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Minnesota seeks its own “Third Frontier”

Fresh from passing a landmark angel investor tax credit, Minnesota lawmakers are advancing a bill […]

Fresh from passing a landmark angel investor tax credit, Minnesota lawmakers are advancing a bill that would, in time, radically alter high-tech economic development  in the state by concentrating authority in a single public-private entity.

The proposed Minnesota Science and Technology Authority, modeled after programs like Third Frontier in Ohio and The Ben Franklin Technology Partners in Pennsylvania, will craft a long-term science and technology strategy. More importantly, it would also oversee economic development efforts, including money to retain locally grown companies and attract out of state ones.

“People felt hope” after the angel credit passed, said Sen. Kathy Saltzman (D-Woodbury). “Now that we have your attention, this is the next step.”

A small step, though. The bill, sponsored by Sen. David Tomassoni, chair of the Senate Finance-Economic Development Committee, essentially reshuffles resources but doesn’t provide any new money. That’s not surprising, given the state’s $2 billion budget deficit.

Still, the bill seeks to address a long-standing problem in Minnesota: the lack of a strong, centralized economic development body to coordinate efforts from a myriad of public and private organizations trying to promote energy, software and biomedical technology.

Critics say the state’s Department of Employment and Economic Development (DEED) lacks money and power to pursue big projects. As a result, groups like LifeScience Alley, BioBusiness Alliance of Minnesota, Minnesota High Tech Association and Enterprise Minnesota have tried to fill the void.

The patchwork of economic development groups sometimes overlap and even compete against one another, said Matt Kramer, a former chief of staff to Gov. Tim Pawlenty who also once ran DEED.

While Kramer, who now heads the Office of Business Relations at the University of Minnesota, supports the concept of a single economic development authority, he wonders how the other organizations will fit into that structure, if at all. Like LifeScience Alley, for instance, the authority can accept donations from individuals and companies. To gain more bang for their buck, existing and potential donors might divert their money to the new authority, Kramer said.

“When we released Destination 2025, the statewide strategic plan for Minnesota’s life science industry, the No. 1 overarching recommendation was to form a statewide science and technology leadership structure,” said Dale Wahlstrom, CEO of the BioBusiness Alliance. “Nothing has changed our belief that this is still a foundational need to ensure our state’s economic future.”

Much of the bill is based on a DEED-commissioned report released this past January. The report, chaired by DEED commissioner Dan McElroy and angel investor Dan Mallin, recommends the authority, among other things, focus on converting university research into companies and licensing deals, attracting outside talent and developing a local workforce versed in science and mathematics. The authority would also help young companies win federal support like the Small Business Innovation Research Grants and National Institutes of Health funding.

The report says the authority should be governed by a commission and a science and technology advisory board. Board  members include venture capitalists, CEOs, entrepreneurs and major research institutions like the University of Minnesota and Mayo Clinic. But while the report recommends private sector leaders run the authority, the bill instead names the heads of DEED, management and budget, revenue, commerce and agriculture to the commission.

Given budget realities and the prospect for turf battles, Saltzman says the authority will take time to develop, a job best left to the person who replaces Pawlenty as governor. But given the recent passage of the angel credit, not to mention credits for research and development, and small businesses, the authority has a strong chance of becoming reality, she said.

“The bill is not as aggressive” as the report’s recommendations, Saltzman said. “But it is an important first step. We’re planting the first seeds.”

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