Good idea. Bad solution
Published July 27, 2023
By Tom Campbell
Would you be willing to turn over 1.4 billion dollars to an unknown group over which you have no oversight or control and who can do with it as they choose? I bet you wouldn’t do that with even $1,400. But our legislature appears ready to go with the $1.4B.
Some background. If North Carolina is going to remain competitive and successful in coming years we need to wisely invest in our future. The state has amassed a huge savings account - some estimate $6 billion or more - so we have the capacity to invest. Our state continues to receive accolades as one of the tops in the nation for businesses to locate or expand. We even rank number two in research & development, but once an idea is germinated how does it get the capital it needs to grow and prosper? The failure rate for new start-ups is high and making that big leap from innovative idea to generating enough funds to sustain and grow into success is a big gap, often referred to as the “valley of death.”
Enter NCInnovation. The concept behind NCInnovation is to provide financial support for researchers at our universities to bridge that “valley of death.” A group of business leaders have already chipped in some $23 million to get it started. It was only natural they would come to the state for additional funding. Governor Cooper included $50 million in his proposed budget for the concept. The House budget included the same number.
Here’s where the good idea becomes a bad solution. The State Senate decided to up the ante to $1.4 billion in state funds and make major structural changes; even some of the original investors into NCInnovation are pooh-poohing what would be the largest single investment in the state’s history to one organization. They think the Senate approach is wrong.
Some history. Former Governor Luther Hodges was the visionary who saw North Carolina’s future in research, innovation and commerce. In 1958 Hodges enlisted Archie Davis, then-president of Wachovia Bank, and they raised $1.5 million to purchase land and, in concert with UNC, NC State and Duke, create what we now know as Research Triangle Park. We all recognize what RTP has meant to our state.
NCInnovation has the same potential for the 21st century and there are some aspects of it that are appealing, but it needs to be scaled back and restructured. Let’s offer some suggestions.
Luther Hodges and Archie Davis had good sense with RTP. NCInnovation needs to be a public non-profit, not a private for-profit venture. The governing board should consist of a minority of political appointees - equally divided between the House, Senate and Executive branch. We like that the current board includes the chancellors of NC A&T, UNC-Charlotte, East Carolina University and Western Carolina University, schools which currently have research agreements with NCInnovation, much as Duke, State and Carolina did with the Research Triangle Institute.
The remainder of board members should come from “research, development, product commercialization, entrepreneurial business development and capital formation,” as the Senate language now states, along with at least one patent lawyer, one business start-up lawyer and a representative from the NC Department of Commerce.
NCInnovation should have an equity stake in any investment it makes, so as to generate a future income stream and cash to invest. The charter should strongly state that preference for investments come from research done on North Carolina campuses, (especially those listed above), and recipients should pledge to domicile in and operate from our state for a reasonable period, say 5 years.
That board should have sole authority to hire and fire staff, keep accurate minutes of meetings and NCInnovation should abide by state public records laws. These laws allow for the exemption of trade secrets and proprietary information. It should at least annually publish balances in their accounting and lists of investments made, giving the name, location, a general description of the organization and names of key officers. Taxpayers have the right to know these things.
My biggest remaining question concerns what to do with the investments already made by private individuals and companies. I see four options: first, these citizens could decide theirs was a worthwhile civic contribution to our future and allow their funds to remain; second, they could be repaid as the board feels funds are available; third, the state could give tax credits to those investors so they can get their money back from tax savings; or fourth, the legislature could increase its appropriation to return the initial $23 million.
There have been many voices opposing the Senate’s proposed legislation. We hope enough others will speak out to stop another apparent power grab by legislators. That said, let us applaud NCInnovation, chair Kelly King and others who have the vision to initiate what could (and hopefully will) become another RTP success story.
Tom Campbell is a Hall of Fame North Carolina Broadcaster and columnist who has covered North Carolina public policy issues since 1965. Contact him at email@example.com.