AUGUSTA – SeptiTech in Lewiston spent $20,000 of state investment to open a testing facility at a local mobile home park.

Pantheon Guitars of Lewiston used state capital to successfully target a niche market and produce acoustic guitars used by Ricky Skaggs and Keith Urban.

Auburn Manufacturing of Mechanic Falls used its first state matching grant to obtain a safety certification before any other company, giving it an edge in the worldwide market.

All three serve as examples of Maine’s research and development investments paying off, but according to a new report, there’s still room for improvement.

Maine’s Office of Innovation, part of the Department of Economic and Community Development, presented lawmakers with an annual report Thursday that evaluated the overall impact of the state’s economic development investments.

Maine’s commitment to research and development has grown, but the impact is still limited, the report said.

Overall, state investments added $2 billion to the Maine economy in 2008, but private investment in research and development remained low, according to the report.

The report recommends increasing industry connections to university and nonprofit research, building local networks to strengthen the state’s culture of entrepreneurship and increasing money available for investment.

Money ‘well-spent’

Auburn Manufacturing President Kathie Leonard said her firm has used two $10,000 state matching grants in the past and is finishing up its application for a third.

Leonard, who, in the interest of disclosure, is a member of the board of directors for the Sun Journal, said her company has grown from two employees in 1979 to about 50 employees with annual revenue of about $20 million.

Though $10,000 per grant may not seem like much for a company with multimillion-dollar revenues, Leonard said the grants are important.

“We’re a perfect example of why it’s worked,” she said. “Each grant helps us identify a project and adds a level of accountability. You have to report on what you’ve done.”

SeptiTech, a developer and manufacturer of wastewater treatment units, and Pantheon Guitars, are examples of a different kind of state investment. Each received funding from the Small Enterprise Growth Fund, which was created by the Legislature in 1995 and has a $9 million revolving investment fund.

For SeptiTech, the investment made in 2000 is still paying dividends.

“It allowed us to do process evaluations for the treatment that we do,” said Dan Ostrye, the company’s director of research and development. “It got us going, and my research is showing some promise for some new developments, so that it might be worthwhile in the next year to go back for some additional development funds.”

Ostrye said the company, which opened in 1997 with four employees and about $200,000 in annual revenue, now operates with 13 employees and has annual revenue of more than $2.5 million.

Roger Brooks, a company director at Pantheon Guitars and a consultant appointed by the Small Enterprise Growth Fund, said the initial capital helped launch the company.

“The goal was to give a small Maine company a little more financial muscle to build itself into a self-sustaining entity,” he said. “They now employ 10 or 11 people in a mill in Lewiston. The business is self-sustaining and is doing reasonably well.”

Brooks said Pantheon produces about 400 guitars a year, priced from $3,400 to $10,000 apiece.

AMI’s Leonard said when investing in Maine people, the state can’t go wrong.

“The Maine work ethic is alive and well,” she said. “We’re taking traditional industries and doing very smart things with them. Mainers are good at that, so this kind of money is well-spent.”