Among the seven ballot propositions in the bond package the Pima County Board of Supervisors approved on April 21, 2015 was the Oro Valley Business Accelerator. At the time the supervisors were asked to approve the proposal, there were few details as to who would actually benefit and who would manage the project.
The bond proposal provides $15 million in bonding to be used for “land acquisition and development of two buildings at Innovation Park that will serve as a new incubator/accelerator for life science companies.”
According to Pima County promotional materials:
The “Oro Valley Business Accelerator will be a new, state of the art 50,000 square foot incubator/accelerator for life sciences in Oro Valley built on land in Innovation Park, adjacent to Ventana Medical Systems and Sanofi, to be acquired by Pima County. It is envisioned as a place where scientists from industry and academia who share research interests will be able to conduct translational research. The Accelerator will help advance research, accelerate the product development cycle, and will support and help create new businesses.”
Prior to the supervisor’s approval, Pima County Bond Advisory Committee member Joe Boogart asked County Administrator Chuck Huckelberry who would manage the project once it was completed. Boogart had concerns about the project based on his research into accelerator/incubator projects across the country. Huckelberry advised Boogart that County would have to hire a management firm. Boogart reminded Huckelberry that management firms will not absorb the financial loses that similar projects had experienced. Huckelberry ignored Boogart’s concerns and the project was approved by the Committee.
In March the Town of Oro Valley published an article on its website that touted the project:
“Town Council and staff remain committed to growing Innovation Park and supporting the Oro Valley Business Accelerator-Collaboratorium that is proposed in the 2015 Pima County Bond Election. It will be a new, state-of-the art incubator/accelerator for life sciences in Oro Valley. It is envisioned as a place where scientists from industry and academia who share research interests will be able to conduct translational research. The Accelerator will help advance research, accelerate the product development cycle and support and help create new businesses. The project already has support from key organizations such as Arizona State University, AZCERT, BIOSA, Desert Angels, Greater Oro Valley Chamber of Commerce, Sanofi, Ventana Medical Systems, University of Arizona, and of course, the Town of Oro Valley.”
Nothing was mentioned as to what entity would manage the accelerator.
The April 21, 2015, Resolution Ordering and Calling a Special Bond Election to be Held in and for Pima County, Arizona on November 3, 2015, only notes:
The BAC supported projects involving public/private partnerships, such as the YMCA, Tucson Children’s Museum, Oro Valley Business Accelerator, and even the acquisition of ranch lands, whereby County bond funds (taxpayer dollars) fund the construction, but operations and maintenance remain the responsibility of the operating entity and are not borne by taxpayers. All of these partnerships provide services the County could provide itself; but for which it is more cost effective to delegate to these nonprofit organizations, or in the case of the ranches, private ranch managers.”
The Resolution did not name the management firm (nonprofit) that would serve as the operating entity responsible for the operations and maintenance of the Oro Valley accelerator.
On May 28, 2015, a new non-profit, BIOSA Innovation, Inc. was formed. BIOSA innovation will be the nonprofit entity to receive the $15 million from the bond, provided for by Prop. 426.
The statutory agent for BIOSA Innovation is Alexander M. Hecker, son of Pima County Bond Advisory Committee Chair Larry Hecker. The elder Hecker also serves as the Co-Chair of the “Yes on Pima Bonds” campaign.
The directors of BIOSA Innovation are:
- Base Horner – Desert Angel , Arch Partners LLC (venture capitalist)
- Eric Walk – Member of SALC, Senior VP of Ventana Medical
- Raymond Woosley – Sun Corridor (TREO) Board member, President and Chairman of the Board, AZCERT, Inc
- Garry Brav – Sun Corridor (TREO) Board member & SALC Member & Pres/CFO of BFL Construction
- David Smallhouse – Sun Corridor (TREO) Board member –Exec. Board member Desert Angels, Managing Partner in Miramar Ventures, LLC, a firm involved in real estate, private equity, and venture capital investments
Arizona’s Gift of Public Fund law prevents the use of taxpayer money for use by private entities. As a result, a work around has been developed by crafty businesses and politicians in which the public funds are used as venture capital to spur “economic development.” In the case of the Oro Valley accelerator, the residents of the fifth poorest metropolitan area in the country, should they approve Prop. 426, will be responsible for the risk by becoming the venture capitalists for wealthy bioscience giants.
And it is a big risk, according to an October 2012 article for Techcrunch.com, entitled 90% Of Incubators And Accelerators Will Fail And That’s Just Fine For America And The World. Author Peter Relan, a former programmer and Internet executive wrote:
I would like to present the claim that 90 percent of incubators will fail. By “failing,” I mean they don’t return (or don’t exceed) the money that was put into them. On what basis do I make my claim? Well, the hundreds of incubators are really startups, and the oft-cited rule of thumb is that 9 out of 10 startups fail.
Is there any reason why incubators would be different from other startup spaces? Just as we’ve seen with daily deals, mobile apps and games, it’s clear only a few (maybe four or five) will become leaders in the category. The rest will absorb more capital than they can return, shut down, or pivot into something else.”
An August 12, 2015 article in the Toronto Star, entitled Ontario government bails out MaRS building for $309m reads in part:
The “$400-million brick-and-glass centre was designed to bring science’s past and future together under one roof…. When it opened its doors in 2005, MaRS was an acronym — Medical and Related Sciences — that summarized the organization’s focus. MaRS’s scope has since widened to four industries: social innovation; life sciences and health care; information technology, communications and entertainment (ICE); and physical science, engineering and “cleantech.”
MaRS, a registered charity designed to foster research and innovation and research, was in danger of missing payments on the $224-million loan issued by the provincial government in 2011.
That loan was supposed to enable MaRS to finance construction of the new building and be paid back using rental income from tenants.
Tuesday’s move comes despite a projected budget deficit for 2014-15 of $12.5 billion.
By August 2015, “despite being touted as an innovation hub to incubate new high-tech businesses, the second phase of MaRS, is only 31 per cent occupied,” and as a result, in order to fill “the remaining two thirds of the building, the province may move in bureaucrats.”
On the bright side, in Pima County, the government is the only thing that has grown over the years. By the time this incubator fails, we might just have enough bureaucrats to fill it.