SmartZones near 20,000 in job creation, MEDC says

By Mike Brennan

In 2002, Michigan created 11 SmartZones, which provide geographical locations where technology-based companies, entrepreneurs and researchers locate in close proximity to all of the community assets that assist them build businesses, and ultimately high paying jobs. The number has since grown to 15 statewide.

SmartZone technology clusters promote resource collaborations among universities, industry, research organizations, government and other community institutions. Of these 15, 11 SmartZones have business incubators to nurture and grow start-up companies. According to data provided by the Michigan Economic Development Corp., since the inception of the SmartZone program in 2002, more than 1,128 businesses have located or expanded in the zones, resulting in more than 18,500 jobs and $1 billion in private investment.

But how much did this entrepreneurial economic gardening cost Michigan taxpayers?

About $90 million since 2001, said Roselyn Zator, the MEDC’s SmartZone manager.

The tax investment, however, leveraged $1 billion in private investment, giving Michigan taxpayers more than an eleven-fold return on investment, said Zator, who has been involved in the SmartZone program since its inception.

Some of those tax dollars came from direct subsidies provided by the MEDC, such as the 21st Century Jobs Fund, which was created by the Legislature in 2005. It tapped into $1 billion of the state’s future tobacco settlement dollars, securitized the money and used the profits to provide commercialization, loan enhancement and investment opportunities.

However, most of the money was captured by the various SmartZones through Tax Increment Financing, or TIF, a public financing method that has been used as a subsidy for redevelopment and community improvement projects in many countries including the United States for more than 50 years.

Tax Increment Financing works like this: The SmartZone establishes a base line for local property taxes. As the value of the property increases, the amount of the increase is subject to capture by the SmartZone to be used for infrastructure improvements, or pay for other services, Zator said.

“You’re depending on the SmartZone property value to increase,” she said. “Grand Rapids, Ann Arbor and Kalamazoo you see property value increases. You might not see that in Detroit.”

Does she consider the SmartZone program a success?

“Definitely,” she replied. “Thirty years ago they funded these incubators and walked away. It doesn’t work like that today. If you’re going to nurture these companies, it takes money and the folks who can provide support services. Continuous nurturing is how you build entrepreneurial cultures and that’s how we’ve done it in Michigan for the past decade.”

For more on SmartZones, click here. Below, see how a few of the SmartZones around Michigan are making an impact. 

Kalamazoo leverages location

KALAMAZOO – The Southwest Michigan Innovation Center is a 69,000-square-foot business incubator/accelerator that provides a comprehensive range of support and assistance for innovative, entrepreneurial, life-science businesses. The Innovation Center opened its doors in 2003. Amenities include state-of-the-art wet lab space, executive office space, and a subsidized, progressive rental structure. Business services include assistance with business and marketing plan development, common scientific and business equipment, and proximity to Western Michigan University resources.

The Innovation Center is located in the Western Michigan University Business Technology Research Park in Kalamazoo, a state-designated Smart Zone. Within the BTR Park, there are 16 life science companies, 12 advanced engineering firms and two information technology companies. Of these businesses, eight have constructed facilities of their own. More than 85 percent of the 137-acre BTR site has been developed, is under construction or is under option.

Ron Kitchens, CEO of Southwest Michigan First, which operates the Kalamazoo Smart Zone, described SMIC as a collaborative model:

“We have a 125-year legacy in life science and health science in Kalamazoo. Life science will be significant for the next two generations,” he said. “We continue to be globally relevant in that area. Genome based medicine is making changes. We want to be on the forefront of that. Medical devices closer to pharma in therapeutics. Life science is our bread and butter and we’ll continue to grow it.” 

SPARK is all about jobs

ANN ARBOR – Ann Arbor SPARK is an economic development organization that operates three incubators. SPARK Central Business Incubator located in Ann Arbor and SPARK East Business Incubator located in Ypsilanti, offer professional, staffed business space that includes private cubicles, meeting and conference space and all of the business amenities you would expect in grade A leased space. The Michigan Life Science Innovation Center boasts state-of-the-art life science and biotech research space in a collaborative entrepreneurial environment with established tenant interaction and support.

Ann Arbor SPARK has 19 tenants in three incubators with firms focused on everything from life sciences to alternative energy to information technology. Ann Arbor SPARK, in a 2010 report, said it served 42 mature companies that had specific projects that represented the potential of $150 million in new investment and 1,425 jobs; and assisted 62 start-ups with hands on consulting services.

Ann Arbor SPARK also manages the state of Michigan’s Pre-Seed Fund, which invests up to $250,000 in a start-up working with a Michigan SmartZone. The fund is a matching fund. Its contributions will always be less than or equal to those of outside investors. In 2010, the Pre-Seed Fund made 12 investments totally $3 million, and made 29 loans for $1.1 million.

Ann Arbor SPARK Senior Vice President Skip Simms said creating a successful business is the goal of everything SPARK does: “If you’re growing, you have to hire more people. We make sure businesses are healthy and growing and jobs come with it.” 

In Midland, a bid for virtual success

MIDLAND – The MidMichigan Innovation Center was created in 2004 by the late Ted Doan. His idea was further developed and supported by the staff and board of directors of MITECH+, a nonprofit organization that supports work-force development in the mid-Michigan region.

Incubation clients range from advanced materials to alternative energy to biotech.

Chris Moultrip, MMIC program director, said MMIC plans to grow on the Internet in a virtual way to serve the more remote and rural parts of mid- and northern Michigan: “The building is great. We love the facilities. You can only grow so much when you limit it to building space. We see much more value when we leverage the resources across the network and service everyone with more quality. We’re working with companies in Traverse City, Cadillac, Marlette, Clair County and Isabella County with people in the field and online.”

MMIC is working on developing a crowd funding model to generate alternative sources of capital for start ups. And, in some cases, start-ups get funding from a key MMIC partner, the Blue Water Angels, a network of more than 30 high-net-worth individuals and select organizations interested in investing capital in promising companies. The amount of investment capital available for annual investments now tops $1.4 million. 

Grand Rapids builds on life sciences

GRAND RAPIDS – The West Michigan Science & Technology Initiative is designated as the Grand Rapids area SmartZone. The Initiative’s Venture Center is a high-tech incubator for life science, medical device and high-growth start-ups or small businesses. With two locations in Grand Rapids, the Michigan Street Incubator and the Monroe Avenue Incubator, the Initiative provides more than 26,000 square feet.

To locate in the Venture Center, the business must be classified as high-tech, with high growth potential and the intention to remain in Kent County. Over the past 15 years, more than $1 billion has been invested in science, technology and health care in the SmartZone.

The incubator offers mini wet labs for as little as $220 a month, making it easier for a laboratory scientist to create a quick start-up from his or her discovery. Grand Valley State University donated more than 100 pieces of life sciences equipment worth more than $1 million for tenants to use. That saves the typical life sciences, pharma or drug development startup from $100,000 to $300,000 in initial costs.

Rich Cook, Venture Center manager, reports the incubator has served 450 businesses in the past five years. Some 350 have come in the door looking for coaching, contacts, commercialization help or capital.

“We want our companies to create jobs in Michigan. We don’t care where they come from,” Cook said. 

Macomb zone invests in defense

AUBURN HILLS – The Macomb-Oakland University INCubator provides entrepreneurial resources, business solutions, and access to student interns and proactive support to businesses at every stage, in an effort to help start-ups on their path to success.

Since re-opening before Oct. 1, 2010, the new Macomb-OU INC facility has secured more than 70 partners/clients.

“Macomb-OU INC is a technology-based, mixed-use incubator differentiating itself from other incubators/accelerators in the region through a focus on business entities with demonstrated competencies in Macomb County’s targeted industries of defense, homeland security, alternative energy, and advanced manufacturing,” explained Julianne Leigh.

“As a result of the SmartZone designation and the launch of Macomb-OU INC, it is projected that a dense cluster of technology-based companies will emerge and begin operating within Sterling Heights and proliferate throughout Macomb County. By the end of 2012, Macomb-OU INC anticipates the incubation of 23 new companies employing almost 115 individuals with those numbers increasing to 40 and over 300 respectively over the next five years,” she said.