Summer 2006
Progress and Pitfalls: Measuring Washington’s Performance in the Key Drivers of a Vibrant Technology-based Economy
Excellent K-12 and higher education systems, to prepare our kids for the knowledge-based jobs of the future...
Strong research capacity, to generate the discoveries and technologies of tomorrow...
A robust entrepreneurial climate, to support the growth of innovative young companies that create new products, services, and jobs...
These are the essential elements of a successful technology-based economy. In 2003, the Technology Alliance benchmarked Washington’s performance in these critical areas against that of eight peer states with similarly technology-intensive economies: California, Colorado, Georgia, Maryland, Massachusetts, Michigan, Texas and Virginia. Now, three years later, we measure Washington’s progress and examine the potential pitfalls for our state’s long-term competitiveness.
ENTREPRENEURIAL CLIMATE
Our state measures up well against its peers on two key entrepreneurial climate indicators: venture capital investment and intensity of highly-skilled workforce. Washington showed significant improvement in the level of venture capital directed to in-state companies while maintaining a high concentration of educated workers in fields that are critical to our technology-based industries.
Venture Capital Investment
Venture capital firms invested $752 million in Washington companies in 2005, a 31% increase over 2002. This amount placed us 4th among our peers behind California, Massachusetts and Texas. Washington increased its share of total venture capital invested in the United States from 2.7% to 3.5%. Among our peers, only California and Colorado also increased their share of the nationwide total.
Even more significant was the growth in venture capital directed specifically to Washington’s biotechnology sector. From 2002 to 2005, the amount of venture capital dollars invested in biotech in our state more than tripled, boosting our ranking among our peers from 7th to 4th place.
Highly-skilled Workforce
Startup companies are dependent not only on dollars but also on people. A concentration of highly-skilled, educated workers who can support innovative, growing companies is critical to sustain our technology-based economy. Washington continues to excel in this category: we rank 5th in concentration of computer and information science experts and 3rd in concentration of life and physical scientists in our workforce among our peers, and 5th in the nation on both.
RESEARCH CAPACITY
Washington continues to be strong in several categories of research activity. Industry, federal government, and non-profit institutions all increased their expenditures on research and development in our state. We are relatively weak in academic research indicators, where we fall in the middle of the pack in R&D expenditures and near the bottom in state funding for research.
Industry R&D
Industry is Washington’s most robust R&D performer, accounting for 80% of all research spending in the state. From 1999 to 2003, total dollars spent by industry on R&D in Washington rose by nearly 28%. We rank a very respectable 3rd among our peers and 5th in the nation on a per capita basis on this indicator.
Federal R&D
We saw a significant rise in federal spending on R&D in our state from 1999 to 2003. Federal agency R&D expenditures in Washington more than doubled, boosting our ranking from 21st to 14th nationally and from 8th to 7th among our peers. Spending in a separately reported category known as federally funded research and development centers (FFRDC’s), which includes national laboratories, increased four-fold, elevating us from 5th among our peers and 7th nationally to the top of our peer group and 4th in the nation.
Non-profit R&D
Non-profit R&D is, overall, a much smaller category compared to other research performers such as industry or universities. However, with the Fred Hutchinson Cancer Research Center and others, Washington has been and continues to be strong in non-profit research activity. Per capita R&D expenditures at Washington’s non-profit research institutions increased by 57% from 1999 to 2003. This placed us 5th in the nation and earned us a 3rd place ranking among our peers behind Massachusetts and Maryland.
Academic R&D
Academic R&D expenditures statewide increased from $588 million in 1999 to nearly $870 million in 2003, but that did not have the effect of putting our state in a more competitive position. Washington gained one place among our peers to rank 5th, but slipped one place from 20th to 21st in the nation on a per capita basis.
“While University of Washington is in the very top tier for federal research dollars, we have very little academic R&D beyond UW and WSU,” noted Chris Rice, chair of the Technology Alliance’s benchmarking committee. “Many other states have either bigger public university systems or private research universities, or both. It is important for Washington to keep our two public research universities as strong as possible, as they are all we have in this category.”
State Support for Research
Our most glaring weakness has been, and continues to be, non-federal government support – essentially, state funding – for academic research. Since the last study, we dropped one place to 47th in the nation and remain last among our peers on a per capita basis. The Technology Alliance discovered that a relatively modest state investment, such as the $35 million per year that will be available beginning in 2008 as part of the Life Sciences Discovery Fund, can make a significant difference in Washington’s competitiveness on this indicator. One year’s worth of LSDF funding added to actual state dollars spent in support of R&D in 2003 would have improved our national ranking by 23 places, on a per capita basis, and elevated us to 6th place among our peers.
EDUCATION
While we can celebrate our state’s recent gains in research and entrepreneurial climate, education continues to be an area of serious concern for our state. Our latest findings suggest that Washington has work to do in order to achieve K-12 and higher education systems that truly support our knowledge-based economy. Education continues to represent a huge potential pitfall for Washington even as we have bolstered our competitiveness in other areas.
Higher Education
Washington’s higher education output contrasts starkly with the workforce data highlighted in the entrepreneurial climate section. We rank in the bottom half of all states and our peer group in the production of bachelor’s degrees and, specifically, bachelor’s degrees in science and engineering fields. We lost ground on these two measures since the 2003 study, while improving slightly in the production of science and engineering doctoral degrees.
“We rank 5th nationally in concentration of high tech workforce, but we’re not producing those graduates here. This highly educated workforce is largely the result of migration,” observed Susannah Malarkey, Technology Alliance executive director. “While the legislature has provided additional funds for baccalaureate programs in high-demand fields such as engineering, our national ranking in this measure fell three places from three years ago because other states have invested more than Washington in these fields.”
K-12 Education
Success in higher education and beyond begins with strong preparation at the K-12 level. To measure how well we are preparing our students to succeed in higher level coursework, we examined eighth grade student achievement on the National Assessment of Educational Progress, also known as the “nation’s report card.” The NAEP data makes overwhelmingly clear the need for all states to improve achievement in essential subjects such as reading and math as students approach high school.
In reading, Washington saw a slight improvement compared to the previous study results, with just over a third of students scoring at or above proficient in 2005. While we remained in 3rd place among our peers, we slipped five places to 17th in the nation as other states have made greater progress. Even in the top-ranked state in the nation, Massachusetts, fewer than half of eighth grade students scored at least proficient in reading.
Washington showed greater improvement in math proficiency, jumping eight places from the previous study to rank 6th in the nation and second among our peers. Here again, in no state did the proportion of students demonstrating proficiency meet or exceed half, with top performer Massachusetts achieving only 43%.
“In math achievement we made some headway,” noted TA chair Marty Smith. “But it is disconcerting to realize that we can be 6th in the nation when only 36% of our students test proficient in 8th grade math.”
Our statewide high school graduation rate, measured as the percentage of incoming freshmen who graduate four years later, was 72% in 2002, placing us 31st in the country. This represents incremental progress since the last benchmarking study, when we ranked 32nd with a rate of 68%, but is nowhere near where we need to be in terms of providing all of our students the opportunity to succeed in higher education or the workplace. While Washington graduates roughly 60,000 high school students in a given year, an estimated 24,000 of their peers do not graduate with them.
Output measures such as student achievement in essential subjects and graduation rate can be tied to the level of resources invested in our education system. While it is not the only determining factor, it is instructive to look at per-pupil expenditures at the K-12 level in absolute dollars and as a percentage of the national average. Washington’s per-pupil expenditures increased by more than 18% from 1999 to 2003, but on a relative basis our state has fallen further behind. Our expenditure level declined from just under 94% of the national average to just above 90%, with a corresponding decrease in our national and peer rankings.
“Clearly we can do better for our students, but it takes strong leadership, a focused approach, and more investment in K-12 education,” said Smith.
“Washington is making progress on a number of fronts, and we have a solid foundation on which to build in research and entrepreneurship,” noted Rice. “But we can not afford to continue to fall short in education. There is a compounding effect of falling short that stays with our students and our economy throughout their lives. It seems priorities are misplaced when Washington is below the national average in per student funding and ranks 45th out of 50 states when we consider per capita income in our state.”
“If we do not address this now, we jeopardize our economic competitiveness, not to mention our kids’ futures,” he concluded. “We must make a commitment as a state to provide our students with a 21st century education to meet the challenges of the 21st century economy.”
To read the complete report, click here.
Alliance of Angels Startup of the Year Award: Sonic Science and Skin Care Prove a Heavenly Mix for Pacific Bioscience Laboratories
Pacific Bioscience Laboratories, the Bellevue-based developer of the CLARISONIC skin care brush, rose above a strong field of six finalists to capture the 2006 Startup of the Year Award, which recognizes entrepreneurial excellence in the Pacific Northwest. The award was presented to CEO David Giuliani and COO Mike Stull at the State of Technology Luncheon in Seattle on May 15th.
Flour Power: WSU Wheat Breeder Kimberlee Kidwell Concludes the 2005-2006 Season of Seattle Science & Technology Roundtable
Some fascinating science goes into the bread that we buy. Oatmeal may be the perennial favorite of the STRT faithful, but as we learned from Dr. Kimberlee Kidwell at the final breakfast of the 2005-2006 season, wheat is really neat.
Learn Something New – Register for the Science & Technology Discovery Series!
Get up close and personal with our state’s leading scientists. Discover groundbreaking research taking place in your own back yard. Experience science and technology like you never have before.
You don’t have to take notes, but you just might find that you want to.
The new season of the Technology Alliance’s popular Science & Technology Discovery Series* starts in September! With programs in Seattle and Spokane, the Discovery Series features presentations on the latest research at our preeminent institutions and innovative companies in an intimate setting.
The Seattle Discovery Series kicks off on September 8th with Dr. Steve Malone, professor of earth and space sciences at University of Washington, sharing his expert insights on the recent volcanic activity at Mt. St. Helens. The Seattle program features ten monthly breakfast presentations from September through June. For more information or to become a member, click here.
The Spokane Discovery Series has expanded! The new season will feature seven breakfasts between September and June, starting with Dr. Lee Siwek, cardiovascular and thoracic surgeon at Sacred Heart Medical Center, on September 22nd. Dr. Siwek will speak about the use of the da Vinci robot in cardiac bypass surgery. For more information or to become a member, click here.
*Formerly Science & Technology Roundtable
Technology Alliance Board Elects Marty Smith as New Chair, Welcomes New Members
The Technology Alliance is pleased to announce the election of Marty Smith, partner in Preston Gates & Ellis LLP and a long-time advocate for education, as our new chair. We also welcomed four outstanding business and community leaders to the board at its May 25th meeting: Mic Dinsmore of the Port of Seattle; Michael Martino of Sonus Pharmaceuticals, Inc.; Tom Vander Ark of the Bill & Melinda Gates Foundation; and Peter Wilson of Google.
Welcome New Alliance of Angels Fellows!
A warm welcome to our 2006-07 AoA program managers: Rebecca Lovell, full-time Preston Gates & Ellis Fellow, and Avniel Dravid, part-time Alliance of Angels fellow.
Our thanks and best wishes to our departing 2005-06 fellows, Edward Hansen and Erik Hanson.
Thank You to Our Geoffrey Moore Workshop Participants!
On July 13th in Seattle, the Technology Alliance was proud to present a special luncheon workshop with Geoffrey Moore, bestselling author of Crossing the Chasm and Inside the Tornado. Geoffrey explored the different ways in which companies innovate and revealed how companies can overcome their own inertia and manage resources more effectively in pursuit of innovation. After the workshop, Geoffrey took the time to chat with members of the audience and sign copies of his latest book, Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution. If you missed it, you can download the podcast here.
The Technology Alliance would like to thank Geoffrey, Kim Ricketts Books, and the following sponsors for their part in making the workshop a great success: Cisco Systems; Enpria, Inc.; F5 Networks, Inc.; Microsoft Windows Live; Onyx Software; and Wells Fargo Bank.