NCInnovation promotes growth across the state

It’s been nearly six months since our last check-in on NCInnovation, and the organization has achieved a lot since then.

After we get into those details, we’ll share a concept that earned a lot of attention in national media this week, and that has a few parallels – and important differences – to the model North Carolina lawmakers pioneered with NCInnovation.

Thanks for reading this morning.

***
In October 2023, the General Assembly charged NCInnovation – a nonprofit public-private partnership – with funding university research that has commercial promise. To pay for it, the legislature authorized $500 million over two years to be transferred into an NCInnovation endowment. Just like any endowment or pension fund, the money earns interest and investment income. NCInnovation uses that interest and investment income to deploy research grants and other support to universities.

The goal is to support UNC System researchers working on projects with real-world applications. When new technologies born from university research succeed in the commercial sector, everyone wins – the university gets a cut of the early revenue; the researchers reap the rewards of their effort; and the local economy sees new jobs and tax revenue.

NCInnovation CEO Bennet Waters told a state legislative committee in July, “A quick walk around NC State’s Centennial Campus shows just how much of a powerhouse the university-to-industry pipeline can be when fully mature. . . We want companies to buy licenses or to buy our licensed research that’s born on university campuses, and especially a UNC System campus.  We want university faculty to go build something amazing and enduring after they advance through the university R&D sequence.”

NCInnovation approved its first slate of research grants in May of this year. The projects that earned NCInnovation support are compelling: a new process for refining lithium, a strategically important mineral, at UNC Greensboro; a way to better remove PFAS and other compounds from drinking water at UNC Charlotte; a potentially groundbreaking universal flu vaccine at UNCW; and more.

“When I took this job last year, some suggested to me that universities outside of the Triangle won’t have enough compelling applied research worth supporting,” NCInnovation’s Chief Innovation Officer, Michelle Bolas, said at the time. “It’s just not true! There is incredible work going on at universities all over North Carolina that people don’t know about, but they will now.”

NCInnovation received its final $250 million allocation from the state in July, which means the NCInnovation endowment is fully capitalized based on the 2023-25 budget. With that money earning about 5% interest right now, NCInnovation says it’s finalizing plans to open its research grant application to all UNC System applied researchers statewide. The organization intends to fund its research grants only from the “new” money earned in the endowment, not from the principal itself.

As NCInnovation moves quickly in executing its mandate to support promising university research, a semi-related conversation is playing out nationally.

This week, both former President Donald Trump and President Joe Biden suggested creating a “sovereign wealth fund” to finance projects of national import. Trump said such a fund could “invest in great national endeavors for the benefit of all of the American people,” though it’s unclear how that fund would be capitalized.

The Biden White House, for its part, told the Wall Street Journal they’ve been talking about such a fund for several months, and it could “provide capital to advance strategic interests such as early-stage technology and energy security as competition with China heats up.”

Presumably an American sovereign wealth fund would be designed to earn returns and then deploy those returns for defined public policy purposes. This concept is generally adjacent to what North Carolina lawmakers pioneered with NCInnovation, but there are several important contrasts.

First and foremost, North Carolina has enjoyed multi-billion dollar surpluses in recent years, so policymakers had plenty of spare reserves to capitalize the NCInnovation endowment. The federal government is not in a similar fiscal position.

Just as importantly, though, North Carolina policymakers thoughtfully built a thick box around NCInnovation. The organization may only deploy funds for a narrow, predefined purpose: to accelerate university applied research toward commercialization. Funds can only go to universities, never to private companies. This design allows NCInnovation to succeed in its strategic mission while eliminating risk the state-backed partnership strays into less defensible territory. Federal lawmakers rarely display such discipline.

Still, the light-on-policy national conversations reported in the media this week underscore one premise for NCInnovation. University research, and commercializing the technologies born from that research, is critical to American strategic interests.

This was true when President Ronald Reagan ordered in 1987, “The head of each Executive department and agency, to the extent permitted by law, shall encourage and facilitate collaboration among Federal laboratories, State and local governments, universities, and the private sector, particularly small business, in order to assist in the transfer of technology to the marketplace.”

It was true when President George H.W. Bush’s administration said in 1992, “International competitiveness requires needed investments in basic research and efficiently commercializing the results of that research.”

It was true when President Barack Obama said in 2011, “One driver of successful innovation is technology transfer, in which the private sector adapts Federal research for use in the marketplace.”

And it was true when President Donald Trump’s administration said in 2020, “Importantly, these [new national research] institutes are a manifestation of the uniquely American free-market approach to technological advancement. Each institute brings together the Federal Government, industry, and academia, positioning us to leverage the full power and expertise of the United States innovation ecosystem for the betterment of our Nation.”