Innovation Ecosystem

Taking the pulse of the RI innovation economy

A talk with Stefan Pryor, secretary at CommerceRI, about the shape of things to come in growing the state’s innovation ecosystem

Photo by Richard Asinof

Stefan Pryor, the secretary at CommerceRI, in the agency's conference room.

By Richard Asinof
Posted 2/4/19
The opportunity to sit down and talk in detail with Stefan Pryor, secretary of CommerceRI, always provides insights into the thinking behind potential investments planned to grow the innovation economy in Rhode Island.
What can be learned from a visit to the Institute for Applied Life Sciences at UMass Amherst in their efforts to translate basic science into product candidates, as Rhode Island plans its build out of innovation campuses? Why is innovation in public health seem to be a forgotten stepchild in efforts to build the innovation economy and to address the threats of climate change? Are there components of the research enterprise in Rhode Island that would benefit from additional investments, beyond web labs, to create a research hub for startups and early stage companies to conduct research in Rhode Island, rather that employ contract research organizations that are out of state or overseas? What will it take to launch an index of the Rhode Island innovation economy, modeled on the Massachusetts publication that has been seen as a key tool in measuring the benchmarks of investing in innovation?
Two days after interviewing Stefan Pryor, a day after traveling to Amherst, Mass., to interview Peter Reinhart, the director of the Institute for Applied Life Science, ConvergenceRI attended the conference at Brown’s Watson Institute, “America’s Climate Change Future: Housing Markets, Stranded Assets and Entrenched Interests.”
Sen. Sheldon Whitehouse gave the keynote address at lunch, entitled: “All this risk: why are we unable to act.” The organizers of the conference called Whitehouse a “climate warrior.”
After his speech, when ConvergenceRI spoke briefly with Whitehouse, the Senator expressed surprise that ConvergenceRI was covering the event, because he thought the newsletter covered health care. My immediate response was that the publication’s name spoke to its mission: reporting on the convergence of health, science, innovation, technology and research, breaking down the silos.
In reflection, what occurred to ConvergenceRI was a simple inconvenient truth about the lack of convergence and connectivity: the innovation practitioners at CommerceRI did not attend the Brown conference on climate change; no one from CommerceRI, or apparently URI, had ever visited the Institute for Applied Life Sciences and met with the director; and public health still did not seem to be part of the conversation around the economics and public policy around climate change. Why not?
Without convergence or connectedness, the ability to create an engaged community to change destructive policies will continue to be an exercise in frustration.

PROVIDENCE – A week after the release of the new strategic report on biotech, life sciences and the innovation economy by RI BioHub and RI Bio, ConvergenceRI sat down with Stefan Pryor, secretary of CommerceRI, on Wednesday, Jan. 30, to take the pulse of the state of innovation ecosystem in Rhode Island. [See link below to ConvergenceRI story, “Talking about an innovation revolution.”]

Rhode Island, like much of the nation, was about to enter a deep freeze, the result of the polar vortex shifting south, a sign of changes to come under climate change, with the promise of warmer summers and cooler winters. Newport was still recovering from an emergency shutdown of its natural gas supply lines. The proposed $10 billion FY 2020 budget by Gov. Gina Raimondo was still being analyzed and picked apart by political pundits.

Pryor, always a glass-half-full optimist, was effervescent in discussing state plans to growth Rhode Island’s innovation economy.

In terms of news, Pryor detailed the plans in the Governor’s budget to strengthen the state’s research and development tax credit, expanding its reach in order to support startup companies.

“We have proposed within the Governor’s new budget to strengthen our R&D tax credit, Pryor explained, “so that it would become the strongest R&D tax credit for early stage companies in the Northeast. The proposed tax credit, Pryor continued, “would have a carry forward provision of up to 15 years, as compared to the previous seven years.” In addition, Pryor said, it would be expanded beyond its current scope to include S Corps, LLCs, and C Corps with no or low tax liability.

Pryor also advanced the news that the Venture Café, one of the key components that the Cambridge Innovation Center will develop as part of its tenancy at the Wexford Innovation Complex, will be launching this spring, ahead of the expected summer opening of Wexford, with events planned at the South Street Landing.

“Venture Café, which is a component of the Wexford Innovation Complex, and is an element of the Cambridge Innovation Center enterprise, will be getting underway even before the new facility opens,” Pryor said. “They will be mobilizing and curating events for the Rhode Island innovation community, starting this spring,” he continued, with locations including the South Street Landing, home of the R.I. Nursing Education Center.

Pryor also hinted at the soon-to-be announced opening of the new Innovate Newport 21st century workspace at 513 Broadway, the site of the former Sheffield School in the heart of Newport’s Innovation District.

“I want to conclude by speaking of Newport, eager to [focus] positive attention, to help [the community] come back,” Pryor said, in the aftermath of the emergency shutdown of natural gas supplies in Newport and parts of Middletown.

The Innovate Newport facility, Pryor continued, is an “exemplary” effort, with the $7 million renovation of a new 34,000 square foot facility, in which CommerceRI has invested more than $2 million. The tenants will include, according to Pryor, Inspire Environmental and the Newport County Chamber of Commerce. The official opening is expected to be sometime in the next month.

Here is the ConvergenceRI interview with Stefan Pryor, which included communications director Matt Sheaff and Katharine Hazard Flynn, the executive director of the URI Business Engagement Center, sharing future plans for the growing Rhode Island’s innovation economy.

ConvergenceRI: Big news. The RI BioHub report came out. How involved was CommerceRI and Gov. Raimondo in the process? What do you think were the takeaways from the report?
PRYOR:
You are correct. We helped to convene the BioHub workgroup, which started meeting in the State House. The notion of the workgroup was that because we have so many talented Rhode Islanders working in the bioscience field in Boston and Cambridge, we ought to capture their wisdom and talk about what we could do to grow the scene right here in Rhode Island.

This group worked very hard and very effectively, and among other things, produced this report.

I think the takeaways from the report and among the priorities form the bioscience community in Rhode Island are:

Increasing access to capital.

Ensuring that there is a viable organizational structure for the bioscience industry itself, and

Ensuring that there is a continuing coordination among the multiple stakeholders across the public and private sectors.

I think those are among the findings. There are more, and your article did a very nice job of outlining the contents of the report.

We were involved in the process all [the way] through, so we in CommerceRI are beneficiaries of the dialogue itself.

I think a next step is ensuring that MedMates, which is re-branding itself as RI Bio, that we coordinate with them, and that we collectively, the entire Rhode Island community, ensure that they are a strong organization, capable of advocating for the recommendations of the report and carrying out some of the elements of it.

ConvergenceRI: One of the recommendations in the report seemed to be taken directly out of one of the proposals that did not get funded as an innovation campus – the one with Biolabs coming in and collaborating with Wexford and creating wet labs and other space for startups.
The obvious question is: Is that one of the potential investments that could be made with the next investment of $8 million for new innovation campuses?
PRYOR:
The short answer is yes. But the longer answer is: the establishment of wet lab capacity is a very high priority – [identified] in the BioHub process, in dialogue with URI over the years, in the dialogue with Brown under Provost Richard Locke, who introduced its innovation related report recently, I believe about six months ago.

In each of these instances, there has been an appropriate focus upon the need for curated wet lab space.

One of the best curators, not only in the United States but in the world, is, in fact, the entity that was the offspring of Lab Central, that is to say, BioLabs, as they re-branded themselves.

We are in continuing dialogue with them. The first step is arriving at a framework that they view as favorable, a framework in which to operate here in Rhode Island.

Then we will begin to look at possible private and public contributions. Everything is on the table.

We might look to the innovation campus process; then again, we might look in a different direction, to ensure that if BioLabs is in, that is to say, if they are ready to move in and operate in Rhode Island, we can make that happen.

That could happen as a next phase of development in the Rhode Island Innovation and Design District. That would make a lot of sense. More to follow.

ConvergenceRI: How are the contracts coming with the first three investments of $12 million in the Innovation Campus process?
PRYOR:
Conversations are advancing very well, but Katharine, would you like to comment on that?

FLYNN: All three are in different phases. Some are more complicated than others in terms of “papering” the deal, if you want to call it that.

But, the iHub proposal, the one that [includes] Brown, URI, MassChallenge and IBM, that proposal is somewhat straight forward. They are going to be looking for space, probably at CIC [Cambridge Innovation Center], so putting that contract together is easier, say, then, what will be the [new] huge Ag Tech center [involving] many acres of land.

They have to get financing, so there is a lot that is a little more complicated. But I would say that they are all at different stages, but we’re in process.

ConvergenceRI: One of the things that Massachusetts has done, because the tendency is sometimes to look north and replicate their work, was a Joint Committee on Economic Development and Emerging Technologies between the House and Senate in Massachusetts, which proved to be a key player in creating the $1 billion Massachusetts Life Sciences Initiative.

Is there an opportunity here in Rhode Island to create a similar kind of joint committee structure to help enable the types of things that you want to do, by involving and educating legislators? Is there an opportunity to build an infrastructure at the legislative level?
PRYOR:
The leadership of the R.I. General Assembly is of paramount importance as we advance the innovation agenda. To their credit, the leaders and the members of the General Assembly have been enormously supportive of our efforts to grow the innovation economy.

We need to not only continue that dialogue but to enhance it and do even more together. Having said that, whether there ought to be a commission formed by the General Assembly, I would leave that to the leadership of the General Assembly to be determined.

The other thing I would point out is that the RI BioHub organization, as one of the recipients of the analysis conducted by the BioHub workgroup, intends to be a connection to the General Assembly, and to help educate legislators regarding a subject that is already of their interest, which is: how to promote innovation in Rhode Island? The BioHub workgroup and RI Bio have spoken explicitly about that. We will work in partnership with them to ensure that that happens.

ConvergenceRI: One of the ideas proposed in the recent report is the creation of a new capital fund. Do you have thoughts on how to organize such a fund? What should be the state’s role in creating this new capital investment fund?
PRYOR
: I would broaden the subject to investment in R&D and in innovation, and to answer your questions in a couple of ways.

First, I think it is quite important that we heavily explore, and upon conclusion of that exploration, probably form a new fund or funds. One of the contributing factors in favor of doing so is the existence of the new opportunity zones.

Under the federal tax law, there is now a significant tax advantage for the investment of capital gains in identified designated opportunity zones. Rhode Island has 25 of them designated by the Governor, inclusive of important sections of Providence, Newport and Galilee, and other census tracts across the state.

[These are places] which are important in this context: important potentially to technology, bioscience and innovation related industry.

We are in active discussions with potential investors, with potential frames of such funds, with educational institutions, including URI, Brown and many others, regarding opportunity zone-related fund formation.

We’ve recently brought on an advisor to the Commerce Corporation to work on opportunity zones. We have formed a new website [https://www.rhodeislandopportunity.com] and we are planning a conference for next month regarding opportunity zones [on Thursday, Feb. 21, at the OmniProvidence.]

I say all of this to say that it is an ideal moment to contemplate the formation of such funds.

I think it may well be the case that private parties would be better positioned to actually establish them and operate them; we’ll have to see what everyone’s analysis concludes as it pertains to which parties should be involved.

ConvergenceRI: Are there other kinds of investments being considered?
PRYOR:
To broaden the subject, so that I can give you another piece of information, Richard, is the [planned expansion of the R&D tax credit in Rhode Island.

Rhode Island has had for a number of years an R&D program …

ConvergenceRI: Is that different from the Science and Technology Advisory Council program?
PRYOR:
Separate from the STAC program, [which provides grants to match federal SBIR awards and hire interns]. The R& D program is a provision of the tax code, within which a company can take a credit against its tax liability for specified R&D activity – activity defined within the definition of the federal tax code.

What I am speaking about here is state taxes regarding state tax liability.

Many states already have state tax credits that correspond to federal definitions.

We have proposed within the Governor’s new budget to strengthen our R&D tax credit. Currently, that tax credit is of value only to C Corps, and more specifically, to C Corps with sufficient tax liability.

Rhode Island’s current R&D tax credit is unavailable to C Corps with no or low -tax liability, to S Corps, to LLCs, or to other companies that do not pay corporate income taxes.

We have proposed in the Governor’s budget a new version of the R&D tax credit that would include the following features:

It would offer up to 22.5 percent of research expenditure as a credit against taxes.

It would offer a carry forward [provision] of up to 15 years as compared to current 7 years. The carry forward provision enables you to carry forward the credit to future years when you may have tax liability.

In addition, perhaps most valuable to early stage companies, the tax credit can be transferred or sold to another company with sufficient tax liability.

There is a per company cap of $250,000; a company may take the credit for a maximum of five years.

ConvergenceRI: Five years at $250,000? Is that corrext?
PRYOR
: That is the maximum. The total allocation of revenue is projected to equal $1.5 million a year.

I have described all of that in order to express, in response to your question, making the point that this is another key way in which we may advance investment in innovation in Rhode Island. It is important we form funds and create government investment mechanisms to promote innovation.

ConvergenceRI: Do you see the creation of an index of the innovation economy in Rhode Island to be a potential investment tool, to be able to benchmark Rhode Island’s progress year over year, as compared to other technology states? And, as a component of that, something that Mary Burke, a senior researcher at the Federal Reserve Bank in Boston expressed interest in, a quality of life index for Rhode Island?

ConvergenceRI: A parenthetical phrase in the RI BioHub report suggested: “We are open for business.” Is that envisioned as a potential PR slogan? Are we going to see signs: “Rhode Island: We are open for business.”
PRYOR:
I will say that phrase has been used frequently in marketing campaigns pertaining to business development. And I think it’s a good one. But I wouldn’t over-emphasize it as a potential slogan or a major new theme. RI BioHub may choose to use it and I think it is a fine phrase.

ConvergenceRI: How does public health play in the future innovation landscape?
PRYOR:
Public health is a key objective. And it’s part of a broader array of public policy goals we should be mindful of.

Some of the investments that Rhode Island has made in innovation are very much focused on achieving dual, or even triple bottom-line objectives.

I point to MassChallenge as an example. As you may know, Rhode Island invested in MassChallenge, establishing a division here in Rhode Island.

And, MassChallenge just graduated its first cohort for Rhode Island. I was able to attend their graduation ceremony in October in Boston.

To your point about achieving public policy goals, the three winners each received a share of the $50,000 prize. Included were two companies:

CBC Wind Energy, which builds “hidden in plain sight” renewable, resilient power systems in built environments.

The company is achieving environmental goals regarding renewable energy, reducing pollution, reducing reliance on fossil fuels, and, of course, advancing innovation and the Rhode Island economy.

T-Var Ed Tech, which designs and sells devices that teach children of all abilities how to read.

The company, which is in the education domain, is aiming to be a successful venture in the private sector, but also to serve blind and low-vision children, with a device that it produces that enables children who have sight limitations to read through a variety of techniques.

My point is: what is wonderful about these kinds of investments in innovation is that you can simultaneously result in profit and success for the company and for societal good.

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