January 2, 2008; revised February 15

Southern Illinois: Garden of the GodsReadiness AssessmentChapter 4: Climate of Innovation, Incubation & Entrepreneurship January 2, 2008;revised February 15 CONNECT SI ViTAL Economy Alliance Frank Knott, Project Lead; Stan Halle, Senior Editor; JimHaguewood, Rob Beynon, & Neil Gamroth, Principal Economic Researchers fknottmd@earthlink.net; http://www.vitaleconomy.com

Table of Contents EXECUTIVE OVERVIEW: Big Picture & Importance of Change in Southern Illinois READINESS ASSESSMENT (RA) 1. State, National & Global Trends 2. Indigenous Resources & Industry Asset Mapping 3. Enabling Environment 4. Climate of Innovation, Incubation & Entrepreneurship 5. Southern Illinois Competitiveness 6. Regional Perspectives 7. Roadmap to Success APPENDICES 4.01 Innovation Assets: Assessment 4.02 Integrated Finance & Risk: Assessment 4.03 Implications & Recommendations

Southern Illinois — "Garden of the Gods" One of the most important ways a 21st Century community creates growth is through the generation of new ideas, new processes, and new businesses. For this to happen, there needs to be a well-established and highly collaborative network of resources to support innovation, incubation and entrepreneurship. This Chapter assesses how well SI does this. Chapter 4:Climate of Innovation, Incubation & Entrepreneurship 4.01 Innovation Assets: Assessment ……………… 11 4.02 Integrated Finance & Risk: Assessment ……. 30 4.03 Implications & Recommendations .………….. 41

Famous Innovators Perspective Chapter 4: Introduction “Innovation distinguishes between a leader and a follower.” - Steve Jobs “Never before in history has innovation offered promise of so much to so many in so short a time.”- Bill Gates "Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets.” - Victor Kiam “Innovation will drive the future of our economy. What happens in your community will largely be determined by you. Communities that position themselves to take advantage of the entrepreneurial sector AND companies, businesses and individuals that have the education, background and ability to generate innovation are going to drive the economy in the future. They're going to create the jobs and the opportunities for our young folks.” - Steve Carter

Innovation, Incubation & Entrepreneurship: Perspective Chapter 4: Introduction • Connect SI and ViTAL Economy participated in the 2-4 May 2007 “Exploring Innovation”, a Nat’l Conference on Community & Economic Development Innovation • Andrew Hargadon** was a keynote speaker on How Breakthroughs Happen — highlights include: • “You need capital of all kinds to succeed, including financial, physical, intellectual & social — when we make connections, we need to ensure that all these ingredients are in place • Genius & innovation are learned, not born — learned through our connections • Community development is about human beings, not product development. How do we link the two? Innovation is acting locally to make connections. It's about individuals who move each other forward • It's about what you create in the networks around you, not just the network itself • How do we re-frame people around networks? Social communities are very important, including churches, schools, etc. — all of which can be leveraged • The future is wireless, everything in mass media will be wireless including TV • How we capitalize risk is changing as well” • The following four slides capture the essence of Andrew’s keynote session **Source: Andrew Hargadon is Associate Professor of Technology Management at the Graduate School of Management and Director of the Center for Entrepreneurship and of the Energy Efficiency Center at the University of California, Davis; “How Breakthroughs Happen”, Harvard Business School Press, 2003

How Breakthroughs Happen (1 of 4)Meeting Notes Chapter 4: Introduction **Source: Andrew Hargadon 2-4 May 2007 St Louis Fed Conf.

Applying Hardagon’s Ideas to SI Chapter 4: Introduction • After researching over 100 years of innovation history, Andrew Hardagon has made it very clear that: • “Innovation networks are critical to a regional economy’s success in building an innovation-driven economy” • He further states that: • “Innovation networks are essentially people networks. The bigger your innovation network, the greater your chance of success. Innovation is about connecting.” • Connect SI’s success will be determined by the degree of connection and collaboration of its people and resources • This is why the RA assesses SI’s Climate of Innovation, Incubation, & Entrepreneurship • This enables Connect SI to benchmark its current climate and set goals for improving this climate to ‘best practice’ by 2012

Southern Illinois — "Garden of the Gods" While many innovation assets exist across Southern Illinois, there is no comprehensive SI-wide strategy as yet to link these together, create centers of excellence or promote collaboration. Connecting these assets through a “starfish network” will provide the leverage SI needs to capture substantial global opportunities (Chapter 1). Chapter 4:Climate of Innovation, Incubation &Entrepreneurship 4.01 Innovation Assets: Assessment

SI Innovation, Entrepreneurship & Incubation: Introduction Southern Illinois performs weakly when measured against innovation and entrepreneurship ‘best-practices’ SIU is not a major generator of patents and spin-off companies COI perspective: Only Greater Egypt has significant innovation and entrepreneurship resources, though other regions are examining developing incubators Two of the Greater Egypt counties are recognized as “creative class” counties Unfortunately Southeastern could potentially lose the Dixon Springs Agricultural Centre that UI is trying to spin off The majority of regional entrepreneurship appears to be in traditional service industries such as retail and food services which generate a relatively low economic impact and wages State of Illinois does not track business startups 4.01: Innovation Assets: Assessment Without a Region-wide innovation network, more focused technology transfer, and a full-spectrum of financial support, SI’s Climate of Innovation has little chance of succeeding

Why We Look at This 4.01: Innovation Assets: Assessment • Key elements for rural economic transformation: • A climate of entrepreneurship • Systems and resources to support innovation • Small/medium enterprises are the job growth engine in the U.S. for the 21st century • 1990-2003 Firms < 20 employees created 79.5% of net new jobs • 1990-2003 midsize firms (20-499) created 13.25 % of net new jobs • Rural regions must develop a robust entrepreneurship support structure • Access to specialty forms of capital is essential • Otherwise these emerging enterprises will be more attracted to neighboring urban centers • Over the past 50 years, investment in R&D produced 50%+ of U.S. economic growth. Increased SI economic growth requires innovation Source: The Alliance for Science and Technology Research in America, 2007 The Role of Small and Large Businesses in Economic Development, Federal Reserve Bank of Kansas City, 2007

The New Economy is an Innovation Economy 4.01: Innovation Assets: Assessment • It is global, entrepreneurial and knowledge-based • It is equivalent in scope & depth to the emergence of the factory economy in the 1890’s and the mass-production, corporate economy in the 1940’s and 1950’s • It is knowledge dependent — knowledge workers have increased their share of total employment from 22% in 1979 to 34.8% in 2003…now the largest sector • It is global — since 1980, global trade has grown 2.5 times faster than the overall U.S. GDP; exports are now $12.5 trillion = 20% of world GDP • It is entrepreneurial — from 1917 to 1976 it took 30 years to replace 50% of the 100 largest public companies; from 1977-1998 it only took 12 years • From 1980-2001 all of the net U.S. job growth was from firms less than five years old; older firms actually lost jobs • It is rooted in information technology — IT is the key technology driving the economy through its use in all sectors to boost productivity, innovation and quality Source: Information Technology & Innovation Foundation & National Governor’s Association 2007 State New Economy Index

Old versus New Economy Realities 4.01: Innovation Assets: Assessment “The ‘old economy’ refers to the economy in place from after World War II until the mid-1970’s when productivity growth slowed down significantly. The descriptors are intended to reflect overall factors in each economic period.” Robert D. Atkinson, The Past and Future of America’s Economy, 2004 Source: Information Technology & Innovation Foundation & National Governor’s Association 2007 State New Economy Index

Innovation Grows From Seeds of Knowledge 4.01: Innovation Assets: Assessment • Transformation of knowledge into new products, processes or services • Involves more that just science and technology • Involves discerning and meeting the needs of customers • Improvement in marketing, distribution, and services can be as important as those generated in laboratories involving new products and processes • Some of the most important innovation occurs in sales and distribution • KBE workers include those specializing in professional, scientific and technical activities — engineering, computers, architecture, law, accounting, etc. • U.S. Government projects a 28% increase in KBE employment between 2004-2014, the 3rd highest growth sector (after Healthcare and Education) Source: Driving Growth, Breaking Down Barriers to Global Prosperity, McKinsey Global Institute

The KBE Worker Gap: SI is well below Illinois and U.S. averages for KBE as % of total employment 8.5% 7.7% Gap 4.3% Climate of Innovation, Entrepreneurship and Incubation 4.01: Innovation Assets: Assessment • Climate of Innovation: • “Zero-sum game mentality exists in the way of collaboration or even basic idea sharing — we are fragmented, jealous and secretive and motivated by risk aversion” • Climate of Entrepreneurship: • Entrepreneurship is not considered to be a “real job” • Entrepreneurs exist but mostly underground • Early stage capital is limited, access is not well known • Research focus at SIUC: high potential for more tech transfer • Entrepreneur development resources in SI are very limited • Support systems for entrepreneurs need bolstering • Climate of Incubation: • “There are too few and unconnected incubation resources and staff — with limited budgets and business experience; several incubated firms left SI to get access to a system of support” SIU is one of the top 100 research universities in the U.S — 67% of SIU business and engineering students want to stay in SI — SIU presents an opportunity to address SI’s KBE worker gap Source of Quotes: RA & EF Hutton Interviews; chart data from BLS

SI Innovation Assets: Activities with Promising Futures 4.01: Innovation Assets: Assessment • Illinois Entrepreneurship Network • Southern Illinois Entrepreneurship Center • Illinois Small Business Development Ctr • Illinois Manufacturing Extension Center • Southern Tech • Illinois Procurement Technical Asst Ctrs • Technology Enterprise Centers • International Trade Centers • Camp CEO Programs • Challenge Grant Program • SIU Transportation Education Center • SIU 20+ Research Centers • Dixon Springs Agriculture Research Ctr • Illinois Clean Coal Institute • National Corn-to-Ethanol Research Ctr • SIU Business Research Parks • SIUC Coal Research Center • SIU School of Medicine • SIUC’s Four R&D Pillars • Energy & Environment • Biotechnology • Materials Technology • Neuroscience • Small Business Development Centers • Rend Lake College • Shawnee College • Southeastern Illinois College • John A. Logan College • SIUC and SIUE • Illinois Eastern Colleges • SI Business Incubators • SIUC Business Incubator • West Frankfort Business Incubator • DRA Mounds Incubator • Entrepreneurs & Innovators across SI

Examples of SI Innovation & Entrepreneurship 4.01: Innovation Assets: Assessment • Dinger Bats • Taking on the big sports equipment companies with a uniquely branded product • Continental Tire • Defying American manufacturing trends to go offshore through highly innovative management practices • Precision Mine • Mine safety and construction knowledge to new residential and commercial building structures • Mt. Vernon Dry Ice • Converting CO2 to dry-ice for various industrial & commercial applications • Dippen Dots • An SI native son and graduate of Shawnee College, is transforming the way in which the world enjoys ice cream • Mermet Springs • 1st class diving facility has leveraged a SI natural asset, acquired enhancements (e.g., Boeing 727, from film U.S. Marshals for $1) to create a valuable unique training facility

SIU: An Innovation Diamond in the Rough! 4.01: Innovation Assets: Assessment • The Jackson County Opportunity Analysis Report stated: • Leveraging the institutional resources of SIUC — including innovation, knowledge, research, finances and business and social networks — and matching those resources with opportunities and individuals in SI must not be overlooked • The presence of a major research university should be treated as a unique and primary asset for fostering a culture of entrepreneurship in the area Source: An Opportunity Analysis for Jackson County, May 2006. (Note: Jackson County was replaced with Southern Illinois)

Current Climate of Innovation & Entrepreneurship in SI 4.01: Innovation Assets: Assessment What your neighbors had to say: Entrepreneurs, risk takers and lone-eagles are seen as counter-culture types and not pursuing a “real job” No clear and well understood path to business assistance resources Weak understanding of risk assessment other than traditional business Silo-vision and independence resulting in a lack of resources aligned for success We have no champion to lead entrepreneurship nor a vision of an innovation-based culture Innovation resources are too Carbondale-centric Our business resources are set up as “spider organizations” (based on centralized hierarchy and power) “A bitterly cold winter day in the wilderness of Southern Illinois, minimal supplies, limited protection from the elements and no compass to find the way to warmth, comfort and shelter” - SI Leader description of SI innovation climate Source: RA & EF Hutton Interviews conducted by ViTAL Economy

SIUC Business & Engineering Survey: Promise & Opportunity 4.01: Innovation Assets: Assessment Survey Objectives: • Assess the level of student awareness of the SIUC Incubator and Research Park • Measure student population’s level of entrepreneurial aspirations • Identify future needs of the students and how Connect SI & related programs can satisfy them Survey Results (from 200± respondents): • 67% of students would remain in Carbondale region to start and operate a business if resources were available • 43% of students have thought of starting their own business after graduation • 24% of students would remain in Carbondale/SI region when they graduate • 19% of students have heard of, visited, interned at, or knew someone who has knowledge of the SIUC Research Park • 16% of students have heard of, visited, interned at, or knew someone who has knowledge of the SIUC Business Incubator • 5% of students currently own a business (while also attending SIUC) • 4% of students have taken classes/courses on entrepreneurship Source: VE Business Incubator, Research Park & Tec-Transfer Assessment Project Final Report, 19 April 2007

Student Surveys: Quotes 4.01: Innovation Assets: Assessment It is a beautiful area, but not very appealing to start a business in Southern Illinois is a hidden gem — the improvement of business will help boost the standard of living • BS-Computer & Electrical Engineering student (note: most of these students are international): No work for my major but I would stay if there were more work opportunities in the area • Over 50% of the respondents support this student’s quote: I believe that if Southern Illinois had more to offer people (e.g., jobs), everyone who lives here would and could stay here Source: Student Survey responses; conducted by ViTAL Economy

SIUC: Mixed Picture of Its Knowledge Assets 4.01: Innovation Assets: Assessment

Region-by-Region Status 4.01: Innovation Assets: Assessment The great plus for the region is that two of the counties are identified as “Creative Class” communities by USDA, implying a higher level of research and innovation; the low level of KBE workers in every region, however, is a weakness that limits innovative entrepreneurial growth** Southern Five KBE workers (total jobs): 4% Rural Creative Class Counties: No Research Facilities: No Business Incubation Resources Yes Entrepreneurship Resources Yes Southeastern KBE workers: 5% Rural Creative Class Counties: No Research Facilities: Dixon Springs Business Incubation Resources No Entrepreneurship Resources No Greater Wabash KBE workers: 4% Rural Creative Class Counties: No Research Facilities: No Business Incubation Resources No Entrepreneurship Resources Yes Greater Egypt KBE workers: 5% Rural Creative Class Counties: Yes Research Facilities: SIU & related facilities Business Incubation Resources Yes Entrepreneurship Resources Yes **See Chapter 1.03 Slides 32-35 for Creative Class definition

= Improving = Average = Good = Strong = Weak to None SI Innovation & Entrepreneurship: Assessment 4.01: Innovation Assets: Assessment

Key Factors Supporting KBE Growth in Rural America 4.01: Innovation Assets: Assessment Source: Center for the Study of Rural America, Federal Reserve Bank of Kansas City 2004; RA and EF Hutton interviews

Currently SI behaves more like a “spider” than a “starfish” Shifting “Climates” from Limited to Unlimited Opportunity 4.01: Innovation Assets: Assessment Source: Starfish and the Spider, Brafman & Beckstrom 2006

Reasons for Optimism 4.01: Innovation Assets: Assessment • SIU commitment to reinvigorating its approach to technology transfer, research parks and business incubation • Network of incubation assets is strong, though not well connected. • Growing understanding of business incubation in the region with a plan for development underway • Broader understanding of entrepreneurship and its role in a new SI economy and need for improved entrepreneur culture at SIU • Greater understanding of need for SIU and SI goal alignment • Many facilities and capabilities supportive of KBE growth in rural America are already present throughout SI, however they need to be leveraged • The values of technology transfer is recognized and on the increase • SIU executive commitment to resource collaboration BUT... much more needs to be done

Southern Illinois — "Garden of the Gods" Significant gaps have been identified in the availability of start-up and early stage finance. There is also a pervasive risk-averse culture in SI. Chapter 4:Climate of Innovation, Incubation &Entrepreneurship 4.02 Integrated Finance & Risk: Assessment

NGA & RUPRI Identify Barriers to Economic Growth in Rural America 4.02: Integrated Finance & Risk: Assessment • Lack access to specialty finance services and early stage venture capital networks • Too few networks to encourage entrepreneurs and allow businesses to share ideas • Very few intermediary resource networks that support new businesses • Limited financial literacy of prospective users and providers of capital • Lack of generation transfer and liquidity opportunities • Little capacity to evaluate intellectual property versus traditional asset-based risks • Minimal environments which encourage entrepreneurship and risk taking • Limited market research capabilities that allow businesses to expand to new markets and that allow entrepreneurs to turn ideas into viable new products Source: NGA (National Governor’s Assoc) Center for Best Practices; RUPRI (Rural Policy Research Institute; and VE Research

SI Finance Leaders Describe Climate of Finance 4.02: Integrated Finance & Risk: Assessment • Limited number of business lending opportunities • Limited experience with loan participations • Limited success or experience with gap financing programs • Lack of independent and experienced small business market valuations • Big gaps in access to equity for early stage and venture capital, as well as mezzanine financing, etc • State programs geared to support large firms versus entrepreneurs • Too many small local revolving loan funds. Collaboration of these funds would create larger critical mass and more opportunity • Limited expertise in assessing risk of knowledge based investments • No organized network of angel investors focused on SI opportunities • Financial literacy of prospective borrowers is not good • Poor climate of support for innovation, risk taking and entrepreneurship Source: RA & EF Hutton Interviews conducted by ViTAL Economy

SI Economic Growth Is Inhibited by Funding and Risk Assessment Gaps Potential Funding Sources $500,000 $10M $100M 0 $50M 4.02: Integrated Finance & Risk: Assessment Current State in SI • Start-up, early stage and non-asset-based financing virtually nonexistent • Few technologies by local entrepreneurs get commercialized • Entrepreneurs tend to leave the region or Illinois • KBEs and entrepreneurs are not attracted from outside Illinois • Communities do not develop technology focused industries Finance Gaps Mature Growth • Public Equity • CommercialPaper • Medium TermNotes • Public Debt • Venture Capital • Short-term loans • Intermediate-termLoans • Private Placement • Mezzanine Financing • Trade Credit • Public Equity • Commercial Paper • Medium-Term Loans Early Stage • Insider Financing • Angels • Venture Capital • Short-term loans • Intermediate-termLoans • Private Placement Start-up • Insider Financing • Angels • Micro-loans/Grants • Venture Capital Company Growth — 33 —

Financial Asset Survey Indicates about $13 Billion of Invested Household Assets in SI 4.02: Integrated Finance & Risk: Assessment $6 billion+/- of FDIC savings deposits represent about 47% of total financial holdings owned by SI households Source: FDIC 6/30/07 Survey of Deposits of all FDIC Insured Institutions & U.S. Census Bureau Statistical Abstract 2007, Table 703

SI Has Not Accessed Its Proportional Share of IFA Finance Programs 4.02: Integrated Finance & Risk: Assessment • Illinois Finance Authority (IFA) issues taxable and tax exempt bonds, makes loans and invests capital or businesses, non-profit corporations and local government units state-wide • Mission: to foster economic development to public and private institutions that create and retain jobs and improve the quality of life in Illinois by providing access to capital • Created 1/1/2004 — absorbed several Illinois authorities: Development Finance, Farm Development, Health Facilities, Educational Facilities, Community Development Finance, Rural Bond Bank, Research Park • SI accessed only about 1.9% ($91 million) of the $4.6 billion issued state-wide — vs. 3.5% of the population • Note: IFA’s website shows financed $10.6 billion in project financing since 2004, however, ‘In The Region’ detail only lists $4.6 billion in projects which is the source of SI financing data • Of the $91 million received by SI during this period, SIH alone accounts for 76% ($69 million) Opportunity: SI can take greater advantage of this important funding vehicle Source: IFA In Your Region 2007 Financial Summary Report; il-fa.com

SI Infrastructure: Capital Estimates 4.02: Integrated Finance & Risk: Assessment • State of Illinois structural deficit has significantly impacted availability of local funding for all forms of public services • IDOT has $400 million in short-term highway projects and another $1 billion in medium and long term projects waiting to be funded • Estimates for drinking water upgrade projects in SI are $130 million+/- • Upgrades for SI wastewater systems are in range of $260 million+/- • Small versus larger municipalities express concerns about insufficient tax base to finance both annual maintenance & road upgrades • Approximately $150 million in tourism hospitality infrastructure investments will be needed for SI to achieve its revenue potential of $300-400 million/year • Raising 10,000 citizens out of poverty will require a significant investment in affordable housing in the range of $200-$300 million Source: IDOT DRA Transportation Study December 2006, Regional CEDS Reports, USDA Regional Surveys, RA Interviews

Climate of Risk and Entrepreneurship in SI 4.02: Integrated Finance & Risk: Assessment Lack of trust: There is a belief that announcing projects or entrepreneurial business opportunities in public will be stolen Uncomfortable with the prospect of change: There is fear of new investment and change in the area No linkage between entrepreneurship and youth: The lack of entrepreneur culture emanates from both citizens that do not know how to do it, and from schools that don’t foster it — there is no creativity breed, only minimal after-school activities, and a weak commitment of teachers Negative impacts of competition: Other regions have been hostile when SI firms try to extend business across the rivers – yet their firms will not think twice about extending their business into SI View from Financial Services Executives in SI (& elsewhere): We are risk-averse and opportunity handicapped Source: RA & EF Hutton Interviews conducted by ViTAL Economy

67% 64% 54% 46% 36% 33% Only 46% of SI Personal Income is Generated by Private Sector Employment 4.02: Integrated Finance & Risk: Assessment • Conclusions: • SI cannot afford the community and economy it wants • A 30% increase in private vs. public sector earnings is required to equal U.S. • Low % of at-risk sources of personal income, creates a risk-averse environment Increasing private sector % of personal income generation is critical to building a climate of innovation

High Government Transfers = Low Risk Tolerance 4.02: Integrated Finance & Risk: Assessment • Implications: • Disproportionate % of non-wage, non-wealth income • Less risk-taking & innovation climate — discourages entrepreneurs • Reduced economic multiplier effect on GRP (Gross Regional Product) Source: Bureau of Economic Analysis

SI Integrated Finance: Assessment 4.02: Integrated Finance & Risk: Assessment

Southern Illinois — "Garden of the Gods" Chapter 4:Climate of Innovation, Incubation &Entrepreneurship 4.03 Implications & Recommendations

SI Innovation, Entrepreneurship & Incubation: VE Overall Assessment 4.03 Implications & Recommendations GOOD WEAK STRONG AVERAGE IMPROVING

Entrepreneurship culture and networks Entrepreneurship is not seen as a “real job” — this suppresses a spirit of innovation Financial literacy Limited risk assessment capacity for KBE soft asset business startups — this limits access to capital Entrepreneurs understanding of equity & debt is low — this results in poor deal flow quality Partnerships and community outreach are centered in Carbondale A regional climate of innovation can not be achieved when the vast majority of resources are centralized — SI needs a region-wide virtual network of innovation resources Underperformance of technology transfer, licensing and commercialization SI cannot grow regional KBE innovation firms without regional access to SIU tech-transfer assets Disconnected entrepreneurship development and tracking systems SI’s business support services are not linked — result is KBE firms leave SI or innovations die on the vine Lack of business startup-tracking demonstrates lack of policy commitment to entrepreneurship SI cannot manage what it cannot track or measure Limited and unconnected incubation space and facility support services Incubation resources cannot supply diverse expertise needs of young emerging KBEs Incubator firms are not linked to potential value-chain partners in other parts of SI Innovation knowledge is silo-based, not shared and, therefore, not leveraged SI Innovation, Entrepreneurship & Incubation: Implications 4.03 Implications & Recommendations

SI Innovation, Entrepreneurship & Incubation: Recommendations 4.03 Implications & Recommendations • Commit to an SI innovation led CED strategy • Develop an SIU led technology transfer growth strategy • Build an SI Innovation Eco-System™ • Map and leverage all SI innovation assets • Organize an SIFinance Industry Cluster • Complete an SIIntegrated Finance Assessment • Implement an SIControlled Integrated Finance Framework These recommendations create the single most critical resource for establishing a successful innovation economy in SI — Ref: Andrew Hargadon in “How Breakthroughs Happen” —

Centralia EC Ethanol Research Center SI Entrepreneurs Served by Shared Regional Network Of Incubator Centers of Excellence Life Cycle Equity and Debt Finance Resources Global Best Practice Technical Support Teams Broadband-Enabled W. Frankfort Business Incubator SIUE-EC Edwardsville GW Incubator International Incubator SE SBDC Coal Research Center GE Incubator Tech Transfer Dixon Springs Ag-Tech Incubator Medical Technology Incubator SIU Medical School SWI Retail Incubator Entrepreneur Center IMEC S5 SBDC Economic Growth Can Be Greatly Stimulated by Implementing an Innovation Eco-System™ 4.03 Implications & Recommendations SI Incubator, Finance & Innovation Starfish Network — the KBE-Engine of Connect SI —

Self-Sustaining Regional Solution for SI Economy 4.03 Implications & Recommendations Regional Integrated Finance Framework Capital, Innovation & Literacy 501(c)3 Intermediary Equity & Specialty Finance Access, Expertise & Literacy Global Best Practice Collaborative Technical Support Services Creating Climates of Risk Taking and Innovation Source: ViTAL Economy Capital Structure

January 2, 2008; revised February 15