Gov. Bill Haslam’s speech to the Tennessee Technology Development Corp., May 5, 2011:
Thank you, it’s a pleasure to be with you here today at the TTDC NEXT conference. I know that much of the discussion here today and tomorrow is focused on the future …where the next wave of new ideas is coming from.
As someone who is highly interested in how innovation can impact Tennessee’s economy …I’m interested to hear your thoughts on that topic. Nearly four months into my administration, and I’ll tell you right now that I have the greatest job in the world. There’s no bigger honor, I think, than to be the governor of your home state, and I’ll always be grateful to Tennesseans for allowing me to serve them.
During this short period, my administration has spent a lot of time determining how best to move Tennessee’s economy forward.
A few weeks ago, ECD Commissioner Bill Hagerty and I traveled around the state rolling out our strategy for job creation, something we call Jobs4TN. It’s a strategy with a broad-based approach but it’s based on a few basic principles.
The first is that government’s role in job growth is to help create the type of business climate that gives the private sector the confidence to invest and hire people. The second is that no single approach to job creation will work for every region of the state.
That’s why we’ve set up nine regional “jobs base camps” across Tennessee … each with a regional director that will operate as a single point of contact – an ombudsman – for companies who want to interact with state government.
It’s also why we’re in the process of hiring an assistant commissioner for rural development at ECD … so that we can address the unique challenges of driving businesses growth and new investment to Tennessee’s rural areas. And the third is to focus our energy and efforts on those areas of Tennessee’s economy in which we have a competitive advantage.
That’s why you’ll see a renewed emphasis on reaching out to companies currently operating in Tennessee.
To be clear, we’ll continue to recruit businesses from out of state, but we’re increase our focus on Tennessee companies because that’s where the vast majority of the jobs in our state are created.
That’s been true in each year of the past decade ….and the most recent data we’ve been able to gather bears that out. ECD went back and looked at data released by the Bureau of Labor Statistics for 2009 and 2010 … and more than 95% of the new jobs created in Tennessee came from existing businesses … or Tennessee-based start ups.
Which confirms something many of us from the business community have long suspected: the entrepreneurial spirit in
Tennessee is alive and well. This brings me to the subject of our discussion today: how to capitalize on a robust innovation community here in Tennessee.
When we rolled out Jobs4TN …one of the key strategies we said we would emphasize was “investing in innovation” ….but we asked the folks we met with to stay tuned until today, when we would have more details to add.
So, I’m pleased to announce today that we will be launching a $50 million dollar initiative aimed at capitalizing on Tennessee-based innovation called INCITE — that stands for: INNOVATION…COMMERCIALIZATION…INVESTMENT…TECHNOLOGY and ENTREPRENEURSHIP. The basis for this initiative comes from a couple of areas in which Tennessee lags behind the rest of the country ….but has a strong potential to make up ground.
For example, we have some remarkable centers for research and development within our state (ORNL, St. Jude) …but, these research centers aren’t as closely aligned with the private sector as they need to be. Less than 3% of the R&D which takes place in Tennessee is funded by the private sector …about half the national average.
When it comes to patents per worker …Tennessee’s rate is only two-thirds the national average …and from 1998 to 2009, the total number of patents created in our state actually declined. Tennessee researchers are developing ideas that can find a way to the commercial marketplace …but, when that happens, it usually happens in another state.
Of the 140 licenses held by Tennessee research institutions …only 28 of those licenses have been purchased by Tennessee companies. Last year, that research spun off only 7 Tennessee-based companies.
If we’re interested in the bottom line, the bottom line is: We can do better.
We have an environment with many of opportunities to improve. We cannot expect to create high quality jobs …and to move our state’s economy forward relative to other states …if we don’t do a better job of capturing innovation created here in Tennessee …and moving it into the marketplace.
That’s why we’ve created the INCITE initiative to raise our game in several important areas. The first is coordination. As I said, part of our Jobs4TN strategy is to create nine economic regions across the state each with its own strategic plan for economic development. An innovation component will be part of each of those strategic plans. We’re also going to work more closely with TTDC to help us engage with key stakeholders on innovation on a more regular basis and to take the lead on staging an annual Governor’s Conference on Innovation.
The second area of emphasis for INCITE is research. When I submitted my budget to the legislature, I included $10 million dollars in funding for the Memphis Research Consortium. This allied effort includes the University of Memphis, the U-T Health Science Center, St. Jude Children’s Research Hospital, Memphis BioWorks and FedEx.
It’s a great model for building innovation networks and working with the private sector to translate R&D into high quality jobs. The health care and life science partners of the consortium alone are responsible for more than 30,000 jobs in the Memphis area. Leaders of the consortium believe that with proper capital investment, the number of jobs associated with research in Memphis can grow by nearly a third by the year 2020.
We will partner with MRC to achieve … and ideally surpass … that goal, and TTDC will help us track and improve Tennessee’s performance on research commercialization. The next area of focus for the INCITE initiative is entrepreneurship.
This part of our strategy is especially important because as a government serving the taxpayers we have to understand what it means to have capital at risk. Tennessee has a long and storied history of companies that went from start-ups to corporate giants as the result of a handful of determined entrepreneurs …whether it’s FedEx or AutoZone or HCA …we’ve seen the impact entrepreneurs can have on our state.
We will support them with a network for those people who are willing to build a growing company out of a great idea.
As part of the INCITE initiative, our plan calls for the creation or support of entrepreneurial incubators in each of the state’s regions. In some places, we’ll fund new incubators …in other areas, we’ll support existing incubators with a strong track record of success. But, our goal will be to create a statewide support network to help entrepreneurs … and to share best practices among the regional incubators across the state.
With that state support however come some responsibilities. Each of the nine regional incubators will have clear benchmarks for raising private capital to support the companies they’re helping to launch.
At the end of the day, we want make sure the people of Tennessee understand the role that individual entrepreneurs play in the economic health of our state. Of course, most of the people in this room understand that great ideas can never be translated into new jobs without capital …and that’s the 4th component of our INCITE initiative.
We’ll take $30 million of the $50 million we’re channeling into innovation …and focus it on enhancing Tennessee companies’ access to early stage capital. Part of that funding will go toward the creation of a pre-seed and seed capital fund that will align with the U.S. Department of Treasury’s State Small Business Credit Initiative. Our plan is to apply for a portion of the funds allocated to Tennessee last October to strengthen state lending programs for small business and small manufacturers.
This co-investment fund will be a perfect complement to other efforts to jump start early stage capital in Tennessee like TNInvestco and other early stage investment activities around the state. These funds will be channeled into broad categories … for example, we’ll create a co investment fund to make seed and early stage investments alongside other early stage investors.
These funds will be available to any qualified company that falls within the eligibility requirements of the Treasury program. We’ll also put additional dollars into the Small Business Opportunity Fund.
The goal of this effort will be to create a sort of “mezzanine” fund in which the state is not the first investor …but can provide capital for low interest loan funding to help a company build the critical mass necessary to succeed. Taken together, these steps can raise the level of energy around innovation in Tennessee.
But they can only be effective if we work together to make our state more competitive, and right now, the status quo is not acceptable. Tennessee currently ranks 35th among the states in the amount of industrial R&D currently underway, according to the 2010 New Economy Index report.
The same report suggests we also fall behind our competitor states in the number of skilled professionals who live and work in Tennessee …the type of people with the skills to take new ideas and develop them into working businesses. It ranks Tennessee 46th in the number of scientists and engineers. That’s why ramping up our educational performance is incredibly important to our future as a state.
It’s why you’re seeing so many school districts across our state focusing on STEM education. It’s why it’s so important for us to build the connections between university-based research …commercialization and tech transfer …and industry competitiveness. Developing these collaborative networks will help us create the types of jobs we need to move our state forward.
I truly believe that with INCITE, we’ve asked the right questions and brought the right people to the table to participate with us. I’m convinced TTDC can play a role in our efforts to translate innovation to high skill jobs. We can also develop strong partnerships in linking together our research assets …like we’ve done with the Memphis Research Consortium.
Earlier this week, Tennessee House Speaker Beth Harwell announced she’s asked State Representative Mark White of Memphis to study how the legislature can help universities in Tennessee commercialize new technologies …so, this is a topic that’s at the forefront of many people’s thinking right now.
I believe all of us working together can find ways to jump-start capital formation with new co-investment strategies. AND I think the time is right to take a hard look at how innovation Tennessee innovation – can drive progress in our state’s economy …and help make Tennessee the No.1 location in the Southeast for high quality jobs. Thank you for the opportunity to speak with you today … I look forward to continuing the conversation in the months ahead.