Innovate Alabama End of Year Report by innovatealabama.org

Innovate Alabama 2023 Annual Report

A letter from the CEO and the Board of Directors

We are delighted to present this executive report, a testament to our unwavering commitment to fostering innovation and economic growth within our beloved state.

The past year has been a remarkable journey for Innovate Alabama, filled with challenges, achievements and transformative progress. Our dedication to cultivating an innovative ecosystem has not only remained steadfast but has also evolved to adapt to the dynamic global environment. This report encapsulates our endeavors and milestones, underscoring our mission to position Alabama as a frontrunner in the innovation landscape.

Our focus has been on nurturing fertile ground for technological advancements and entrepreneurial spirit. The initiatives and policies outlined in this report are a reflection of our concerted efforts to foster an environment conducive to creativity, experimentation and groundbreaking discoveries. Approximately $47.5M was invested into the innovation ecosystem, providing necessary resources to innovators across 20 counties in Alabama. We believe that these efforts will propel Alabama into a new era of economic prosperity, driven by innovation and supported by a robust and inclusive community of thinkers, creators and leaders.

Collaboration with various stakeholders – from government agencies to academic institutions, from local businesses to global corporations – has been instrumental in shaping our strategy and execution. Through our seven active programs, over 100 businesses, 1,550 students and 25 academic institutions were engaged. This synergy has not only enriched our approach but also amplified our impact, enabling us to reach new heights in our innovation-driven journey.

In this report, you will find detailed insights into our strategic initiatives, key achievements and future roadmap. Our commitment to transparency and accountability is reflected in the thorough analysis and comprehensive data presented. We are proud of what we have accomplished and excited about the possibilities that lie ahead.

As we move forward, we remain dedicated to our core mission: to ignite a culture of innovation that resonates throughout Alabama and beyond. Our vision is to create an Alabama where every individual has the opportunity to contribute to and benefit from the innovation economy, where our state is recognized as a hub of technological excellence and entrepreneurship. While we’re excited to share our many accomplishments in this first year, the continued success of Alabama’s innovation ecosystem will evolve over generations. This report measures the short-term investments required to cultivate a successful innovation economy, whereas long-term metrics will be substituted in future reports as Innovate Alabama matures and grows deeper roots.

We extend our deepest gratitude to everyone who has been part of this remarkable journey. Your support, insights and contributions have been invaluable. Together, we are shaping a brighter future for Alabama, fueled by innovation and driven by a shared passion for excellence.

We hope this report serves as both a reflection of our journey thus far and an inspiration for the path ahead. Thank you for joining us in this pivotal chapter of Innovate Alabama’s story.

Sincerely,

Introduction

Innovate Alabama is on a mission to help innovators grow roots. By 2030, Alabama will realize its potential as a regional hub for innovation.

This report underscores the early-stage impact of Innovate Alabama on the state’s innovation ecosystem. Between 2022-2023, the programs made their mark across more than 20 rural and urban counties by supporting several notable initiatives, including the Innovating Alabama Tax Credit, Supplemental Grant Program and the Innovate Alabama Network.

For most of its history, Alabama has played a significant role in driving the invention of groundbreaking technologies across science, technology, auto manufacturing and aerospace industries. The Hoover Institution’s October 2021 Alabama Innovation Commission Report presented key findings on how the state’s innovation legacy could be strengthened through several programs and policies. In response, Governor Kay Ivey enacted AL HB 540 and HB 609, establishing Innovate Alabama and a Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) supplemental grant matching program for federal recipients, the Supplemental Grant Program. By 2022, Innovate Alabama became the state’s first public-private partnership tasked with ensuring that Alabama remains a catalyst of technological development for future generations. Innovate Alabama has efficiently allocated approximately $47.5M in capital, while creating $24M in tax incentives. Through its programs and funding, Innovate Alabama has engaged over 1,550 students across the state. Over an 18-month period, the Supplemental Grant Program delivered and retained over 350 jobs within Alabama’s innovation ecosystem by way of a one-time public investment valued at less than $40K/job. Of the jobs created or retained, grant recipients reported salaries between $80K and $100K. Proud of our impact thus far, we are poised to leverage our organizational capacity to drive greater impact in years to come.

Looking forward, our vision for the future centers around continuing to foster an environment in which entrepreneurship thrives. Our actions will revolve around three pillars relating to resources, people and places. To bridge divides across the state, we will ensure that Alabama’s residents have access to the necessary capital, education and digital infrastructure to thrive in this innovation economy. Additionally, we will attract skilled workers by leveraging outdoor recreation and tourism, further supporting our growing economy of the future. Through targeted investment, knowledge sharing and reduced barriers to entry, we strive to create an inclusive workforce and resilient economy steered by innovation.

1 Sum comes from 2022 + 2023 SBIR/STTR, 2023 tax credits, 2023 networks

2 Jobs created by SBIR/STTR over 18 months

3 Both pending and awarded patents

20 Alabama counties $47.5M in capital 1 $24M in tax incentives Engaged over 1,550 students across the state Creation and retention of over 350 jobs2 Emergence of 33 patents3

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Innovate Alabama Pillars

To fortify Alabama’s innovation and entrepreneurial ecosystem, Innovate Alabama focuses on three core pillars: Access to Resources, Talent Development and Lifestyle & Recreation. These pillars are often informally referred to as resources, people and places.

Access to Resources

By expanding access to both startup capital and data, businesses with high growth potential can commercialize their unique technologies, products and processes, while increasing the likelihood of achieving long-term success.

Talent Development

Partnerships with educational institutions, nonprofits and research entities will support a multigenerational approach aimed at cultivating a highly skilled workforce within the State of Alabama.

Lifestyle & Recreation

Investing in our natural and cultural assets will develop an innovation ecosystem where innovators and the workforce thrive both personally and professionally.

Innovate Alabama Programs

In the two years since its founding, Innovate Alabama has advanced its mission and pillars by supporting numerous initiatives and by advocating for the advancement of several policies. Funded programs include the Supplemental Grant Program (SBIR/STTR), the Innovate Alabama Network (Designation Program and Statewide Asset Map), the Innovating Alabama Tax Credit, State Small Business Credit Initiative (SSBCI), the HBCU Innovation Experience and Fuel Alabama. In its 2021 report, the Alabama Innovation Commission made

several policy recommendations in the following areas: entrepreneurship and access to capital, talent attraction and retention, increasing research commercialization, bridging digital and economic divides and the knowledge economy. Innovate Alabama’s three pillars reflect the recommendations from each of these recommended policies. By focusing on these areas, Innovate Alabama strives to foster entrepreneurship, create jobs, build a talented workforce and spur innovation.

Pillar and Program Overlap

RESOURCES

Supplemental Grant FuelAL Innovating AL Tax Credit SSBCI I nnovate Alabama Network PEOPLE HBCU Innovation Experience PLACES Emerging Scholars Outdoor Recreation QuantHub Pillars Ongoing Program Upcoming Program KEY

2022-2023 Review of Programs and Policies

Supplemental Grant Program (SBIR/STTR)

Innovate Alabama launched a supplemental grant program designed to provide additional resources to small businesses and university inventors who have an active Phase I or Phase II Federal Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) grant. The program provides these businesses up to $350K of growth capital to support commercialization of new concepts. The program provides recipients with access to non-dilutive funding. Innovate Alabama has awarded more than $9.6M in grant funding to eligible recipients across 9 Alabama cities. This includes 50 small businesses, 11 of which have women and minority founders.

Innovate Alabama Network

The Innovate Alabama Network consists of two programs. Recognizing that knowledge of existing resources can limit the capacity to create strong, local innovation networks, Innovate Alabama sees the development of an ecosystem asset map as a major priority for 2024. This map will allow Alabama to fill missing gaps in the innovation ecosystem, develop opportunities for industry partnerships with like-minded innovation organizations and maximize the impact of funding. This connectivity effort will be further supported by the Network Designation Program. Entities, communities and universities are eligible to apply to be a designee, which provides them with access to various funding sources and networking opportunities. In 2023, the Network Designation Program awarded $9.3M in funding to 30 entities, 11 communities and 10 educational institutes. Of the 51 designees, 8 were rural communities, receiving a total of $1.8M in funding. Both the ecosystem asset map and the Network Designation Program will allow participants to connect to talent, locations and resources that will help ignite their businesses.

Map of Network Designation Recipients by Location and Awarded Amount

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Innovating Alabama Tax Credit

The Innovating Alabama Tax Credit allows Alabamabased Economic Development Organizations (EDOs) to create, operate or support technology accelerators and/or economic mobility for Socially and Economically Disadvantaged Individuals (SEDIs) operating “innovation companies” within the state. Similar incentives in neighboring states have successfully encouraged private-sector investment and corporate expansion. Providing tax credits can stimulate job growth and wealth creation and accelerate new ventures in Alabama by incentivizing the transfer of capital to early-stage startups. The Innovating Alabama Tax Credit incentivizes the development of rural and underrepresented small businesses and accelerators. Formerly run by the Alabama Department of Commerce, this program was created to support Alabama-based tech accelerators and innovative companies in an effort to help innovators grow roots in the state. This acts as an incentive mechanism to provide funds to EDOs to stimulate economic growth.

State Small Business Credit Initiative (SSBCI)

Funded through the State’s federal SSBCI allocation, Innovate Alabama supports small business development and growth through two programs. The debt financing tool is used to provide loans to Alabamabased early-stage companies. This tool is composed of three debt programs – loan participation, loan guarantee and loan collateral support – and is intended to spur future private investment from in-state and out-ofstate sources. SEDI-led businesses, with founders based in underrepresented and/or rural communities, will be prioritized. Additionally, the Alabama Venture Capital Growth Fund will further support small businesses. This fund pools private and public capital for distribution to equity investors that fund startups at multiple stages. Each of these programs will be supported by $97.9M in federal infusion. About $72M of this will be reserved for the debt programs, and $25M will be utilized in the Venture Capital Growth Fund.

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Photo credit: via Innovation Depot

HBCU Innovation Experience

As a joint effort between The Alabama Collective and Innovate Alabama, the HBCU Innovation Experience elevates minority tech and entrepreneur talent to strengthen the state’s thriving ecosystem of emerging technology, innovation and entrepreneurial excellence. By engaging with local governments and 14 Historically Black Colleges and Universities (HBCUs), the HBCU Innovation Experience connects innovative participants with the necessary resources to thrive in the tech community. The organization does this through a number of programs and engaged over 1,000 students in 2023. This includes the Innovation Power Hour networking events, coding camps and the Innovate Alabama Hackathon. More than $40K in prize money has been awarded to HBCU students, entrepreneurs and innovators. Additionally, the HBCU Innovation Experience supported 20 summer internships in which students were exposed to many different tech opportunities.

FuelAL

Fuel Alabama (FuelAL) connects current Alabama university students with high-impact companies, while introducing them to the high quality of life that communities statewide can provide. Going into its second year, FuelAL worked closely with partners in Auburn, Baldwin County, Birmingham, Calhoun County, Dothan, Huntsville, Mobile, Montgomery and Tuscaloosa to host summer internships and programming, while also hosting a “Summer Summit” in Muscle Shoals. The FuelAL program has supported more than 450 students. Each city is encouraged to offer monthly professional development sessions, community service projects and social outings, while also providing a “Regional City Pass” that shows students the lifestyle offerings in the given community and includes discounts at local destinations. The combination of professional and leisure experiences provided by FuelAL serves to retain Alabama graduates, while extending the benefit of a young, Alabamaeducated skilled workforce beyond the urban centers.

$9.3M awarded to Innovate Alabama Network Designees

50 small businesses awarded Supplemental Program Grants

9 Alabama communities engaged through FuelAL

Outdoor Recreation

Innovate Alabama seeks to leverage the natural resources within the state to attract and retain workers in the innovation ecosystem. Innovate Alabama will be working closely with the Alabama Department of Natural Resources and strategic advisory boards to carry out the 13 recommendations set forth set forth by the Council on Outdoor Recreation and Advisory Council, created by the Innovate Alabama Board of Directors. The Council will provide recommendations for utilizing Alabama’s recreational assets as innovative economic development tools. As this program continues to develop, local and state parks, landscape diversity and other natural resources will be promoted in an effort to showcase Alabama’s unique offerings.

Emerging Scholars

After a successful pilot program in the spring of 2022, the Emerging Scholars program was fully implemented in the Fall 2022 (Phase I)-Spring 2023 (Phase II) program year. Innovate Alabama in partnership with the University of Alabama Honors College kicked off the Fall 2023-Spring 2024 program year. This program was created to encourage undergraduate students to develop unique innovative solutions for problems, exploring impacts outside of profit potential. Teams of 3 to 5 students are

paired with advisors, mentors and workshops to help teams develop their proposals. This program is designed for those who haven’t participated in an idea-based contest, allowing students to build both confidence and skills. In the Fall 2023-Spring 2024 program year, Emerging Scholars will engage with 23 teams composed of 76 students from seven colleges at the University of Alabama. While winning teams will leave the program with a $2,500 or $3,000 cash prize, students will also take with them invaluable skills.

QuantHub

In partnership with Innovate Alabama, QuantHub seeks to equip Alabama students with marketable data skills through their summer 2024 internship program. Eligible high school students will be placed into data-oriented internships and will have the opportunity to explore AI and machine learning in depth. This 8-week internship will also be supplemented with skillbuilding courses, professional development and academic coaching for each of the students. A cohort of 25 students will learn how to use data to innovate and drive positive change across the state of Alabama. In addition to receiving a modest scholarship, students will walk away from the program better positioned to navigate the tech industry with strong baseline data literacy skills.

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Photo credit: via Gulf State Park

Impact Statements from Participants

HBCU Innovation Experience

“The HBCU Innovation Experience offered by the Alabama Collective, in collaboration with Innovate Alabama, has truly been an inspiration . It motivated me and gave me the chance to explore something entirely new. Before participating, I didn’t realize my inner potential to achieve at this level. After the first competition, I felt even more motivated to keep pushing myself, knowing that I could achieve great things. As a computer information student, this program has opened my eyes wider to the world of technology. Being an early CIS major, it helped me dip my toes into the field and provided invaluable networking opportunities , connecting me with like-minded individuals who share my passion for innovation.”

–MaKaylah

Harris, Alabama State University

Supplemental Grant Program

“We appreciate the support of the State, the Innovate Alabama Board, its committee and all the others involved in getting this program off the ground and successfully executed for the first round. We are proud to represent the State of Alabama as we advance our health technology innovations around the world.”

Innovate Alabama Network Designation Recipient

“Being a recipient of both the Innovate Alabama Network Designation and the Innovating Alabama Tax Credit Program has been truly game changing for Innovation Depot. The success of our incubation and entrepreneurial programming that serves over 100 startup companies is a testament to the power of investing in innovation in Alabama. We’re proud to be able to continue supporting the entrepreneurial community in Birmingham and, with the partnership of Innovate Alabama, will be able to enhance that support and double down on resourcing promising founders to grow economic opportunities and our community. ”

–Innovation Depot

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–AI Metrics

Investment in the Innovation Ecosystem

Supplemental Grant Program Innovating Alabama Tax Credit Network Designation Program $9.6M $9.3M $24M

Reconvening of the Alabama Innovation Commission

Held on December 14, 2023, at Birmingham’s Innovation Depot, the State of Innovation Day was a celebration of Innovate Alabama’s milestones. The event featured many special guests, including Gov. Kay Ivey’s reconvened Alabama Innovation Commission. The recommendations from the Commission laid the foundation for Innovate Alabama, setting targeted goals to guide the organization in helping innovators grow roots in Alabama. Dr. Condoleezza Rice, a key member of the Commission’s Advisory Council, was also in attendance. Dr. Rice and Innovate Alabama Board Chair Bill Poole engaged in a State of Innovation Fireside Chat in which they discussed the Hoover Institution’s research that led to the formation of Innovate Alabama. During the Fireside Chat, Zeke Smith, former executive VP of external affairs at Alabama Power Company, was awarded the inaugural Innovate Alabama award for his efforts in leading the Commission’s Advisory Council.

Recognizing the work that Innovate Alabama has done thus far to expand the state’s innovation ecosystem, Gov. Ivey declared December 14, 2023, Innovate Alabama Day. The organization was hailed for infusing nearly $50M into the Alabama innovation ecosystem to small businesses, economic development organizations (EDOs) and accelerators in 2023. In addition to reviewing each of the pillars and programs in the Commission Briefing, Innovate Alabama hosted the December board meeting joined by Birmingham Mayor Randall Woodfin and Gov. Ivey. Looking forward, the board discussed objectives for 2024, including priorities, program updates, funding, another approved round of tax credits and the organization’s legislative agenda.