Technology Fund. Much has changed since March 2004, when the state last considered proposals. The 21st Century Fund’s focus remains on stimulating innovation. But the IEDC has decidedly different ideas on how to achieve it.

In its first half-decade, the 21st Century Fund’s investments often skewed toward the research side of the R&D equation, underwriting discoveries in university laboratories. These days, Kidd said, the 21st Century Fund will lean instead toward development. Its emphasis will be on job creation in small, entrepreneurial high-growth companies.

Kidd’s first goal is to reduce turnaround time. Previously, the 21st Century Fund considered applications only during a designated timetable. Over a half-decade, that meant just six opportunities for applicants to solicit funding. Instead, Kidd has begun a rolling application process he believes will provide flexibility to consider projects quickly, whenever they arise.

“We’re trying to run this like a business,” he said. “I view the people who turn to us as customers or clients. We have to treat those people well, or they’ll go elsewhere.”

The first 10 percent, or $7.5 million, of the 21st Century Fund’s dollars have been set aside to attract more money from the federal government’s Small Business Innovation Research program.

Through the SBIR program, promising new discoveries can attract up to $100,000 in phase one to continue research. Such grants are the first step toward attracting still more federal money. IEDC wants to match any phase one SBIR grant, providing resources to sustain small companies while their projects await further funding.

The 21st Century Fund had begun such grants before IEDC began managing it earlier this year. But Kidd’s goal is to dramatically increase the number of SBIR grants Indiana attracts. This year, it earned 31. Ohio, by contrast, earned 190.

Another significant change is the addition of a formal business review for every application. The 21st Century Fund previously required a formal scientific review of every new project by a team of peer experts around the nation. The new business review, Kidd said, will provide an additional layer of scrutiny about each project’s market prospects. Reviewers will be selected on a case-by-case basis.

“I’ve got the recruits in mind,” Kidd said. “I just haven’t told them yet, ‘You’ve got a scholarship, buddy.'”

IEDC is also exploring methods to maximize its return on investment on 21st Century Fund grants. For example, it is introducing a clawback provision for new projects that would require a company to return its grant if it moves out of state.

The IEDC also would like to find a way to earn back some of the gain if 21st Century Fund grant recipients do well, Kidd said.

However, mandating a return for the state would be a thorny proposition. Such pressure might stymie a small company’s growth. And since the technologies involved are so new, a fair number of recipients are expected to fail or fold. IEDC doesn’t want to punish honest efforts at entrepreneurship, Kidd said.

“We have to protect the state’s money, invest it wisely and not throw it at projects without a return,” he said.

Karl Kohler, the 21st Century Fund’s longtime deputy director, said the IEDC’s approach isn’t so much an overhaul as a shift in focus. The 21st Century Fund always had emphasized formation of new technology businesses. But in its earlier years, it hadn’t yet created the partnerships between Indiana’s universities and the private sector that exist today.

“I think it is important for the fund to chart a new direction, although this isn’t actually so new,” he said. “It’s just a different emphasis.”

Robert Uffen, an Arlington, Va.-based consultant whose firm Partners in Research reviewed the 21st Century Fund for Democratic Gov. Joe Kernan’s administration, said the 21st Century Fund’s evolution follows the recommendations researched by the previous administration.

“The fund in Indiana has just made all the right moves,” Uffen said. “It has gained focus and has shown that academic laboratories and companies really can work together.”