2007 Dual Use Defense Info Briefing - Feb 26 2007

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  • 2007 Dual Use Defense Info Briefing - Feb 26 2007

    1. 2. Dual Use Hawaii’s Innovation Industry February 26, 2007 Joint Information Briefing <ul><li>Economic Development & Business Concerns </li></ul><ul><li>Rep. Kyle T. Yamashita , Chair </li></ul><ul><li>Rep. Glenn Wakai , Vice-Chair </li></ul><ul><li>Rep. Lyla B. Berg </li></ul><ul><li>Rep. Tom Brower </li></ul><ul><li>Rep. Jerry L. Chang </li></ul><ul><li>Rep. Faye P. Hanohano </li></ul><ul><li>Rep. Robert N. Herkes </li></ul><ul><li>Rep. Joey Manahan </li></ul><ul><li>Rep. Clift Tsuji </li></ul><ul><li>Rep. Ryan I. Yamane </li></ul><ul><li>Rep. Corinne W.L. Ching </li></ul><ul><li>Rep. Barbara C. Marumoto </li></ul>Economic Development & Taxation Senator Carol Fukunaga, Chair Senator Will Espero, Vice-Chair Senator J. Kalani English Senator David Y. Ige Senator Sam Slom
    2. 3. Panelists <ul><li>Jennifer Goto-Sabas, Chief of Staff, Senator Daniel K. Inouye </li></ul><ul><li>Jeanne Unemori-Skog, President & CEO, Maui Economic Development Board </li></ul><ul><li>Tom Cooper, Chair, Kauai Economic Development Board </li></ul><ul><li>Jan Sullivan, COO, Oceanit </li></ul><ul><li>Keith Matsumoto, Technical Director, HTDV </li></ul><ul><li>Ed Young, Program Manager HTDV, Enterprise Honolulu </li></ul><ul><li>Dr. Pat Sullivan, Founder & CEO, Hoana Medical </li></ul><ul><li>Larry Lieberman, Communications Director, Referentia Systems </li></ul><ul><li>Monte Littlefield, Founder & CEO, Pipeline Communications </li></ul><ul><li>Dr. Rob Yonover, Founder & CEO, See Rescue Technologies </li></ul><ul><li>Tareq Hoque, Founder & CEO, Concentris Systems </li></ul><ul><li>Ian Kitajima, Dual Use Network </li></ul>
    3. 4. Agenda <ul><li>Introductions </li></ul><ul><li>What's Dual Use? </li></ul><ul><li>Why should you care about Dual Use? </li></ul><ul><li>What’s needed to create an innovation economy? </li></ul><ul><li>What’s missing? </li></ul><ul><li>Q&A </li></ul>
    4. 5. What’s Dual Use? <ul><li>Dual Use – Refers to technology which has more than one use. Hawaii’s dual use companies have used Federal grant funding to develop state-of-the-art technologies. </li></ul><ul><li>Dual Use is Hawaii’s Innovation Industry </li></ul><ul><li>Innovation industries are driven by ideas , people , Capital, & companies </li></ul>Ian PEOPLE CAPITAL IDEAS COMPANIES
    5. 6. Why Should You Care? <ul><li>$4B in the last 10 years in support to Hawaii’s economy </li></ul><ul><li>Fast growing segment of tech </li></ul><ul><ul><li>739% growth in contracts </li></ul></ul><ul><ul><li>73% growth in grants </li></ul></ul><ul><li>Rank 24 th in SBIR grant funding, from last, with minimum State $s </li></ul><ul><li>Over 100 companies and growing </li></ul><ul><li>Average salary $54K vs. $42K median income </li></ul>Ian Sources: HIPA 2005 Policy Review; University of Hawaii OTTED, U.S. Department of Commerce, Bureau of Economic Analysis; U.S. Department of Commerce, Census Bureau; National Science Foundation/Science Resources Study Division; U.S. Bureau of Labor Statistics; Milken Institute; National Venture Capital Association; U.S. Patent & Trademark Of.ce; U.S. Of.ce of Management & Budget; U.S. Small Business Administration.
    6. 7. Ingredients for an Innovation Economy Jennifer PEOPLE CAPITAL IDEAS COMPANIES
    7. 8. Federal Investment in Hawaii’s Ideas <ul><li>$323.5M </li></ul><ul><li>63 RDT&E Projects </li></ul><ul><li>in 2005 </li></ul>Source: Enterprise Honolulu Defense & Dual Use Strategic Plan Jennifer
    8. 9. Federal Funding from HTDV in Ideas Hawaii Technology Development Venture 3 years 45 projects $13M Keith/Ed
    9. 10. Ideas to Commercialization Technological Risk Ed/Keith Valley of Death Capital Requirements Product Development Hawaii Technology Development Venture State Tech Grants SBIR II / STTR Angels-Act215 Venture Capital Commercialization Institutional Investors-ERS Oahu Technology & Innovation Center KEDB & MEDB State Innovation Fund Self Funds Angels-Act215 Incubation SBIR I HTDC Incubators MIC & MRTC Government Support Private Sector Support
    10. 11. Ingredients for an Innovation Economy Jeanne PEOPLE CAPITAL IDEAS COMPANIES
    11. 12. People – Workforce Development <ul><li>Maui Economic Development Board </li></ul><ul><li>Kauai Economic Development Board </li></ul><ul><li>Hawaii Economic Development Board </li></ul><ul><li>Enterprise Honolulu </li></ul>Jeanne/Tom
    12. 13. Ingredients for an Innovation Economy Patrick PEOPLE CAPITAL IDEAS COMPANIES
    13. 14. What’s Missing? Turning ideas Into Products and Companies Patrick IDEAS via Federal Funding PRODUCTS >SB1688< Valley of Death COMPANIES via Act 215 Venture Capital
    14. 15. Ingredients for an Innovation Economy Ian PEOPLE CAPITAL IDEAS COMPANIES
    15. 16. Company Stories <ul><li>Established </li></ul><ul><ul><li>Referentia Systems </li></ul></ul><ul><ul><li>Oceanit </li></ul></ul><ul><ul><li>See Rescue </li></ul></ul><ul><li>Startups </li></ul><ul><ul><li>Pipeline Communication & Technology </li></ul></ul><ul><ul><li>Concentris Systems </li></ul></ul><ul><ul><li>Hoana Medical </li></ul></ul>
    16. 17. Supported Concepts <ul><li>Matching grants </li></ul><ul><ul><li>3 rd Party Validation. Projects are vetted </li></ul></ul><ul><ul><li>Leverages federal $$$s </li></ul></ul><ul><ul><li>SB1688/HB1666 (Technology Grants) </li></ul></ul><ul><li>Incentives like Act 215 that allows direct investments by investors into companies (bypass Venture Capital gatekeepers), and transparency for the public </li></ul><ul><ul><li>Allows companies and investors to deal direct. No middlemen. No single person or organization should control the investment flow. No politics. </li></ul></ul><ul><ul><li>SB898: Annual DoTax report on QHTBs and effectiveness of tax credits. </li></ul></ul><ul><li>Keep Act 215 alive, and intact! </li></ul>Ian
    17. 18. Data Slides
    18. 19. Example of Defense / Dual Use Co’s <ul><li>Kauai: </li></ul><ul><li>Trex Enterprises Corporation </li></ul><ul><li>Oceanit </li></ul><ul><li>SAIC </li></ul><ul><li>Advance Fusion </li></ul><ul><li>Maui: </li></ul><ul><li>Ambient Micro </li></ul><ul><li>Trex Enterprises Corporation </li></ul><ul><li>Akimeka, LLC </li></ul><ul><li>Lockheed Martin </li></ul><ul><li>SAIC </li></ul><ul><li>Peletex, Inc. </li></ul><ul><li>Big Island: </li></ul><ul><li>Kona Labs </li></ul><ul><li>Hawaii Oceanic Technologies </li></ul><ul><li>Carpin-Force Microelectronics </li></ul><ul><li>Oahu: </li></ul><ul><li>Pipeline Communications </li></ul><ul><li>BAE Systems </li></ul><ul><li>SAIC </li></ul><ul><li>Oceanit </li></ul><ul><li>Referentia Systems </li></ul><ul><li>Pacific Marine/Navatek </li></ul><ul><li>Trex </li></ul><ul><li>Omega </li></ul><ul><li>Oceantronics </li></ul><ul><li>Williams Aerospace </li></ul><ul><li>See Rescue Technologies </li></ul><ul><li>Cellular Bioengineering </li></ul><ul><li>21 st Century Software </li></ul><ul><li>Pukoa </li></ul><ul><li>Progeny </li></ul><ul><li>Applied Marine </li></ul>
    19. 20. Federal Investment in Hawaii’s Ideas <ul><li>$4B </li></ul><ul><li>RDT&E* 10 yrs </li></ul><ul><li>*Research, Development, Test & Evaluation </li></ul>Source: Enterprise Honolulu Defense & Dual Use Strategic Plan
    20. 21. Defense/Dual Use in Hawaii Sources: HIPA 2005 Policy Review; University of Hawaii OTTED, U.S. Department of Commerce, Bureau of Economic Analysis; U.S. Department of Commerce, Census Bureau; National Science Foundation/Science Resources Study Division; U.S. Bureau of Labor Statistics; Milken Institute; National Venture Capital Association; U.S. Patent & Trademark Of.ce; U.S. Of.ce of Management & Budget; U.S. Small Business Administration.  49th 75 / yr Patent Activity  47th 1? Businesses created from UH R&D (2000-2002)  24th $3.5M / yr SBIR grant funding  15th 65 / yr Scientists & Engineers % of WF  ~ 80+ No. of Defense D/U Companies Trend Rank 2003
    21. 22. <ul><li>QHTB salaries ($112,683,520) </li></ul><ul><ul><li>327% more than credits claimed during last 4 years (p. 30, Table 2) </li></ul></ul><ul><li>QHTB expenditures ($263,286,379) </li></ul><ul><ul><li>764% more than credits claimed during last 4 years (p. 30, Table 2) </li></ul></ul><ul><li>QHTB gross revenue generated ($51,625,758, ’03 only ) </li></ul><ul><ul><li>149% more than credits claimed in 2003 (p. 31, Table 4) </li></ul></ul>Effects of Act 215 (’02, ’03)
    22. 23. Job Creation of Act 215 <ul><li>$44K 1 vs. $83K 2 </li></ul><ul><li>investment creates 1 innovation job in Hawaii compared to Silicon Valley </li></ul><ul><li>1 $60.32M credits claimed from 2000-’03 divided by 1,378 high tech jobs in existence at the end of 2003. Figures less performing arts investment & jobs. </li></ul><ul><li>2 $60.5B in venture capital invested from 2000-’03 in Silicon Valley divided by 725,400 tech jobs in existence at the end of 2003. Source: PWC Moneytree Report </li></ul>
    23. 24. But Hawaii Startups Under-funded <ul><li>$900K 1 vs. $12M 2 </li></ul><ul><li>investment per startup in Hawaii compared to Silicon Valley </li></ul><ul><li>1 $60.32M credits claimed from 2000-’03 divided by 67 QHTBs in existence at the end of 2003. Figures less performing arts investment & jobs. </li></ul><ul><li>2 $60.5B in venture capital invested from 2000-’03 in Silicon Valley divided by 4884 tech startups during the same time period. Source: PWC Moneytree Report </li></ul>
    24. 25. 2005 Venture Investment Per Deal $0.9M $6.6M $7.35M $5.4M $6.6M $10M HI ‘03 Ireland Germany UK Israel U.S.
    25. 26. How Act 215 Auto-Corrects <ul><li>If I move my QHTB out of state, can I still claim the R&D tax credit, and can my investors still claim the investment tax credit? </li></ul><ul><ul><li>Answer is NO to both questions. The majority of the R&D must be performed in Hawaii </li></ul></ul><ul><li>Can I can avoid spending my investors’ investment, and my investors can still claim their investment tax credit? </li></ul><ul><ul><li>NO …the company will lose its QHTB status, and thus investors will lose their investment tax credit, and be subject to recapture </li></ul></ul><ul><li>I heard there is no risk to investors when they are getting a 100% tax credit? </li></ul><ul><ul><li>NO ….because an investor does NOT get his entire investment tax credit in the first year – the credit is spread over five years, during which the company could go bankrupt, and thus the investor would lose the credits for the remain years. </li></ul></ul>

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