The Bay Area Innovation System Science and the Impact of Public Investment March 2019 Acknowledgments This report was prepared for the Bay Area Science and Jamie Lawrence, IBM Corporate Citizenship Manager – Innovation Consortium (BASIC) by Dr. Sean Randolph, California, Hawaii, Nevada, Utah, Washington Senior Director at the Bay Area Council Economic Daniel Lockney, Program Executive – Technology Transfer, Institute. Valuable assistance was provided by Dr. Dorothy NASA Miller, former Deputy Director of Innovation Alliances at Dr. Daniel Lowenstein, Executive Vice Chancellor and the University of California Office of the President and Provost, University of California San Francisco Naman Trivedi, a consultant to the Institute. Additional Dr. Kaspar Mossman, Director of Communications and support was provided by Estevan Lopez and Isabel Marketing, QB3 Monteleone, Research Analysts at the Institute. Dr. Patricia Olson, VP for Discovery & Translation, California Institute for Regenerative Medicine In addition to the members of BASIC’s board of Vanessa Sigurdson, Partnership Development, Autodesk directors, which provided review and commentary throughout the research process, the Economic Institute Dr. Aaron Tremaine, Department Head, Accelerator Technology Research, SLAC National Accelerator Laboratory particularly wishes to thank the following individuals whose expertise, input and advice made valuable Eric Verdin, President & CEO, Buck Institute for Research on Aging contributions to the analaysis: Dr. Jeffrey Welser, Vice President & Lab Director, IBM Dr. Arthur Bienenstock, Special Assistant to the President for Research – Almaden Federal Policy, Stanford University Jim Brase, Deputy Associate Director for Programs, Computation Directorate, Lawrence Livermore National Laboratory About BASIC Tim Brown, CEO, IDEO BASIC is the science and technology affiliate of the Doug Crawford, Managing Director, Mission Bay Capital Bay Area Council and the Bay Area Council Economic Dr. Nathalie Cabrol, Planetary Scientist/Astrobiologist, Institute. A collaboration of major organizations in Director Carl Sagan Center, SETI Institute the Bay Area’s scientific research community, it brings Stephen Ciesinski, President, SRI International together leaders from the region’s university, national Bill Diamond, President & CEO, SETI Institute laboratory and business communities to facilitate collaboration and address key issues and opportunities Dr. Loren Frank, Professor, Department of Physiology, University of California, San Francisco impacting the region’s research base and its ability to support technology-led growth. Chris Haskell, Vice President & Head, West Coast Innovation Center, Bayer U.S. LLC BASIC is led by a Board composed of research leaders Sam Hawgood, MBBS, Chancellor, University of California, at the region’s universities and national laboratories, San Francisco plus CTOs and lab directors at many of its leading Jim Hawley, State & Community Relations Manager, Lawrence technology companies. BASIC Advisers, a committee Berkeley National Laboratory of non-research-based companies with an interest Andrew Hessel, CEO, Humane Genomics and Co-Founder, in science and technology, interacts with the Board, Genome Project-write providing further perspective and insight. The Bay Sheryl Hingorani, Systems Analysis and Engineering Lead, Area Council Economic Institute provides BASIC’s Sandia National Laboratories management and support, and the Bay Area Council’s Dr. Thomas Kalil, Senior Adviser, Eric and Wendy Schmidt Group policy team connects its initiatives to the regional Dr. Regis Kelly, Executive Director, QB3 business community and policy leaders in Sacramento Perry King, Executive Analyst for the Vice Chancellor – Office and Washington. Together, they work with BASIC of Research, UC Davis to support economic growth and competitiveness Buck Koonce, Senior Advisor to the Laboratory Director, by advancing the Bay Area’s leadership in science, Lawrence Livermore National Laboratory technology and innovation. Contents Introduction ..............................................................3 CHAPTER 2 Funding Research and Development CHAPTER 1 in the Bay Area ........................................................29 The Evolving Innovation System and Its Linkages .....5 Industry Funding for University Research ................30 Research Universities ................................................. 5 Federal Funding........................................................31 Interdisciplinary and Research Universities ............................................... 32 Collaborative Research .......................................... 8 National Laboratories and National Laboratories and Federal Research Facilities ...................................... 33 Federal Research Facilities ...................................... 10 State Funding ........................................................... 33 CIRM: A State Research Institute ............................. 13 Philanthropic Funding .............................................. 36 Independent Laboratories and Research Institutes ............................................ 13 Funding for Startups ............................................... 36 Corporate Laboratories and Small Business Innovation Research (SBIR) and Innovation Centers .................................................. 15 Small Business Technology Transfer (STTR) .........37 Incubators and Accelerators .................................... 18 CHAPTER 3 Federal Innovation Offices ...................................... 20 Science and the Economy: Public Investment in Economic Leadership ..........................................39 Risk Capital ............................................................. 20 Translating Research Into Economic Benefits .......... 39 Industrial Innovation Centers ....................................21 From Research to Market .................................... 39 Specialized Service Providers: Design ..................... 22 Potential Future Impacts .....................................40 Innovation Districts .................................................. 24 Science-Enabled Startups ....................................41 Mission Bay .......................................................... 24 Moving Forward: Livermore Valley Open Campus.......................... 25 Policy Initiatives at the Federal Level ....................... 46 NASA Research Park ........................................... 26 Federal Support for Science ............................... 46 System Connections ................................................ 27 Visa and Immigration Policy .................................47 Moving Forward: Policy Initiatives in California ................................... 48 State Support for Science ................................... 48 Skills Development and Housing ........................ 49 Notes ....................................................................... 51 “The best way to predict the future is to invent it.” Alan Kay Palo Alto Research Center (1971) Introduction The San Francisco Bay Area, which includes Silicon Valley, The second phase begins in Chapter 2 with a focus on has for decades served as the world’s flagship hub for the importance of government investment in scientific technology, innovation, and entrepreneurship. This status research. It includes discussion of the respective roles has been earned through a collaborative relationship of industry, federal, and state funding, and of major among the region’s research universities, venture capital government funding flows by source and destination. firms, and technology and life sciences companies, which Key findings include the following: combined have produced an unparalleled track record of ■ revolutionary change and technology commercialization. California leads the nation in R&D activity, Parallel with technology, companies are developing accounting for 25 percent of total national R&D and executing innovative business models. Positive expenditures in 2015. and interconnected networks and feedback loops have ■ While industry is responsible for the largest share sustained this flourishing environment. of R&D expenditures, most of that funding is spent This report examines the scientific roots of this process on product-related R&D. Basic research (scientific and the contribution of public investment to the research research without an immediate commercial objective) on which much of the region’s technological success has provides a critical and necessary foundation for been built. Because the region’s innovation process grows technology breakthroughs that underlie the region’s out of an organic relationship among its components, it and the nation’s economic leadership and may is important to understand the contribution that each ultimately be commercialized. The largest share of makes to the system as a whole, as a strengthening or basic research expenditures comes from government weakening of any one component can impact the others. sources, and almost half of basic research is This report addresses this dynamic in two phases. performed by the higher education sector (49.1 The first phase in Chapter 1 maps and assesses the Bay percent in 2015). Area’s innovation system and how it operates. It builds ■ California received $15.3 billion in federal support on the Bay Area Science and Innovation Consortium’s for science in 2015, 93 percent of which came 2012 report The Bay Area Innovation System: