2021 Innovation Insights Report

I N N O VAT I O N

INSIGHTS

RELENTLESS PURSUIT OF TRANSFORMATIONAL IDEAS

After graduating with a B.S. degree in Packaging Science from Clemson University, Elizabeth Rhue began her career with SONOCO in 2005 as a Research and Development engineer. Over the next several years, she held several positions and generated two patents for the Company. Rhue now leads SONOCO’s global sustainability programs for the company’s consumer- and Industrial-related packaging business.

TABLE OF CON PRIMARY AUTHORS Tia Nelson Business Intelligence Manager South Carolina Department of Commerce Office of Innovation Robin Hendricks Editor Scribble Media South Carolina Department of Commerce Office of Innovation A special thank you to Ainsley Schmidhausler and Brandon Wilkerson for research assistance.

Laura McIntosh Managing Director South Carolina Department of Commerce Office of Innovation

NTENTS

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INTRODUCTION

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ECONOMIC RESILIENCY

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ECOSYSTEM LEADERSHIP

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INFRASTRUCTURE

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TALENT

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COMMERCIALIZATION

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UNIVERSITY PARTNERSHIPS

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STARTUP CAPITAL

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CONCLUSION

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APPENDIX

Fueled by innovation and committed to design, Milliken has been exploring, discovering and creating ways to enhance people’s lives since 1865. The company’s community of innovators has developed one of the largest collections of United States patents held by a private company. Meet one of their innovators, Mary Mason, Principal Scientist at Milliken Chemical, who invented the washable marker.

THE RELENTLESS PURSUIT OF TRANSFORMATIONAL

IDEAS

The South Carolina Department of Commerce defines innovation as the “relentless pursuit of transformational ideas.” That definition was carefully crafted by state business thought leaders who see the potential of explosive growth across all South Carolina industries, both current and emerging. The possibility for innovation in a historic state with a diverse culture, steeped in foundational industries like manufacturing and agriculture, is endless. Even more, the smaller size of the state equates to a strong sense of community and collaboration, which are essential tools in the current global marketplace.

This document builds upon the Innovation Plan released in 2017, providing a collection of insights and growth opportunities directly from the business community and its supporters. We explore South Carolina’s current activity in dominating clusters, areas of traction in emerging markets, and recommendations for navigating both opportunities and challenges within the ecosystem. In addition to the earlier plans, this document includes seven case studies illustrating how business and research leaders creatively utilized existing resources and partnerships to attain disruptive growth in their industries. We hope readers will lean upon these examples and even call upon these leaders as they consider opportunities to strengthen the South Carolina innovation economy.

It should be understood that just like innovation, the strategy for advanced economic development is constantly evolving. Readers can expect consistent updates to this document as we continue to mirror the innovation landscape.

INTRODUCTION The benefits of innovation are far reaching: resilient and diversified economies, high paying wages, equitable access to resources, strong supply chains and a host of other unquantifiable advantages. On both the individual and regional level, numerous deliberate plans need to be put in place over an extended period of time before tangible rewards may be recognized. This makes the commitment to innovation particularly challenging, however essential to long-term prosperity.

With globalization increasingly disrupting local economies, governments worldwide are reprioritizing economic development strategies to create and enhance “knowledge” jobs for the sake of overall competitiveness. These jobs are largely science- and technology-based, actively requiring critical thinking and problem solving to help companies stay ahead of the curve in their respective industries.

Additionally, it is now widely accepted that technology is ubiquitous, especially as it relates to the vast majority of new products and services. As a result, a host of new resources and assets are required for communities to maintain economic success. According to The State Science & Technology Institute (SSTI), communities need the following for Technology-Based Economic Development (TBED) strategies to be effective:

Importantly, as the global, digitized economy creates increasing competition for better products and services, municipalities are pressed to understand how to increase access to capital, talent and critical resources needed to maintain economic growth within their region. This mission is highly complex, with the economic and social disruptions of 2020 accelerating that complexity. Talent is highly mobile in nature, offering workers a variety of options when choosing to invest in an employer. Capital is also not bound by geography, allowing investors to screen and recruit startup ventures via remote collaborative networks as well as traditional in-person meetings. Local resources, most specifically innovation-based infrastructure, are still largely location-driven but are becoming more sophisticated as virtual technology becomes more routine. We see this example in the explosion of telehealth during the COVID-19 pandemic. Similarly, when exploring commercialization opportunities, researchers and innovators can now ‘test out’ or virtually tour a laboratory space before committing to a costly and time-critical corporate or university partner agreement. The silver lining of disruption will always be opportunity for innovation.

A research base that generates new knowledge Mechanisms for transferring knowledge to the marketplace

An entrepreneurial culture Sources of risk capital A technically skilled workforce

INNOVATION ECOSYSTEM Place-based innovation ecosystems play a crucial role in driving local and regional economic development. Drawing on the metaphor of a biological ecosystem, innovation ecosystems refer to the complex, dynamic systems in which innovators operate—systems characterized by an array of interacting actors, resources, relationships and conditions that work together to either enable or to impede innovation.

INTRODUCTION

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INNOVATION IN SOUTH CAROLINA As Bruce Katz and Julie Wagner describe the “anchor plus model” of innovation districts, regions most benefit from research and development (R&D) and successful commercialization when research institutions are clustered in near proximity to a vibrant industry center. This proximity leads to effective and ongoing collaboration, which encourages discovery opportunities between creative individuals of diverse mindsets. A prime example is Boston, Massachusetts, where multiple flagship universities like Harvard and MIT are partnering with major healthcare centers to commercialize cutting-edge healthcare products.

Fortunately, South Carolina has a plethora of innovation-critical resources readily available to leading business partners. Within a three-hour drive for even the most rural South Carolina resident, the state boasts three research universities that are propelling the next level of automotive engineering, patient health and consumer technology. Traditional manufacturing giants, such as BMW and Bosch, have invested substantial capital into the ongoing research conducted in these universities as well as into the future workforce through training and development. As heard around the state, “cars are rolling computers,” and this is in no small part due to South Carolina’s historic influence on the automotive industry.

The S.C. Department of Commerce’s Office of Innovation found several overarching opportunity areas during the research portion of this document. Given the state’s global pro-business legacy, we believe there are many assets already available in the toolkit that can be better utilized and built upon to position South Carolina for future economic competitiveness. Specific examples of these areas will be discussed in the benchmark section of this document.

BUSINESS AND JOB RECRUITMENT South Carolina’s storied reputation in business development has drawn the attention of companies globally, especially in manufacturing. The proximity to the Port of Charleston, vast interstate and railway infrastructure, quality of life and work-ready talent all contribute to the state’s attractive business environment. Currently the S.C. Department of Commerce and economic development partners focus heavily on incentivizing recruitment of companies that promise to bring many jobs, which are often invaluable to rural and underprivileged counties. Understanding that automation will continue to transform the landscape of manufacturing and other production-type industries, South Carolina should focus efforts on recruiting and promoting high-skill positions that pay competitive wages. This shift is already evident in the increasing technology-based employment throughout the state’s manufacturing centers.

SKILL DEVELOPMENT The state has traditionally offered a number of programs to supplement training for companies seeking to move to the United States. Companies like Volvo Cars and Boeing have utilized readySC, which provides cusomized training through the S.C. Technical College System, to retrain workers for full-time positions. As employment evolves to incorporate critical thinking and problemsolving for new and emerging business applications, South Carolina will need to continue to invite industry participation in handson training opportunities and industry-research collaboration at large.

BUSINESS ACCELERATION South Carolina provides a culture of ‘business friendliness,’ a top selling point for many local and potential companies, that includes a low cost of doing business and minimal regulation. This, combined with tax incentives for business investment, has provided some needed traction for company growth. However, technology commercialization for emerging small businesses presents unique challenges, typically including product patenting and extensive testing, significant upfront capital for long-term viability and more. The leadership of these startups also benefit from mentorship and effective partnering between entities— academic, industry, legal, federal agencies, etc.—to achieve scalability and success. A thriving startup community necessitates that economic development professionals place the needs of the founder at the center of all strategy—an esoteric guideline for most to fully embrace.

ECOSYSTEM SUPPORT The state has many organizations and programs to help with both entry-level technology commercialization and industry-wide innovation projects. Currently statewide organizations like S.C. Department of Commerce, the South Carolina Research Authority (SCRA) and the S.C. Council on Competitiveness provide leadership for ecosystem development. Economic alliances carry out business recruitment and regional support; university tech transfer offices help researchers navigate commercialization of intellectual property; cities and counties host a variety of economic development initiatives; and community organizations like

INTRODUCTION

Charleston Women in Tech provide valuable connections to the various groups previously mentioned. “Economic development” in the modern sense is less than 50 years old, and as a formal practice has changed drastically within that short time frame.

South Carolina has kept pace with other states in providing basic business services and will continue to evolve to meet innovators’ needs. However, in the global, continuously technical economy, more collaborative efforts will be needed for the state to compete nationally and globally for supply chains and markets. The state should consider leveraging the strengths of support organizations for the majority of entrepreneurial and commercialization efforts.

STATE PROMOTION No one would argue that South Carolina has made a name globally for its beautiful beaches, landscape and history. Tourism continues to be a self-sustaining economic engine that fuels ongoing investment. And as mentioned previously, the state is widely known for its pro-business reputation. The robust manufacturing industry and low cost of living make it widely attractive for business leaders and workers alike.

While South Carolina is to be celebrated for its resilience and consistent growth, the state has many accolades in the innovation sector that are still largely unknown or under promoted. For example, the growth of the technical workforce has doubled since 2005, ranking number six in the country according to a 2020 CompTIA report. Prominent companies like ChartSpan and Blackbaud are a testimony to the value of the plentiful tech workforce on both sides of the state. The state is also nationally competitive in foreign direct investment and boasts an international corridor of businesses, thanks in no small part to the port systems. This has led to an infusion of global talent, which will only accelerate as remote workers discover the state’s notorious quality of life.

S.C. Department of Commerce is currently showcasing innovators across a spectrum of industries to help elevate in-state and global awareness of our innovation capacity. We strongly encourage other regional and state partners to do the same.

IN SUMMARY

The South Carolina innovation economy is primarily boosted by three key variables: people, systems and resources. The job of state ecosystem champions is to create an environment conducive for creativity and exploration, so that all three of these building blocks can thrive. While this document is certainly not comprehensive of the opportunities that exist, we believe we have compiled the most concise strengths, challenges and recommendation areas for key benchmarks within the science and technology business community. These responses were collected via interviews with a diverse range of stakeholders. The 56 highgrowth entrepreneurs surveyed for this document span science, technology, consumer products and a range of emerging industries relevant to the state. More details related to the survey responses may be found in the Appendix section of this report.

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Van Robotics CEO Dr. Laura Boccanfuso is no stranger to taking risks. After spending the first half of her career as a researcher, her passion for education and computer science led her to entrepreneurship. From there, she founded Van Robotics and created ABii — the Smart Robot Tutor, recognized on the Times Best Inventions of 2020.

BENCHMARKS

BENCHMARKS

For the purpose of this document, our team identified and explored seven benchmark areas that convey strengths and challenges of the South Carolina innovation ecosystem.

Below is a brief description of each benchmark as they relate to the scope of this project.

ECONOMIC RESILIENCE South Carolina has several innovative sectors that contribute to high wages and economic growth.

Industry leaders and public stakeholders have collective influence on how the state capitalizes high-growth industries. Priorities must be set and communicated for state leadership to best foster these sectors, which will ultimately secure the state’s positioning as a diverse and resilient global competitor.

ECOSYSTEM LEADERSHIP Support organizations play a vital role in the overall success of entrepreneurial and tech-based economic development initiatives. How those organizations work together and creatively enhance resource offerings is a priority topic in this section.

INFRASTRUCTURE The state’s physical assets and digital pathways provide multiple levels of connectivity needed to commercialize a product. The collaborative space, cutting-edge equipment and strategic clustering of talent all invite a level of experimentation needed to propel a globally competitive idea.

TALENT Talented workers and leaders are crucial components of a robust innovation ecosystem and “knowledge economy”. The talent pipeline must be self-sustaining, with more experienced leadership passing along knowledge and opportunities to young talent. This process ultimately leads to the development of self-sustaining communities.

COMMERCIALIZATION Commercialization is a comprehensive process, generally constituting anything from initial product design to product manufacturing. This benchmark section focuses more specifically on South Carolina’s core resources for research and development: funding, patent development and resource connectivity.

UNIVERSITY PARTNERSHIPS Universities are predominantly looked upon to fulfill industry’s pressing needs for talent and applied research. This section builds upon the commercialization benchmark, emphasizing the importance of state level university-industry partnerships in cultivating South Carolina’s greatest technological advancements.

STARTUP CAPITAL Funding is a critical asset for high-growth ventures. Startups with a healthy foundation of seed capital often perform at greater capacity and higher volume than similar firms without such assistance. This means the company can act boldly in early-stage product experimentation and talent recruitment, leading to new discoveries and lucrative economic growth.

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BENCHMARKS: ECONOMIC RESILIENCY STRENGTHS South Carolina’s quality of life is highly rated by both startup survey respondents (89%) and stakeholder respondents (50%) as one of the state’s most competitive assets for innovation. Survey respondents also mentioned ‘ease of doing business’ as a reason they will likely stay in the state for the duration of their growth journey.

South Carolina wages have increased by 40% in the past 10 years, keeping up with national metrics. Especially important are the higher wages being reported from STEM sector jobs within the state. According to a 2017 study commissioned

by SCBIO and SCRA, life sciences annual wages average $78.6K, compared to just over $40K for all other sectors that same year. Likewise, SC Launch reported $74K as the average wage for their portfolio companies. As an important side note, “For every 10 jobs that are created within the life sciences industry in South Carolina, an additional 19 jobs are created elsewhere in the state.” High-growth sectors tend to create a diversified and sustainable economic environment.

The life sciences industry is South Carolina’s fastest growing sector, and is reporting growth across all metro regions. On April 1, 2021, Governor McMaster declared an executive order for more comprehensive development and recruitment of the life sciences sector, prioritizing domestic marketing campaigns, business development opportunities for existing industry and incorporation of South Carolina-made products in the procurement of medicines, medical devices and medical supplies.

Traditional sector giants like automotive, aerospace and logistics are continuing to see strides in technology spinoffs and product development. In the 2020 S.C. Department of Commerce existing industry survey, 167 new jobs were reported across the 109 companies polled. 74% of these jobs were attributed to “innovation-related activities.”

CHALLENGES Though on the rise, South Carolina salaries are still lagging national averages by almost 20%, according to the Bureau of Economic Analysis. The state reported a $47,502 per capita income in 2020, compared to $59,729 nationally. Lower wages can hinder talent recruitment and general economic opportunity, ultimately hindering the state’s knowledge economy.

Traditional business recruitment continues to dominate state and regional efforts, as recognized by the continued national

BENCHMARK: ECONOMIC RESILIENCE

strides in manufacturing. Because of this widely-accepted economic development strategy, there is less attention cast to science- and tech-based needs and opportunities. For example, business recruitment tools are generally crafted for high volume job creation or physical infrastructure investment. Technology-centric business development requires resources outside of traditional incentives.

Basic needs include a research base that generates new knowledge, mechanisms for transferring knowledge into the marketplace, an entrepreneurial culture, sources of risk capital and a highly skilled workforce.

According to some local investors, South Carolina currently lacks a research university that would sustain the R&D capacity of a major life science hub like Boston. They note that South Carolina flagship universities are making great strides in all innovative activities, not just life sciences, but more industry support is needed to elevate applied research to a nationally competitive level. This presents a chicken or egg scenario, as universities are often a catalyst for spinning out companies that can eventually become major industry investors.

RECOMMENDATIONS Stakeholders should better leverage the state’s rich ecosystem when recruiting and helping develop highgrowth companies. Given South Carolina’s notoriety for successful business recruitment, an opportunity is being missed to proactively connect those target businesses to instate innovation centers. Such an initiative could also serve as the first experimental step to attracting corporate R&D operations to locate in the state.

Consider tailoring state business incentives to incorporate high-growth ventures. Tech firms, as an example, are credited with creating many jobs but may not qualify for certain incentives due to a lack of infrastructure investment.

Likewise, research and development projects typically account for a spillover of technology and high paying positions in traditional sectors, but might not produce the job count necessary to meet eligibility. Importantly, these innovative activities increase the number of STEM jobs available, with entry level jobs bringing $66K annual income compared to the state’s average wage of $48K. Current legislation and economic development tools do not incentivize creation of high wage positions, which would help address the state’s national income gap and the recruitment and retention of talent.

The state should explore opportunities for updating current laws and tax structures that hinder innovative growth. For example, the Franchise Tax on C-Corporations requires an annual fee on firms receiving investment capital. This can inadvertently penalize young startups still heavily reliant on fundraising.

Create a statewide Technology-Based Economic Development (TBED) initiative that promotes advancement of traditional and new industry clusters. TBED includes research and workforce related activities mentioned in the introduction of this document. An obvious opportunity for South Carolina is the expansion of Industry 4.0 in our globally competitive manufacturing sector. Examples of cuttingedge manufacturing projects can be found in university and industry partnerships managed by the S.C. Fraunhofer USA Alliance. SCRA is also credited with a number of funding and university initiatives that fuel advanced manufacturing and engineering. However, for the state to become an R&D hub for manufacturing, we need many more leaders and organizations intentionally prioritizing these types of projects.

Consider methods to expand and connect innovation opportunities within lesser known sectors. For instance, South Carolina boasts national acclaim for hospitality services and research, but little to no coordination exists between research and the thriving sector within the state. Cybersecurity, another quickly growing cluster, will only become more in-demand as the digital economy expands. Likewise, the $28.8B aerospace industry has strong allies in state industry leaders like Boeing and Lockheed Martin. The sector houses three notable innovation and training centers in the McNair Center for Aerospace Research and Innovation, the South Carolina Technology and Aviation Center and the newly launched S.C. Aeronautical Training Center. Other clusters with great potential within the state, according to local investors, include ag-tech, insure-tech and real estate. Ag-tech is also paving the way for high paying jobs in rural regions, as can be seen in the $314M technology campus recently announced in Hampton County.

DELTA BRAVO AI Named one of the “25 leaders transforming manufacturing,” Delta Bravo AI has helped clients like Rolls Royce, Gulfstream, Nucor and the US Dept of Defense turn mountains of raw data into productivity-enhancing AI solutions.

Serial entrepreneur Rick Oppedisano launched Delta Bravo AI in Rock Hill to take advantage of the Winthrop talent pool and nearby Charlotte workforce. The startup built an artificial intelligence (AI) platform that benefits a wide range of markets, eventually discovering the South Carolina manufacturing industry as an ideal fit for scaling the technology.

An early believer in ecosystem integration, Oppedisano built a close relationship with David Warner, former director at the Incubator @ Knowledge Park. Warner helped him connect with manufacturers, even cold-calling to convince some industry leaders to pilot his automation software. From there, the company received a $50K demonstration grant from SCRA and was introduced to the South Carolina Manufacturing Extension Partnership (SCMEP) for additional testing. This series of events led the young AI company to defy the odds and carve a transformative niche in South Carolina’s most dominant sector.

Delta Bravo is just one example of a high growth company that is spurring economic output for traditional markets while also introducing new skills and competitive wages both internally and within the supply chain. Stakeholders would be wise to continue fostering these solutionoriented companies as an integral force in the state’s global competitiveness.

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BENCHMARKS: ECOSYSTEM LEADERSHIP STRENGTHS During Global Entrepreneurship Week 2020, 16 higher education institutions rallied for the state’s first and largest student pitch competition, SC Innovates. The event was promoted to over 130,000 students and gained over 100 submitted ideas. Of those submitted, 77 were accepted for consideration, and ultimately 15 student teams were picked to compete virtually for $10,000 in early seed investment. The entire event was planned in a mere couple of months by volunteers, demonstrating the power of regional leaders to collaborate and overcome new obstacles posed by the Covid-19 pandemic. The experience also shed light on the power of digital connectivity to better serve the innovation ecosystem. Those relationships between institutions and regional leaders continue through a variety of programs, especially within the entrepreneurial community.

South Carolina has noted progress in entrepreneur-led ecosystem building. Two examples are the continued success of the MIT Venture Mentor program and the launch of GrowCo, a nonprofit collaborative led by high growth entrepreneurs.

GrowCo’s mission is to increase innovative growth activity in the Midlands through networking and collective representation of entrepreneurial needs.

Initially launched out of NEXT in collaboration with the S.C Department of Commerce, the MIT Venture mentoring program followed the MIT model of mentor engagement and training.

Providing value for entrepreneurs on both sides of the table, the program quickly drew attention from other South Carolina communities and soon expanded to four additional regions. Each community has 15-20 mentors and about the same number of mentees.

According to interviews with stakeholders, innovation and entrepreneurial resources are expanding and becoming more accessible statewide. Challenges still exist in the marketing of these assets and collaborations between support groups, leaving innovators without full access to resources during critical growth phases.

CHALLENGES According to survey results and stakeholder interviews, startup companies are struggling to maintain growth opportunities and to integrate into traditional supply chains within the state.

Companies report a generally supportive environment for prelaunch and profit stages, but fewer known options “in between” fundraising and sustainability. Many startups are building products and services catering to state manufacturing leaders, but haven’t received guidance on vendor rules and processes.

BENCHMARK: ECOSYSTEM LEADERSHIP

As mentioned earlier, support for innovative activities is generally expanding, but entrepreneurs are still largely unaware of available options. According to our survey, less than 50% (47.3%) of survey respondents are currently working with an Entrepreneur Support Organization (ESO). A combined 79% of those survey respondents learned about their respective ESO through wordof-mouth. Only 5.9% learned about the ESO through general marketing. Of the respondents currently working with an ESO, 41.2% listed the services received as ‘extremely helpful’ and 44.1% as ‘somewhat helpful.’ However, 51% of the respondents said business development assistance was ‘somewhat difficult’ to obtain when needed, leading us to postulate that a significant number of founders are missing opportunities to connect into effective resource hubs. A more strategic and comprehensive campaign to engage entrepreneurs from diverse backgrounds and industries will pay dividends for the ecosystem at large.

RECOMMENDATIONS Continue to promote efforts like SourceSC to help small highgrowth firms link into the state’s existing market and supply chains. Stakeholders should consider additional matchmaking events, “shop small” business incentive programs and other collaborative efforts to help increase sales for emerging firms and technologies. Additionally, the state should experiment with creating transparency for existing industry’s technology needs via a request for proposal (RFP) process and allow prospective suppliers to then allow prospective suppliers to bid on those requests.

The state should continuously promote the Relentless Challenge grant and similar funding initiatives to Historically Black Colleges and Universities and rural organizations. This funding and ongoing support would fuel innovation in disadvantaged regions and populations.

The South Carolina ecosystem should provide more connectivity for the founder’s growth journey. Ecosystem members should collaborate statewide so entrepreneurs have a full array of funding opportunities, legal and financial assistance and general coaching as needed through each stage of development. Support organizations shouldn’t be overly preoccupied with regional ‘wins’ and should instead leverage resources and promote success stories for the state at large.

South Carolina should showcase the state’s excellent quality of life to recruit proven CEOs nationally and internationally. This would create an infusion of new ideas and accountability in the form of board appointments, capital, mentorship and general advice for the greater ecosystem at large.

Charleston Women in Tech (CHSWIT) plays an important role in building an ecosystem of mentorship and opportunity for individuals traditionally underrepresented in the technical workforce. Connecting the dots within the talent pipeline, Charleston Women in Tech introduces its 3000+ members to formal training programs and employers. For example, STEMapalooza is an annual STEM event held in partnership with the National Society of Black Engineers that allows participants to demo new technologies and gain insights into tech careers. Likewise, CodeOn introduces coding skills to young girls and residents through laundromats and other underserved neighborhood community centers, gaining interest from national publications like CNN Money and Upworthy. SC Codes is another more recent partner that provides no-cost access to training and resources for ongoing skill development within technology.

CHSWIT functions as an entirely volunteer-led 501c3. The movement is organically driven and effective, but shouldn’t be expected to play a leading economic development role in the region. Industry and ecosystem stakeholders should help equip and guide CHSWIT in their mentorship objectives. This type of proactive partnership will help create a competitive and diverse talent pool, enabling women at all levels of their career to participate in the explosive growth of the Charleston tech sector.

ChartSpan got its start in Houston, Texas, when brothers Jon-Michial Carter and Patrick Carter began dreaming of an intuitive technical solution for personalized healthcare management. In 2013, they were warmly accepted into Iron Yard’s Ventures Healthcare Accelerator Program, then continued to be supported by several Upstate stakeholders upon graduation. Former NEXT CEO John Moore credits Jon-Michial with taking full advantage of a plethora of opportunities to grow his company to 200+ high-skilled employees with “one of the most downloaded medical apps in America.”

“Jon-Michial fully leaned into the ecosystem by leveraging its resources while also giving back to the region. He embraced all networking opportunities that were handed to him, even moving his early operation into the NEXT Innovation Center to be near other high growth entrepreneurs. We credit our focus on peer networking, one-stop concierge services, and collaborative infrastructure as the right combination for ChartSpan’s eventual success.” — John Moore Moore said the NEXT team treated ChartSpan like they were ‘winners from day one,’ as they do with all accelerator graduates. He understood that resourceful companies like ChartSpan tend to rise to the top, even creating new assets and opportunities for future startups. The company’s ability to attract venture capital from across the Southeast helped raise South Carolina’s profile with investors, eventually paving the way for Cultivation Capital’s move to the Upstate.

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BENCHMARKS: INFRASTRUCTURE STRENGTHS

RECOMMENDATIONS

Developers are beginning to incorporate flex and lab space into their renderings, becoming more accommodating to the needs of new product development and corporate R&D.

Market and leverage the state port systems as an entry point to US markets for high growth, global companies. Our port is one of the most accessible and affordable in the nation, inviting a host of opportunities for small to mid-level innovation ventures. Local investors specifically mentioned an opportunity to attract small to medium-sized European life sciences companies looking for US market access. This would allow the state to extend life science manufacturing and the supply chain while research activity continues to grow.

To date, SCRA has dedicated financial and human capital support for the build out of over 1.3M square feet of facilities.

More recent developments include 20,000 square feet at 22 WestEdge in Charleston and 3,000 square feet of new lab space at the SCRA-UofSC Innovation Center in Columbia.

SCRA plans to upfit the last available 4,000 square feet at the SCRA-UofSC Innovation Center for new labs in the coming years.

Industry leaders and philanthropists have provided substantial support for innovation centers in the state. The Clemson Composite Center, the University of South Carolina McNair Center for Aerospace Innovation and Research and the S.C. Aeronautical Training Center at Trident Technical College, just to name a few, have all benefited from a combination of public and private sector investments.

Charleston philanthropist Anita Zucker and her family have contributed at least $9M collectively to both the S.C. Aeronautical Training Center and the McNair Center. Boeing was also a notable early contributor to McNair, investing $5M into the center. Clemson Composite Center has benefited from SCRA grants, S.C. Department of Commerce funding and other endorsements from industry leaders.

CHALLENGES 47% of startup survey respondents said high tech labs and equipment were necessary for their growth needs; 33% said that a lack of this type of infrastructure is one of South Carolina’s “greatest challenges to innovation.”

According to the Federal Communications Commission, in 2019 South Carolina was 40th in broadband deployment, but 17th in speed of broadband. Per the Office of Regulatory Staff, 78 rural and disadvantaged communities throughout the state have received $26.4M for the expansion of broadband infrastructure through August of 2020. These efforts are expected to continue in the coming years.

Statewide, wet lab space is becoming limited as hospitals are now reserving space for vendors rather than young companies that have traditionally rented the facilities. SCRA anticipates the life sciences and advanced materials sectors will continue to have the greatest demand for space. The state is currently performing well in accommodation for advanced manufacturing.

BENCHMARK: INFRASTRUCTURE

Promote infrastructure and support services so emerging and established firms have quick and easy access to resources.

Statewide, current infrastructure exists that is underutilized for innovation related projects and activities. For example, all of the state research universities and other regional facilities like Greenville Tech’s Center for Manufacturing Innovation and the Southeastern Institute of Manufacturing Technology (SiMT) have advanced equipment and labs available for product development.

These centers have various processes for accessing these features, which can be hard to navigate for outside firms. The state would benefit from a user friendly database or campaign to catalogue and communicate infrastructure available by industry need.

Encourage industries to become engaged in large-scale infrastructure projects that benefit the state collectively. G&P Trucking has played a leading role in supporting cloud-based R&D and other road improvement projects. Build and market case studies like these to set an example for similar public-private partnerships.

The state should consider building or incentivizing testing facilities and other research-specific infrastructure to advance commercialization capacity for industry R&D. There have been instances of industry leaders shipping products outside of the state for further development, a missed opportunity for the SC workforce. The state should be especially cognizant of the need for wet lab and advanced material spaces, since these areas currently have the greatest demand.

The state should continue to prioritize rural access to high speed internet. 68% of startup survey respondents said high speed internet is most regularly used in their innovation ventures. South Carolina has a large population of rural residents who need high speed broadband to build necessary skills for higher paying, more sustainable employment opportunities. No-cost programs like SC Codes are available to help jumpstart an individual’s career with adequate digital connectivity. The state should continue to collaborate with the newly launched S.C. Broadband Office to ensure visions align with any statewide innovation strategy for rural development.

Dr. Srikanth Pilla, pictured above, is the Robert Patrick Jenkins Endowed Professor and Founding Director of Clemson Composites Center at Clemson University, located at the CU-ICAR campus.

South Carolina boasts a 250-acre International Center for Automotive Research (CU-ICAR) that provides the ideal conduit for industry partnerships, talent development and global promotion of the state’s advanced manufacturing capabilities.

In collaboration with Clemson University, the center also offers over 450,000 square feet of space for industry partners to build and test new products. Electric busing manufacturer Proterra landed in the Upstate to be near CU-ICAR and is now celebrated for going public in a $1.6B acquisition deal.

CU-ICAR is home to the United States’ only graduate program in automotive engineering, which has awarded more than 600 advanced degrees over the last 14 years. Through the Deep Orange program, students use applied research techniques to build prototype vehicles and devices alongside industry giants like BMW, GM, Ford, Sage Automotive and several others. The Deep Orange program is actively developing the next generation of engineers through a two-year project in collaboration with automakers and suppliers. Students engineer, prototype and validate a concept vehicle, with the 12th and latest cohort actively building a driverless high-speed racecar.

With more than half of the university research sponsored by industry, students learn under the expertise of acclaimed leaders like Dr. Srikanth Pilla. As Founding Director of the Clemson Composites Center and Endowed Professor of Automotive Engineering, Dr. Pilla introduces students to the advanced materials that are quickly becoming a mainstay for futuristic automotive manufacturing.

Dr. Laine Mears, the BMW SmartState Endowed Professor of Automotive Manufacturing at CU-ICAR, explains that the program’s unique combination of applied training and theoretical study is piquing the interest of national industry partners: “Our students will head to the West Coast and other regions of the country for full time employment and co-ops, and we’ll get calls and even campus visits from those manufacturers asking what we are up to down here. That has led to some long-lasting research partnerships.”

Mears says this type of exposure has helped the center stay top of mind for ongoing industry projects. His research portfolio of over $16M has a balance of federal, state and industry sponsors, and even fundamental projects have impact partners from industry. Dr. Pilla, who has brought in $13.78M in funding from major federal agencies, also brings a level of prestige to the state and can be credited with attracting interest from other renowned researchers.

CU-ICAR has become a world-class education and research facility, but its success is largely due to the industry-centric vision that was embedded into the campus’ culture from its earliest days. CU-ICAR also nurtures the talent pipeline in its ongoing efforts, providing industry partners with exposure to new ideas as well as access to a creative and trained workforce for easy recruitment. While the state considers plans for additional innovative centers, stakeholders would be wise to follow a similar model in prioritizing industry leaders’ needs for access to talent, experimentation and user-friendly resources.

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BENCHMARKS: TALENT STRENGTHS According to the S.C. Council on Competitiveness 2020 impact study, employment in the South Carolina technology workforce has doubled since 2005. Accounting for 180,801 employees and an average salary of $78,977—well above the state average of $44,986—the industry boasts a state economic impact of $89B. Programs like SC Codes and Charleston Women in Tech are helping underrepresented individuals plug into the growing workforce with free training and networking opportunities. Additionally, rural initiatives are gaining traction in tech workforce training, including a $1.3M federal grant awarded to the Beaufort-based South Coast Cyber Center and a near $13M federal grant for new science and technology programs deployed across seven schools in the county. Cybersecurity training will be offered via magnet programs within the seven schools.

Organizations and institutions statewide are creating proactive outreach efforts to engage and retain student talent. SCBIO is building partnerships with state research universities to increase student exposure to industry prior to graduation. Students are offered a discounted membership to SCBIO, making way for networking opportunities with state industry leaders in the life sciences sector. Likewise, Clemson University, Furman University and NEXT have all built internship pipelines into the entrepreneurial ecosystem, encouraging students to experience immersive opportunities with state founders and creators. These efforts provide students with real-world exposure to executive management of startup operations, as well as introduce students to lucrative job opportunities within South Carolina.

The University of South Carolina is providing students with “greater implementation of advanced manufacturing techniques” through a 15,000-square-foot Digital Transformation Lab at the McNAIR Aerospace Center. These facilities work in tandem with industry giants like Siemens, Samsung and IBM. Private sector partners can pilot a new product while leveraging engineering talent and cutting-edge equipment, providing hands-on experience and lucrative career opportunities for participating students.

CHALLENGES Multiple stakeholders have mentioned a lack of soft skills as young talent adjusts to professional work environments.

In the innovation sectors, “soft skills” are referenced most often in terms of problem solving and effective collaboration.

These skills are lacking in high-growth industries like tech and life sciences, reinforcing the importance of internships and hands-on training.

B E N C H M A R K : TA L E N T

Some startup respondents feel a disconnect between their entrepreneurial needs and the services and mentorship offered on behalf of the entrepreneur support organization (ESO). While ESO leadership need not have experience as high-growth entrepreneurs to be effective, the ESO benefits from having experts in areas like funding, intellectual property, scaling, etc, readily available for guidance to both the ESO leader and the members. Additionally, the ESO leadership is most effective when keeping the founders’ growth at the center of the organization’s mission. This will help maintain productive relationships with stakeholders like board members and investors that sometimes have conflicting interests from that of the startup.

Employment and workforce challenges continue to be cited as a major challenge to innovation by 58% of survey respondents and 71% of stakeholders. However, a combined 92% of startup survey respondents said their workers have the necessary skills to meet the company’s ongoing growth needs. With continued recruitment and retention of instate talent, workforce challenges within innovation can be expected to slowly decline.

RECOMMENDATIONS Prioritize soft skill enhancement across all levels of talent development in the state. As related to innovation, soft skills provide workers the opportunity to understand the needs of the industry, become effective team members and make critical decisions that will help push their organization to the next level of competitiveness. Stakeholders should build on current initiatives mentioned in this benchmark to help continue bridging student and workforce exposure to industry needs and opportunities for innovation. While South Carolina has a significant and growing tech workforce, a key need exists to expose the workforce to technical business applications for development of innovation initiatives. This effort would benefit from an industry champion akin to similar initiatives in the state, notably BMW’s historic influence in advanced manufacturing training.

The state should employ recruitment mechanisms for proven CEOs, researchers, mentors and young talent to help prop up and sustain the growing workforce. Innovation at all levels begins with talent, and efforts need to be made to strategically target and develop the individuals who contribute ideas and create new opportunities in all sectors of the economy.

South Carolina students should be immersed in blockchain, IoT, AI, Industry 4.0 and other base-level tech skills that will become increasingly normalized in the future workforce.

Encourage K-12 curriculum focusing in these tech sectors, mirroring projects like the Beaufort County STEM initiative, and promote projects that connect students and the current workforce to hands-on learning opportunities. Stakeholders and educators should also consider ways to introduce women, minorities and other underrepresented groups to more comprehensive opportunities within the tech workforce.

For example, the tech field encompasses a wide range of in-demand skills, like communications, design, sales and customer service, but the K-12 student population might only be aware of digital roles like coding and programming.

This lack of awareness can prohibit a student from pursuing further education in technology, further limiting the candidate pool of a quickly expanding field.

projects. The University of South Carolina Office of Innovation, Industry Partnerships and Economic Engagement (UofSC OIPEE) has found success in expanding the ‘tech transfer’ mission and definition to accommodate workforce and training initiatives. With UofSC OIPEE’s help, Nephron has partnered with university students and research experts to help launch an automated process to safely fill syringes.

Similarly, Siemens is teaming with students to showcase demonstrations for clients at the McNAIR Center’s Digital Transformation Lab. For state university tech transfer offices interested in this type of integration, OIPEE’s Chad Hardaway has specifically noted the unique opportunity to utilize SC Competitiveness Council industry reports to determine student projects and internships.

University tech transfer offices can and should assist in building pathways for student integration into industry

TCube Solutions was founded in 2007 by Sam McGuckin, who launched the company with decades of experience within the Columbia insurance-tech industry. TCube became a member and resident at the USC/Columbia Technology Incubator, who’s leadership made an introduction to a UofSC import-export class. Students in that class were tasked with building a case study on insurance services outside the United States. This opened a new market for a major TCube expansion, eventually leading to the acquisition by global information technology leader, Capgemini.

Between that import-export class and acquisition, TCube found a unique opportunity to employ dozens of UofSC student interns to help build new products and software solutions. Originally housed at the UofSC/Columbia Technology Incubator, the overnight presence of these students made a major impact on the overall energy of the incubator.

Several of the original interns from TCube have gone on to build flourishing careers within the Columbia ecosystem. Some are currently serving in senior management positions at companies like Cognito Forms, and others like Joshua Snead have gone on to found their own startups.

MEET THE TALENT Joshua Snead spent three years with TCube Solutions as an intern and employee of Capgemini. Today, Josh is Co-Founder of Rainwalk Technologies, a SaaS-based platform intended to provide insurance brands a smooth way to enter pet insurance. Rainwalk was accepted into the Global Insurance Accelerator in 2021 and continues to scale in Columbia today.

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BENCHMARKS: COMMERCIALIZATION STRENGTHS

RECOMMENDATIONS

In 2020, South Carolina achieved a 30% success rate in SBIR Phase I applications, a 13.3 point increase from 2019. In that same stretch of time, 3Phase, a state resource aimed at assisting research-based companies in South Carolina successfully acquire Small Business Innovation Research (SBIR) and Small Business Innovation Technology Transfer (STTR) funding, helped 14 companies receive over $18M in awards. This positive momentum has led to the creation of the state’s first SBIR Phase 2B Matching fund. This now makes South Carolina one of eight states to provide additional funds in all three stages of the SBIR program.

Strengthen connectivity of resources to make the commercialization process seamless from idea to shelf.

Current programs like 3Phase are building partnerships with stakeholders in all levels of the ecosystem, acting as a one stop shop for small business owners. The state should continue to foster these types of pathways and build digital and physical opportunities to connect.

87.5% of South Carolina-based research & development is paid for by private industry. According to SSTI, “As a substantial performer and funder of R&D in the United States, the strength of private industry’s R&D activity in a region can provide an indication of the region’s capacity for bringing innovative technologies to market.” South Carolina’s high industry engagement in R&D activities should be appealing to companies interested in commercialization pathways.

For nine consecutive years, the University of South Carolina has been recognized as one of the top 100 universities to be granted U.S. utility patents. Earning the 63rd ranking, its highest yet, UofSC has surpassed prestigious institutions like Dartmouth and Carnegie Mellon. The university was granted 45 U.S. utility patents in 2020.

CHALLENGES As mentioned a couple times in this document, funding is the greatest challenge currently limiting expansion of existing commercialization opportunities. Life sciences companies in particular need well over the $50K match currently offered for SCRA Phase I SBIR/STTR grant awardees. The funding currently offered by the federal government via the grant does not apply to important business development needs like legal fees and accounting. These expenses can be quite costly for companies in life sciences that typically assume a hefty amount of risk for product production.

Currently, several assets exist to help companies navigate the commercialization process. However, many companies are unaware of available resources. This includes intellectual property licensing opportunities, specialty equipment available in-state for rent, state-sponsored programs like 3Phase and various commercialization grants from SCRA that provide seed funding starting at $15K.

B E N C H M A R K : C O M M E R C I A L I Z AT I O N

Help small business owners and new founders assess market needs and particular ‘fit’ for federal funding agencies prior to applying for SBIR/STTR grants. Federal agencies are looking for grant applications solving pressing challenges in respective sectors. Support academic programs that expose students to market fit prior to graduation, similar to the UofSC I-CORPS model. Groups like 3Phase also provide free assistance for applicants exploring market viability, partnership sourcing and access outside risk-capital.

High growth companies, especially in the life science sector, need significant financial support for product development, testing and patenting. Stakeholders should consider at least doubling the current $50K match for Phase I SBIR/STTR funding. This would put the program closer in line with other states like Kentucky, that has a Phase 1 match program for National Institute of Health recipients of $150K and $500K for Phase 2 recipients.

South Carolina should recruit venture capitalists, who can take advantage of the state’s growing SBIR/STTR awardee portfolio. The state currently has a low density of investors, resulting in a missed opportunity to provide supplemental funding for these ventures as new rounds of capital are needed.

Provide services that de-risk technology, so founders can fundraise and leverage assets for continued growth. Derisking technology can include access to free or subsidized equipment, hands-on resources for navigating regulatory or administrative processes, and guards against potential liabilities.

In 2012, the Zucker Institute for Applied Neurosciences (ZIAN) launched to help “enhance and expand the innovation ecosystem at MUSC.” An accelerator of successful technologies like the Blink Reflexometer, the institute has advanced 11 MUSC technologies through early stage development and acquisition of $3.3M in risk capital. Six of those technologies have been licensed, and three have achieved commercialization and approval by the FDA. ZIAN is now expanding beyond neuroscience to inspire and recruit 40 ideas across the MUSC healthcare system. Their goal is to select at least three for entrance into the next accelerator program, then to help them obtain the risk capital needed for the next stage of commercialization by presenting their technologies to angel investors. The institute is looking at four key benchmarks to guide the selection process: “ability to address an unmet clinical or research need, patentability, feasibility and potential market value.”

The vision of ZIAN, according to founder Sunil J. Patel, M.D., is to be a “self-sustaining model of innovation, in which the licensing of inventions provides the funds needed for the development of new technologies.” In the era of global competition and market transformation, institutions like ZIAN are critically important to “foster an innovation culture, curate a portfolio of technologies, attract angel capital investment, create local jobs and bring royalty income to the region.”

MEET THE INVENTOR As a clinical associate professor of neurosurgery at the Medical University of South Carolina, Dr. Nancey Tsai invented the Blink Reflexometer, a device that uses videography to detect subtle differences in the way a patient blinks. As Nancey puts it, “it’s all in the eyes” when it comes to examining neurological functions. Now, the portable device can be used to test an athlete for concussion right on the sidelines, and in the future has the potential to detect other neurological disorders including Alzheimer’s, stroke and Parkinson’s.

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BENCHMARKS: UNIVERSITY PARTNERSHIPS STRENGTHS

RECOMMENDATIONS

Industry collaborations are being seen across multiple sectors, especially during the period of the Covid-19 shutdown. S.C. Department of Commerce together with its sister organizations representing several major industry sectors, namely logistics, automotive and aerospace, are seeing more efficient and effective recruitment of companies in those clusters due to this uptick in interaction. Stakeholders are able to provide interested companies with direct insight into the customer market and research and development opportunities due to ongoing conversation with similar businesses.

These are recommendations primarily for state leadership hoping to create a sustainable innovation ecosystem through commercialization and strategic partnership. This section is similar to ecosystem leadership but has a more targeted audience.

Clemson University and the University of South Carolina are showing increased collaboration for research projects within the purview of the SC Fraunhofer USA Alliance. Each project is specifically geared toward industry challenges and growth opportunities. See this section’s case study for more on the Alliance.

SCRA is currently supporting 47 academically affiliated companies with $9.9M in grants from 2018-2020, including $29.9M in follow-on funding. These grants provide valuable seed money to accelerate industry-university collaborations.

CHALLENGES Startups and industry leaders alike struggle with how to initiate partnerships with universities on research projects. This problem is not unique to South Carolina, as most academic institutions have different benchmarks and processes than are typically accustomed to the private sector.

Part of the SC Centers of Economic Excellence, the SmartState Endowed Chairs program doesn’t inherently complement the industry needs of the state. Academic faculty involved in the Endowed Chair program are typically recruited from competitive universities, but in practice are not directly tied to the South Carolina business community they are intended to serve.

SmartState Chairs mostly benefit from local leadership, who help guide relevant and in-demand research opportunities.

As mentioned previously, research and teaching institutions have processes that don’t typically match the speed and flexibility needs of private sector innovation. This is especially true for curriculum and patent development. Universities tend to benefit most from creative third-party partnerships that create avenues for hands-on training and commercialization assistance.

B E N C H M A R K : U N I V E R S I T Y PA R T N E R S H I P S

The state needs to build clearer pathways for industry to partner with institutions on applied research projects.

Universities should cater projects to a specific industry problem and perform within the scope of the company’s value position, deliverables and deadlines. Rather than expecting researchers to understand the needs of industry, tech transfer leadership need to network with industry partners and coordinate projects that best align with the company’s growth needs. Tech transfer offices can build other bridges to industry through demo space collaboration and presenting prospective projects to researchers and students according to specific industry needs.

Industry should bring opportunities to universities unfiltered.

State economic development leaders can invite clustering of innovative activity by paying for or subsidizing the cost of innovation-specific infrastructure and equipment. As mentioned in the previous benchmark, other states are finding success in keeping R&D activity in-state by building testing centers and other relevant facilities. These efforts often invite natural collaboration among industry and research partners, as seen at the McNair Center for Aerospace Research and CUICAR. Important to note: some state industry leaders are taking proactive measures to invest in spaces on campus, as seen in Nephron Pharmaceuticals’ accommodation for suppliers.

These companies should be offered formal assistance from public leaders to complement their efforts.

The state needs to better market the plethora of resources readily available to fuel both industry and research commercialization projects. Specifically, SCRA offers several grants that provide funding to encourage flexible, early-stage collaborations and pilot projects between research experts, industry leaders and entrepreneurs. Additional services like 3Phase offer state-sponsored assistance with SBIR/STTR grant applications. These funding mechanisms, plus various labs and specialty equipment, are still largely underrecognized as key in-state assets for all levels of commercialization projects.

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PARTNERSHIPS LIKE THIS ONE ARE A WIN FOR PATIENTS, EMPLOYEES AND STUDENTS — NOT TO MENTION FOR COMPANIES LIKE OURS, THAT CONTINUE TO GROW

Frequently partnering with South Carolina research universities, Nephron Pharmaceuticals recently teamed up with a University of South Carolina class led by Dr. Ramy Harik to explore new production opportunities for the Cayce-based drug manufacturer. A collaboration on multiple fronts, Nephron benefited from a sterile manufacturing space provided by the UofSC McNAIR Center, a Yaskawa robot paid for by an SCRA Demonstration Grant, and hands-on research by staff and expert faculty at both the McNAIR Center and UofSC. The result? Nephron now has an automated system for safely and efficiently filling syringes, greatly optimizing their ability to meet customer demand for pharmaceutical products. The company has also invested in new infrastructure at their Cayce Campus and has ultimately hired several of the university students connected to the original project for full time positions.

“Partnerships like this one are a win for patients, employees and students, not to mention for companies like ours, that continue to grow and expand our capacity to help others,” said Nephron CEO Lou Kennedy.

“We are excited to build on the momentum created by our work with the university, especially with Dr. Ramy Harik, and I can’t wait to see what we can do in the years ahead.”

This Nephron expansion is not only a boon to the South Carolina workforce and economy, but ultimately the technology licensed on behalf of Nephron and the University of South Carolina will be a benefit to healthcare customers around the globe. Stakeholders would be wise to recognize this type of collaboration and leadership as a precursor to the state’s resiliency and competitiveness across all sectors, traditional and new.

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BENCHMARKS: STARTUP CAPITAL STRENGTHS In the past year, the state has benefited from several funding ‘wins’ in attracting firms like Cultivation Capital to the state.

VentureSouth also continues to gain national attention, with the firm’s dispersed angel funds acting as a feeder to larger follow-on funding for emerging companies. Collectively, the state’s existing venture groups and SCRA have a track record of collaborating and pooling funds to assist successful portfolio projects.

for funding or attempting to commercialize high-growth and high-risk technology and products in the current space. Like the first point in this section, the state will need to take an incremental approach to increasing the fundability of existing founders.

NEXT has found success connecting companies to national funding opportunities through the Venture Pitch competition.

In 2020, the conference winner earned a spot as a showcase company at Venture Atlanta, with six other companies from the conference also selected to pitch.

South Carolina would benefit from an initiative to recruit venture capital firms to the state. The voluntary expansion of Cultivation Capital to the Upstate demonstrates natural interest in southeastern entrepreneurial activity. The state would greatly benefit from an initiative prioritizing quality of life and untapped investment opportunities within the emerging clusters.

Since 2019, Venture Carolina has provided workshops for over 1500 individuals interested in learning the regulatory and legal processes for investment certification. As a result of the workshops, 263 new angel investors have joined VentureSouth and over $12.6 million dollars has been invested in South Carolina early-stage companies.

Charleston-based Good Growth Capital provides ample expertise and mentorship to the entrepreneurial ecosystem.

With an active presence in Boston and other leading Northeast hubs, the venture firm has national insights on trends and opportunities that will greatly benefit South Carolina startups at the onset of their growth journey.

CHALLENGES According to the National Science Board (2018), South Carolina still lags in availability of venture capital compared to other states, ranking 39 out of 50 for deals dispensed per $1000 of GDP. To attract activity comparable to major national hubs, the state needs an incremental approach that is focused on talent recruitment, commercialization assistance and stateincentivized funding mechanisms like tax credits and matching programs.

Currently the venture capital fund levels offered within the state are small in comparison to the great equity needs of life science and similar high growth companies. This is another chicken or egg scenario—investors need to see competitive return for their investments, which is most often secured in portfolio companies within larger national hubs. South Carolina only has a handful of companies currently performing at that level of investment, therefore the funds are not typically targeted to the state. However, if larger VC funds were more readily available, there would likely be an uptick in founders moving to the state

B E N C H M A R K : S TA R T U P C A P I TA L

RECOMMENDATIONS

The state should expand the Angel Tax Credit and provide a higher match for SBIR/STTR grant awardees.

South Carolina should incorporate funding education as a major priority area, while creating meaningful networking between accomplished CEOs and new entrepreneurs for knowledge sharing. Inexperienced entrepreneurs struggle to understand effective pathways for funding, even within the state.

With South Carolina still lagging other states in venture capital availability, stakeholders should strategically position successful entrepreneurs for funding opportunities. They should help VCs understand what emerging technologies are coming to market and what’s next on the radar for the state.

Consider a trade show or networking event to introduce proven companies to VCs. Pitch competitions are helpful for talent development but are not a major investment factor for VCs. Recruit proven CEOs & serial entrepreneurs with South Carolina’s quality of life incentive. This will help create buzz for the state and expand existing networks with national VCs. Promote regional/state success stories so entrepreneurs can believe opportunity exists in the region and draw the attention of additional risk capital firms.

B E N C H M A R K : U N I V E R S I T Y PA R T N E R S H I P S

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THE FACT OF THE MATTER IS BEING IN GREENVILLE IS A LOT LIKE BEING ADOPTED INTO A FAMILY

Proterra got its start in the early 2000s and quickly grew in the electric vehicle manufacturing space but almost went out of business in 2011. Its investor at the time was unable to fulfill their obligations, leaving Proterra suddenly cut off from funding. Now a public company with $197M annual revenue and 350 employees in Greenville alone, Proterra realized the value of South Carolina’s tight knit community when it needed the ecosystem the most.

“The fact of the matter is being in Greenville is a lot like being adopted into a family,” said Marc Gottschalk, Proterra’s former general counsel and director of business development.

That ‘family’ consisted of a band of 13 individuals who all had a collective passion for Upstate competitiveness and recognized the young company’s potential for the region’s innovation economy. Once it became evident Proterra was in grave danger of insolvency, even going as far as hiring attorneys to begin bankruptcy paperwork, these key players quickly came to the table and pooled funds to help Proterra make payroll. Rick Davis, managing shareholder of Elliott Davis, and Tim Reed, a local businessman, were the first to offer connections to potential investors. Tim invited the Upstate Angel Network (now VentureSouth) to participate along with other local business leaders who formed the “Gang of 13,” as they are fondly called. Mr. Reed also introduced Proterra to SCRA, who was able to match the gang’s contribution with a $250K loan. These funds were critical in bridging Proterra’s cashflow needs until Kleiner Perkins Caufield & Byers, a Silicon Valley-based venture capital firm, could formally award a $30M investment that would eventually set the company back on its growth trajectory.

Now those 13 leaders own a small equity stake in the public company, and the Upstate has added confidence in its ability to partner successfully in critical moments and attract interest from nationally acclaimed venture capitalists.

While South Carolina still lacks the venture capital density of major innovation hubs, it has significant ammunition in the Proterra story. Not only should the state deploy a unified communications campaign for these types of successes, individual entrepreneurs and stakeholders should regularly use Proterra as a prime example of South Carolina’s strong network when calling upon and recruiting venture capitalists to the state.

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CONCLUSION South Carolina has ample potential for innovative growth, especially in the areas already witnessing traction. Surveys and interviews undoubtedly confirmed that the state’s quality of life, pro-business culture and connectivity to international markets are a significant competitive advantage. South Carolina has a reputation for being proactive and strategic in workforce development and business recruitment, which has paid dividends in the current successes of the advanced manufacturing sector particularly. As we consider opportunities for further advancement of the state’s innovation economy, stakeholders should keep global best practices top of mind, namely: nurturing a research base that produces new ideas and talent; building mechanisms to transfer knowledge and new ideas into the marketplace; promoting an entrepreneurial culture; recruiting and expanding availability of risk capital; and prioritizing a technically skilled workforce.

Additionally, we believe stakeholders would be wise to hone in on a couple key focal areas to balance these strengths with further competitiveness opportunities: DON’T LIMIT NEW MARKET POSSIBILITIES The state has unlimited innovative capacity in a myriad of cluster areas, new and current. While it’s prudent to recognize and foster growing sectors like manufacturing, biosciences and aeronautics, lesser known sectors are finding their own momentum in the market due to a natural collision of talent, supply chains and financing. South Carolina venture capital partners pointed to several emerging clusters that have had strong investment potential in recent years including tech-based real estate, agriculture and hospitality. They mentioned that new markets form constantly, therefore ecosystem members should closely study the landscape to identify new opportunities.

RECOGNIZE INDUSTRY INTERSECTIONALITY - PROMOTE ECOSYSTEM ASSETS COLLECTIVELY Industries are increasingly interconnected. They often face similar workforce, policy and general market needs, while naturally creating new assets and opportunities within the community at large. For example, the parallel rise of the technology and manufacturing sectors in South Carolina has given way to a workforce skilled in digital manufacturing and Industry 4.0 capabilities.

Likewise, innovative companies are prioritizing diversity of thought as a key strength in their production and design teams. This means South Carolina needs to foster a workforce skilled in a wide variety of specialties, from hard sciences to communications. As recommendations in these benchmarks are considered, we encourage stakeholders to utilize a well-balanced approach to nurture the innovation ecosystem collectively, rather than in a manner hyper-targeted to a particular industry need.

Some considerations: Economic developers should leverage all available assets to recruit high growth companies globally. For example, the state port system is largely promoted as a critical asset for potential automotive manufacturing partners. However, according to some local investors, the port’s advantages to young European life sciences companies hoping to establish accessible and affordable US manufacturing connections can be overlooked. Economic developers should think openly and creatively about how they present and position state assets in their recruitment efforts.

The state’s quality of life presents benefits for all high growth businesses and should be leveraged and promoted throughout the ecosystem. Municipal associations, tourism organizations and local chambers of commerce should be connected to macro level initiatives to boost high growth business opportunities.

Innovative industry leaders are most adept at understanding the pressing needs of the evolving marketplace. Industry should be regularly consulted on talent, policy and funding needs, especially as they relate to changes to the business sector at large. Industry leaders are also typically the first aware of technical challenges outside of the purview of ecosystem supporters, like infrastructure issues that might be causing delays in the logistics of a particular supply chain.

CONCLUSION

APPROACH ECOSYSTEM DEVELOPMENT INCREMENTALLY AND COLLABORATIVELY South Carolina lags other states in venture capital and skilled talent, but those challenges are best met incrementally. The state should recognize unique competitive advantages and build coordinated efforts around those opportunities. As one example, the state has nationally recognized researchers in the hospitality sector that have yet to be connected to the growing technology markets.

There are many more potential industries that position South Carolina for global competitiveness, but are yet to be recognized by stakeholders who may be hyper-focused on traditional sectors that have carried the economic weight historically.

T best understand these potential opportunities, connectivity is critical. South Carolina is comparable to economically competitive states in overall availability of support organizations, but gaps exist in the awareness of resources available to the science and technology community. Support organizations should deliberately network with one another, determine value propositions and market strengths with the greater ecosystem in mind. This will greatly help business owners and industry leaders better understand what assets may be leveraged for the next stage in their growth journey.

MARKET THE SOUTH CAROLINA INNOVATION COMMUNITY As heard from countless venture capital partners, entrepreneurs, researchers and stakeholders alike, South Carolina has many “wins” within the global innovation community that don’t receive even close to the promotion warranted. Simply researching and telling these stories will greatly complement South Carolina’s current reputation as a manufacturing leader and tourist destination.

Venture capital partners have emphasized that stories of novel inventions and significant exits quickly draw the attention of other national funding organizations looking for new investment markets. Fortunately for South Carolina, Cultivation Capital discovered the growing Southeast entrepreneurial ventures and chose Greenville for its next hub. Better marketing of these assets and specific success stories will accelerate these kinds of advancements, arming the stakeholder with valuable information for recruitment of innovative companies, R&D operations and investors.

IN SUMMARY

As mentioned, the recommendations in these benchmarks are not meant to be exhaustive examples of South Carolina’s capacity for innovation. This document leans heavily on a wide swath of stakeholders to provide a basis for productive conversations amongst ecosystem leadership and the innovators themselves. We hope this information will result in a fruitful sounding board for more ways to promote transformative growth within South Carolina.

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2021 DATA & SURVEY RESULTS S.C. RANK

S.C. AVERAGE

U.S. AVERAGE

46th 44th 36th 43rd 24th 42nd 10th

$46,318 $45,359 $62,028 $45,500 5.10% 13.80% 31.20%

$63,543 $54,760 $68,703 $54,600 6.00% 10.50% 16.30%

36th 33rd 33rd 42nd

1.06% 0.84% $3.15 $249

2.45% 2.25% $3.82 $806

33rd

808

981

COMMERCIALIZATION Average Annual SBIR/SSTR Funding per $1 Million of GDP 2016-2018

38th

58

147

Academic Patents Awarded per 1000 S&E Doctorate Holders in Academia 2017

26th

13.9

21

Patents Awarded per 1000 Individuals in S&E Occupations 2019

26th

15

22.8

Venture Capital Dispersed per $1000 of GDP 2018

39th

0.53

6.07

Venture Capital Deals as Percentage of High-Tech Business Establishments 2016

32nd

0.54%

1.33%

Average Academic License Income (Gross) as a Percentage of Academic S&E R&D Expenditures

37th

0.50%

3.80%

Average Annual Academic Licensing Income (Running Royalties) as a Percentage of Academic S&E R&D Expenditures 2011-2013

37th

0.20%

2.50%

INNOVATIVE ORGANIZATIONS High-Tech Establishments as a Percentage of all APPENDIX Business Establishments 2016

38th

7.3

9.23

ECONOMIC WELL-BEING Per Capita GDP 2020 Per Capita Income 2019 Median Household Income 2019 Average Annual Wage 2019 Unemployment Rate March 2021 Percentage of Citizens in Poverty 2019 Population Growth 2000-2019 RESEARCH & DEVELOPMENT Total R&D as a Percentage of GDP 2017 Output 2018 Academic S&E R&D per $1000 of State GDP 2018 Federal R&D Obligations per Employed Worker 2018 Academic Science & Engineering Article Output per 1000 S&E doctorate Holders 2017

Average Annual Academic Licensing Income (Running Royalties) as a Percentage of Academic S&E R&D Expenditures 2011-2013

37th

0.20%

2.50%

S.C RANK

S.C. AVERAGE

U.S AVERAGE

38th

7.3

9.23

High-Tech Business Formations as a Percentage of all Business Establishments 2016

20th

0.13

0.12

Employment in High-Tech Establishments as a Percentage of Total Employment 2016

28th

10.56

12.08

Average Annual Number of Entrepreneurs per 100,000 People 2019

35th

0.26%

0.30%

Average Annual Opportunity Share of New Entrepreneurs 2019

33rd

84.87%

85.51%

EDUCATION & WORKFORCE Individuals in S&E Occupations as a Percentage of the Workforce 2019

36th

3.77%

4.98%

Employed S&E Ph.D Holders as a Percentage of the Workforce 2017

43rd

0.33%

0.53%

Engineers as a Percentage of all Occupations 2019

16th

1.41%

1.25%

B.A.'s in Natural S&E Conferred per 1,000 Individuals 1824 Years Old 2019

39th

19.58

23.75

Natural S&E Degrees as a Percentage of Total Higher Education Degrees Conferred 2019

27th

31.50%

33.10%

High School Diploma+ Attainment among Residents Aged 25 and Over 2019

37th

88.33%

88.61%

Average Years of Education Among In-Migrants

40th

13.53

13.73

In -Migration of College Educated Adults as a Percentage of Total State Population

16th

1.52%

1.20%

ENVIROMENT & INFRASTRUCTURE Elementary and Secondary Public School Current Expenditures as Share of GDP 2017

14th

3.60%

3.17%

State Tax Funds for operating Expenses of Higher Education as a Percentage of GDP 2018

43rd

0.30%

0.41%

Broadband Deployment 2019 Average Speed of Broadband Cost of Living Index 2019

40th 17th 33rd

92.10% 39.3Mbps 91.5

96.30% 35.4Mbps 100

Manufacturing GDP as a Percentage of State GDP 2019

11th

19.33%

13.13%

INNOVATIVE ORGANIZATIONS High-Tech Establishments as a Percentage of all Business Establishments 2016

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FOUNDER FEEDBACK In March 2021, 80 high-growth startups were presented a survey for feedback on workforce, business development, funding, research & development and general state innovation metrics. The startups were identified with the help of over a dozen entrepreneur support organizations (ESOs). The ESOs were given the following indicators to help select startups for surveying: Quick company growth in a short period of time Success in fundraising Patent development and/or commercialization success Recipients of SBIR or STTR federal grants Culture of R&D Generally known for a revolutionized product or process 55 startups from seven South Carolina localities responded to the survey. The regions included Columbia (30%), Greenville (27%), Charleston (13%), Rock Hill (16%), Aiken, Horry County and Florence. Participating startups included the following sectors: technology (80%), life science or healthcare (24%), prediction and data analytics (13%), consumer goods (11%), advanced materials (2%) and logistics (2%). Many startups chose more than one industry sector as their company services and products overlapped. 62% of the startups surveyed were less than 10 years old, with the majority of the respondents claiming less than 10 employees. The yearly volume of the startups varied greatly, with 20% at $1M–$5M in annual revenue and 18% earning the next highest average at $200K—$500K per year.

More findings are available in the graphs and charts below.

WHAT CITY OR METRO AREA IS YOUR FIRM HEADQUARTERED IN?

Aiken 5.5% Charleston 12.7% Columbia 30.9% Florence 5.5%

APPENDIX

Greenville 27.3% Horry County 1.8% Rock Hill 16.4%

ETHNICITY OF RESPONDENTS

White 85.4% Black or African American 7.3% Asian 5.5% Two or more races 1.8%

WHAT IS THE YEARLY VOLUME OF YOUR FIRM?

Less than $25K 9.3% $50K - $100K 9.3% $200K - $500K 18.5% $1M - $5M 20.4%

$25K - $50K 9.3% $100K - $200K 3.7% $500K - $1M 16.7% Greater than $5M 13%

SELECT ANY SPECIFIC TYPE OF FUNDING YOU’VE RECEIVED TO DATE

YEARLY VOLUME - FEMALE FOUNDERS (9 OF 55)

Less than $25K 25% $100K - $200K 12.5% $200K - $500K 25% $500K- $1M 12.5% $1M - $5M 25%

HAVE YOU RECEIVED FUNDING FROM SC LAUNCH?

30 25 20 15 10 5 0

Friends & Family 59.6% Crowdfunding 2.1% Angel Investment 36.2% Venture Capital 19.1% Loans 40.4%

Federal Grants 23.4% Non-Federal Grants 27.7%

Yes 50.9% No 49.1%

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HAVE YOU DEVELOPED OR ARE YOU CURRENTLY DEVELOPING A PATENT?

Yes 56.4% No 43.6%

HOW LIKELY ARE YOU TO WORK WITH A RESEARCHER OR UNIVERSITY EXPERT IN THE FUTURE?

Extremely Likely 45.1% Somewhat Likely 31.4% Somewhat Unlikely 15.7% Extremely Unlikely 7.8%

APPENDIX

HOW LIKELY ARE YOU TO DEVELOP A PATENT AT SOME POINT IN YOUR COMPANY’S GROWTH?

Extremely Likely 50.9% Somewhat Likely 20.8% Somewhat Unlikely 7.3% Extremely Unlikely 15.1% I’m Not Sure 5.9%

IN GENERAL, HOW EASY IS IT TO FIND SPECIFIC BUSINESS DEVELOPMENT ASSISTANCE?

Extremely Easy 6.2% Somewhat Easy 29.2% Somewhat Difficult 52.1% Extremely Difficult 12.5%

DO YOU CURRENTLY RECEIVE ASSISTANCE FROM AN ESO WITHIN YOUR REGION?

Yes 46.3% No 48.1 % I’m not sure what this is 5.6%

Incentivize large companies to do business wtih startups

Find venture capital groups from outside the state and BRING THEM HERE!

HOW WOULD YOU RATE THE QUALITY OF SERVICE YOU RECEIVED FROM THE ESO?

Extremely Helpful 41.2% Somewhat Helpful 44.1% Somewhat Unhelpful 8.8% Extremely Unhelpful 5.9%

Work as a STATE and not the separate geographical regions like Upstate, Lowcountry, etc.

Recruit “centers of excellence” from corporations who can bring in talent pools and leverage competitive costs

HOW MIGHT SOUTH CAROLINA STRENGTHEN INNOVATION WITHIN THE STATE?

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THANK YOU TO EVERYONE WHO PROVIDED FEEDBACK ON THIS REPORT. YOUR INSIGHTS WILL GUIDE STRATEGIC CONVERSATIONS AS THE STATE CONTINUES ITS MISSION IN THE RELENTLESS PURSUIT OF TRANSFORMATIONAL IDEAS.