3.1. EDSR 08-12-2002 MEETING OF THE ELK RIVER
• BUSINESS INCUBATOR ADVISORY COMMITTEE
HELD AT THE ELK RIVER BUSINESS INCUBATOR
TUESDAY,JULY 16, 2002
Members Present: Mayor Stephanie Klinzing,Louise Kuester,Jim Barthel,Jack Mowry
&Larry Hickman
Members Absent: Jeff Gongoll
Others Present: Dick Gongoll,John Weicht& Gary Santwire
Staff Present: Director of Economic Development Catherine Mehelich&
Economic Development Assistant Heidi Hall
1. Introductions
Each attendee introduced him/herself.
2. Evaluation of the program since its inception in 1997
Jim Barthel expressed concern that the Incubator Advisory Committee's role has
• become a"rubber stamp" process. Mr. Barthel stated that most of the backround
research of potential Incubator tenants is completed by Harlan Jacobs (Genesis
Business Centers) and staff.
There was discussion that the Committee originally believed that if 1 out of every 10
Incubator tenants expanded within the community, the program would be deemed a
success. Catherine Mehelich noted that Cymbet represents the original goal of the
program.
Most Members agreed that the success of the Incubator Program is hard to measure
but that the Program itself promotes the City as being pro-business.
3. Program Components
3.1 Technical Assistance
Dick Gongoll and Jim Barthel agreed that Harlan Jacobs brings much value
to the Incubator Program. Catherine Mehelich explained that Harlan
Jacobs's role as a consultant for the Incubator Program is to complete the
initial screening of potential Incubator tenants and to provide ongoing
technical assistance to tenants. Mehelich noted that Harlan's role has
resulted in much press for Elk River,which created a pro-business image for
the city.
•
Business Incubator Advisory Committee Minutes Page 2
July 16,2002
• 3.2 Financial
Catherine Mehelich explained that funding for the continuance of the
program, as currently structured,is limited by the availability of funds from
the Tescom loan and tenant rent. Mehelich reported that several sources
exist for tenants to access additional financial assistance through the City's
partnerships with the Anoka Sherburne County Capital Fund, the Elk River
Investment Club and the Initiative Foundation.
3.3 Structural—Space and water/sewer needs
There was much discussion regarding the Incubator Program's structural
needs. Catherine Mehelich expressed thanks to Larry Hickman for leasing
the current space to the EDA and explained that although the space has
sufficed thus far, the lack of city water and sewer limits the pool of potential
tenants. Mehelich also noted that tenant issues had also taken much staff
time. The Committee agreed that the Incubator space should accommodate
both office and light manufacturing tenants.
4. Recommendation to EDA regarding the Incubator Program
The Committee recommended that staff explore five options to present back to the
Committee for review and recommendation to the EDA for ways to continue the
program.
Five Options
• The EDA to lease space for the Incubator in the Ripplinger building
(located off of Joplin St.)
• Include the Incubator as part of Cymbet's expansion
• The EDA to construct a building to operate the Incubator Program
• Connect Incubator applicants to appropriate space in the community as
available
• The EDA to partner with a private entity to run the Incubator program
It was the consensus of the Committee to recommend that Harlan Jacobs receive
an increase from$500.00 per month to $1,000.00 per month effective January 1,
2003 for consulting services provided for the Incubator Program. Since Harlan was
unable to attend this meeting he provided staff with comments regarding the issues on the agenda (see
attached comments).
5. The meeting of the Incubator Advisory Committee adjourned at 5 p.m.
• Heidi Hall
Economic Development Assistant
J
Hall, Heidi
om: TedGenesis@aol.com
nt: Tuesday, July 16, 2002 7:36 AM
To: HHall@ci.elk-river.mn.us; cmehelich@ci.elk-river.mn.us
Subject: Incubator status report and recommendations
To: Elk River EDA
From: Harlan Jacobs
Genesis Business Centers, Ltd.
Date: 15 July 2002
Re: Update and Recommendations
For the Elk River Incubator Program
Preface: My apologies for being unable to attend this meeting in
person. A
client commitment that was previously made before the date for this
meeting
was set could not be changed. Therefore, this report is being made
electronically in advance of the meeting on Tuesday 16 July.
Overview: The CYMBET success story has helped underscore the success of
the
Elk River Incubator Program. Of the seven companies that have gone
through
the incubator program since inception , the scorecard may be summarized
as
follows:
•aduates now located in market rate space in Elk River:
CYMBET
Graduates now located in Elk River:
Solar Attic
Companies remaining in the incubator for extended period:
Vertical Publishing
New Companies in the incubator:
Bixby Energy
KnowledGenetica
Companies in liquidation:
P:rotectorCare
Companies out of business/operations terminated:
MAS Technologies
Of the seven companies, one is a major success by any objective standard
•YMBET)
One company is struggling, has a good product, needs more marketing and
some
working capital and may yet become successful (Solar Attic) ,
1
I
One company has new management, new customers and is poised to realize
its
full potential albeit after a one year plus hibernation (Vertical
Publishing) .
o new companies have entered the program (Bixby and KnowledGenetica) .
ach
have excellent prospects and good management teams .
One company is in liquidation; it may also be sold on a royalty stream
basis
(ProtectorCare) .
MAS Technologies is dead and buried.
In summary, one major success out of seven incubator companies is a
great
statistic and would be highly regarded among incubator professionals.
The
fact that only two of the seven are dead or dying is also impressive.
Further, the fact that economic development staff from Duluth recently
visited the incubator to gain insights into the successful Elk River
incubator program speak volumes about the results that have been
achieved.
Beyond the obvious job creation (high wages as well) and enhancement of
the
tax base (through the additional property tax payments made as part of
the
rent paid by CYMBET) , CYMBET's stock (of which the EDA now holds a
modest
position) may well become quite valuable in three to five years based
upon
conversations held recently with one of the foreign venture capital
investors
o serves on the board of directors of the company.
111,
Other equity positions held by the EDA from the rent barter program may
also
become valuable over the years ahead. In the aggregate, these holdings
may
yet provide a significant asset to the EDA as its mission evolves over
the
years ahead. This asset may ultimately provide a modest endowment for
the
EDA-a source of annual income once converted to cash and invested in
high
grade debt securities. This income would offset or eliminate any need to
seek
taxpayer or other sources of funding to some extent for either the
incubator
program or other programs in the future.
Looking Forward
The success of CYMBET should lead to the establishment of a cluster in
the
community. Other materials sciences companies may well be attracted to
the
community as success begets success. These companies will have equipment
and
apparatuses that require cooling that in turn will require the discharge
of
substantial quantities of water (albeit clean water) . CYMBET and at an
earlier date Northstar Photonics were unable to use the incubator
facility
much or at all respectively because of the water throughput restrictions
of
2
the septic tank system in the current incubator facility.
CYMBET's battery technology may provide Elk River with an unanticipated
ilin hancement of the Energy Alley theme. This battery technology may yet
dd
hundreds of high paid jobs in the community. Further, companies that
incorporate the battery technology into their products may find Elk
River an
ideal location for these operations.
Recommendation: The Elk River Incubator Program should be moved to a
facility that is hooked to city water and sewer in order to accommodate
these
types of companies (unless the city water and sewer are likely to be
connected before the end of calendar year 2003 at the latest) .
Requests for Consideration:
Genesis has been pleased to have helped the Elk River EDA over the last
4 to
5 years in respect of helping to establish and then helping to manage
the
incubator program. It has been a rewarding experience.
The monthly fee for our services has been $500 for the last 3 plus
years. We
respectfully request that the fee be set at $1, 000 . Of course, this is a
large increase per se. It represents a 'step function' increase because
of I
the three or more prior years that were flat. For comparison purposes,
,en
were helping the VIDC in Mankato, our fee was $2,000 per month. For
the
last few years our fee for the WBIC in Spooner, Wisconsin has been
$1,000 per
month. We are shortly going to enter a contract with SREDA in Saskatoon,
Saskachewan for about $2, 000 per month.
A secondary option would be for the EDA to offer a larger portion of the
shares from the rent barter transactions to Genesis in lieu of an
increase
in the cash payment.
ill
3
•
For Immediate Release: Tuesday, July 2, 2002
Contact: Arnold Angeloni, Chairman of the Board
Vertical Publishing, Inc.
VERTICAL PUBLISHING, INC. ANNOUNCES NEW CHIEF EXECUTIVE OFFICER
Elk River, Minnesota—Vertical Publishing, Inc., a Elk River based online content service
provider for publishers, today announced the appointment of Benjamin Moyer as
President and Chief Executive Officer.
Mr. Moyer joins Vertical Publishing after more than 10 years providing software and
technology solutions for a number of Minnesota based companies. His most recent
position was co-founder and chief operating officer for Synergy Services, Inc., a local
help-desk service provider.
"I am very pleased to have Ben join Vertical Publishing. His years of technology and
operations experience will bring additional strength to Vertical Publishing's management
team,"commented Arnold Angeloni, Vertical Publishing's Chairman of the Board.
Vertical Publishing, Inc. is a provider of Web based content management services for
publishers. Vertical Publishing is one of the first companies in the U.S. to provide a
service that allows publishers to outsource their Internet content management activity
instead of creating an internal capability thereby eliminating the need to purchase costly
software and to add IT people to their staff Vertical Publishing is currently serving
customers in Minnesota and California, and is beginning a national rollout of their new
service.
•