To keep university innovations and startups local, states could establish a tax exemption for investments in targeted early-stage companies. This would incentivize venture capital from accredited investors and equity crowdfunders. One way to achieve this would be to offer a capital gains tax exemption for investments in qualified start-up companies. The exemption could require a three-year minimum investment to be eligible, and could extend for up to ten years. Having patient capital gives companies more certainty and helps avoid the “valleys of death” during technology development and commercialization. Knowing that... (learn more)

Over the past four years, twenty-six states and the District of Columbia have enacted intrastate securities exemptions that allow equity crowdfunding from non-accredited investors.These exemptions align with updates to the federal exemption for equity crowdfunding under Title III of the JOBS Act. Establishing this exemption would open up a new pool of investors within states that could invest in local startups. Intrastate exemption rules allow states to set limits on equity offerings from companies and maximum investments by non-accredited investors. These limits often exceed federal rules, giving states the ability to... (learn more)

States lacking venture capital investment in new companies could create an Equity Crowdfunding Hub. Online equity crowdfunding hubs allow entrepreneurs to advertise their business ideas and gather small investments from many investors. By creating a single location for investors across the world to find new businesses, equity crowdfunding hubs can dramatically improve access to capital. Several states and universities have set up crowdfunding hubs, including Wisconsin’s CraftFund where Wisconsin investors can browse specialized companies seeking investors, and Penn State’s Crowdfunding. States could allocate funds to the office of economic development to coordinate a... (learn more)

States that lack support for companies entering the commercialization stage can create a matching fund for businesses that are awarded funding by the federal Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. This support could be coupled with increased commercialization planning assistance. The fund could be targeted at federal award grantees that align with advanced energy technologies. Kentucky has an exemplar matching grant program: awards are given to companies either already located in Kentucky or willing to move at least 51 percent of the company to Kentucky within ninety... (learn more)

Encouraging investments in university-level research is essential for states to promote innovation ecosystems, remain economically competitive, and spur job creation. One way states can stimulate investment in university research is by creating a university R&D tax credit. Arizona’s  tax credit incentivizes businesses to invest in local R&D activities through a nonrefundable income tax credit. From 2011 to 2017, the R&D tax credit is equivalent to 24 percent of the first $2.5 million of investments plus 15 percent of additional investments over $2.5 million. After 2018, the tax credit rates will drop... (learn more)

Many states have numerous foundations that could be enlisted to help create a robust innovation ecosystem and expand access to capital. Every year, foundations award billions of dollars in grants, ranging from youth development to emerging energy technologies. In Michigan, the Governor has a Foundation Liaison, a cabinet-level, non-partisan position. The Foundation Liaison works with the governor, state legislators, federal officials, the business community, and foundations to build funding partnerships and strategic collaborations. Since 2003, the foundation community has invested more than $150 million through partnerships brokered by the Foundation... (learn more)

To support entrepreneurial enterprises and grow startups, states can create innovation districts. Innovation districts are geographic areas where anchor institutions and companies cluster, connecting with startups, business incubators, and accelerators. The districts are compact, transit-accessible, and technically wired. These live-work-play districts offer mixed-use housing, office, and retail. Examples of successful innovation districts can be found in Chattanooga and St. Louis; both cities created collaborative advisory boards. Key to their success was a group of leaders from universities, businesses, and government coordinating a centralized plan for growth. Chattanooga, the first mid-sized city to form... (learn more)

Energy efficiency improvements are extremely cost-effective for home and business owners, but the upfront costs often act as a barrier to energy and financial savings. In order to address the resulting energy efficiency gap, some states have embraced innovative financing models to offer low-interest loans for home and business energy improvements. Only a small amount of seed capital is required to launch an energy efficiency loans program that will save homeowners money and give positive returns on investment to the state.The Warehouse for Energy Efficiency Loans (WHEEL) is an independent... (learn more)

A crucial piece of a state’s innovation ecosystem is its venture capital climate. When a state or region lacks venture capital investment, states can establish a fund of funds to attract more funding to the state. A fund of funds invests in venture capital funds rather than directly in companies, and can leverage its investments with outside funding to channel more investment into state or regional startups. States or regions can develop this fund through a partnership between nonprofits, business leaders, and the public sector. States could look to Michigan for... (learn more)

Encouraging investments in early-stage technology startups is essential for states to stay competitive and spur job creation. Many states use a variety of policy tools with this aim in mind, but a policy that has seen significant success is a Technology Investment Tax Credit. A properly designed incentive tax credit can influence investment decisions and boost demand for investments in early-stage technology companies.In 1996, Ohio pioneered a Technology Investment Tax Credit, a temporary tax credit with a $30 million cap. The program was so popular that  venture capitalists are now... (learn more)