07
Mar
2005
While DavenportOne is a partner in the old-school Eastern Iowa Industrial Center, trying to lure large industrial businesses to create high-paying jobs in volume, it's also working at the new-economy end of the spectrum, trying to help startup businesses in high-tech fields get from the idea stage to market.
The vehicle for this effort is the NewVentures Center, which plans to have its grand opening next month. The center is a division of DavenportOne.
NewVentures staff members have been working for about 18 months, even though they only moved into the newly erected building at 331 West Third Street in downtown Davenport at the beginning of 2005. The NewVentures Center, on the building's first floor, houses the organization's staff, a private patent attorney, the Eastern Iowa Community College's Small Business Development Center, and a community-college employee who explores how to commercialize ideas developed in academic settings.
The center's goal is ultimately to help get startups off the ground and into positions where they're creating high-tech, high-paying jobs. But the organization will be judging itself on how successful it is at helping those fledgling businesses attract financing.
And that's not easy. Typically, one out of every 100 proposed startups is funded by venture capital. The NewVentures Center hopes to raise that rate to 2 or 3 percent.
"This is pioneering for us," said Dan Huber, DavenportOne's president and CEO. "We're going to learn a lot."
So far, said NewVentures Executive Vice President Kim Kudrna, the center has had 10 clients, two of which are in the process of applying for "financial assistance," either in the form of private investment or grants. One client is in negotiations with a local "angel" investor, Kudrna said.
In addition, one client - Mad Shopper - moved into the NewVentures Center on March 1. It provides text-message advertising to cell-phone users who agree to receive it. Another client, Silver Beacon, specializes in electronic signage in casinos and is located in the Executive Square building in downtown Davenport.
The NewVentures center is envisioned as a one-stop shop. Entrepreneurs with an idea, some market research, and (preferably) a business plan can get assistance refining a business plan or management structure, or get help assessing a technology. The NewVentures Center attempts to identify and correct weaknesses in any of those areas. "We're really trying to grow businesses from within," Kudrna said.
Kudrna came to the NewVentures Center 18 months ago after being at Alliant Energy. According to the NewVentures Web site (http://www.newventuresinc.com), she "co-managed a $27-million investment portfolio in emerging technology-related technologies. Her activities included evaluation of deal flow, due diligence, valuations, negotiations, and technology transfer." She has also been appointed to the State of Iowa's Small Business Advisory Council. She is also a committee member with the Iowa Venture Capital Association and the Iowa Capital Formation Hot Team.
Kudrna replaced Dave Abbott as director of NewVentures in early February. Abbott was hired to run NewVentures in July 2003. Huber declined to discuss Abbott's departure, saying it was a private personnel matter.
Pete Fry is the NewVentures Center's newly hired vice president of client services, and he reviews business plans, works with clients, and conducts research and analysis. The NewVentures Web site said that he worked 10 years at Barclays Bank, where he did "credit-risk analysis, human-resources management, project management, and operations management."
The NewVentures center has small office spaces available - as little as 500 square feet but as much as 3,000 square feet - for startups. "We understand the flexibility they require," Kudrna said. It's expected that companies will "graduate" from the NewVentures Center to find space somewhere else.
Rent for space in the NewVentures Center is market rate but includes all amenities, such as utilities, a conference room, a copier, a fax machine, and an administrative assistant. The NewVentures Center can have up to 10 tenants at any given time in its 18,000 square feet.
The center's goal is to have the building completely built out within two and a half years, Kudrna said, and to consistently have 80-percent occupancy, which would be considered "full" occupancy because of anticipated turnover.
But because of the small staff, there's a limit to how many clients it can assist at any time. "What we're running into is a capacity issue," Huber said. He added that increasing the client capacity of the NewVentures Center will be one component of the second D1 Initiative fundraising effort. (See sidebar.) The center also hopes to build capacity through federal, state, and private sources.
DavenportOne is the primary funder of the NewVentures Center, and the State of Iowa is now a partial funder - giving $175,000 in grants over three years. The center's other income will come from clients and tenants.
The $5-million facility was built with nearly $3 million from Kaizen Company of America (which owns and leases the building's second floor), $1.5 million from the City of Davenport and Scott County, and $500,000 from the Iowa Department of Economic Development.
Of the 10 clients so far, three companies are from the Quad Cities, one is from the Chicago area, and the remainder come from elsewhere in Iowa, Kudrna said. Huber said the NewVentures Center is intended as a regional facility.
The NewVentures Center is a not-for-profit organization, but it does receive money if a startup gets funding. "We cap the amount we would ever charge you" at 10 percent of the amount of venture capital the company receives, Kudrna said. The fees come in three forms, all of which clients who receive funding would pay: compensation for staff time spent with each client (typically 200 to 300 hours, charged at $75 per hour); a performance bonus of less than 3 percent; and a dilutable equity stake. An equity bank would typically charge 30 percent of the amount of money raised, Kudrna said.
The center is supposed to be self-sustaining over time, she said. Huber noted that DavenportOne expects to subsidize the center for several years.
Sidebar: Measuring DavenportOne with Its Own Goals
Coming up on its fifth birthday, DavenportOne has certainly made good on its promise to be more than a chamber of commerce. In its half-decade of existence, it has been a major player in many key Davenport initiatives, from being an engine of support for River Renaissance to being a partner in the Eastern Iowa Industrial Center to shepherding the River Music Experience and NewVentures Center into existence.
"The status quo could not prevail," Dan Huber, president and CEO of DavenportOne, said last week. "We could not be an ordinary chamber of commerce doing ordinary chamber-of-commerce programs. We've been aggressive. We've been risk-takers."
DavenportOne has completed a feasibility study for a new fundraising initiative and will probably roll out the new campaign in several months. "It'll be more than the last time and maybe five years instead of four," Huber said. A "confidential discussion draft" said the campaign will try to raise $6.75 million.
Four years ago, the D1 Initiative raised $4.1 million for DavenportOne programs, staff, and initiatives. The organization also developed a set of measurable goals to be reached over four years, by July 2005. In setting specific benchmarks after the fundraising initiative finished in 2001, the DavenportOne board then extended the time frame to five years, until July 2006, Huber said. The goals were:
• 5,000 new primary jobs;
• an increase in the growth rate for Davenport's assessed property valuation, from 2 percent a year to 3 percent a year;
• an increase in the growth rate for sales-tax generation, from 2 percent a year to 3 percent a year;
• five new industrial tenants creating 200 jobs;
• an increase of 250,000 occupied square feet in downtown Davenport; and
• an increase in downtown employment from 7,451 to 8,200.
Dana Waterman told the Reader in 2001 that until those goals are met, "we don't have the right to go back and ask people to invest." Dan Portes said: "We want to be judged." At the time, Waterman and Portes were the new and past chairs, respectively, of DavenportOne. They acknowledged that even though achieving the goals would not be a function only of DavenportOne's activities, they would be a good indicator of the organization's effectiveness.
With DavenportOne exploring another fundraising initiative, now is a good time to evaluate DavenportOne's performance. While statistics for the entire period are not yet available - in many areas, the organization only has numbers for two or three years - they do give a good indication of how well the organization has fulfilled its promises.
Overall, the organization is on track to meet three of its six goals.
Huber said that 85 percent of D1 Initiative investors have said that DavenportOne has had a significant impact on improving the local economy, and 98 percent rated the D1 Initiative as effective.
5,000 Primary Jobs
In the first three years of the D1 Initiative, Davenport created 2,075 new primary jobs, DavenportOne reports. Its goals for those three years called for the creation of 2,400 primary jobs, with goals of 1,200 jobs in 2004-5 and 1,400 jobs in 2005-6.
Increasing Property-Tax Growth to 3 Percent a Year
The property-tax base in Davenport grew 5 percent in 2001-2, 9 percent in 2002-3, and 2 percent in 2003-4. Overall, the property tax base has grown nearly 17 percent over those three years. If property tax grew at a 3-percent annual rate, over three years its overall growth would have been merely 9 percent.
Increasing Sales-Tax Growth to 3 Percent a Year
The sales-tax base grew 4 percent in 2001-2, dropped 5 percent in 2002-3, and jumped 8 percent in 2003-4. Overall, that's an increase in the sales-tax base of just under 7 percent for the three years. If it grew at 3 percent each year, its overall growth over that period would have been just more than 9 percent.
Five New Industrial Tenants
The Eastern Iowa Industrial Center has one tenant employing 80 people. (See story here.) Huber said this is the one area in which DavenportOne hasn't come close to meetings its goal.
Increasing Downtown Employment by 10 Percent
DavenportOne did not provide statistics for 2001-2. In 2002-3, downtown employment increased by 151 people, and in 2003-4, it increased by 161. That exceeds those two years' goals by 11.
Increasing Downtown Occupancy by 250,000 Square Feet
DavenportOne did not provide statistics for 2001-2. In 2002-3, occupancy increased by 104,600 square feet, and in 2003-4, it increased by 62,900 square feet. The targets for those two years were 40,000 and 50,000 square feet, respectively. Even without the numbers for 2001-2, the number exceeded DavenportOne's three-year goals by more than 57,000 square feet.
- Jeff Ignatius
The vehicle for this effort is the NewVentures Center, which plans to have its grand opening next month. The center is a division of DavenportOne.
NewVentures staff members have been working for about 18 months, even though they only moved into the newly erected building at 331 West Third Street in downtown Davenport at the beginning of 2005. The NewVentures Center, on the building's first floor, houses the organization's staff, a private patent attorney, the Eastern Iowa Community College's Small Business Development Center, and a community-college employee who explores how to commercialize ideas developed in academic settings.
The center's goal is ultimately to help get startups off the ground and into positions where they're creating high-tech, high-paying jobs. But the organization will be judging itself on how successful it is at helping those fledgling businesses attract financing.
And that's not easy. Typically, one out of every 100 proposed startups is funded by venture capital. The NewVentures Center hopes to raise that rate to 2 or 3 percent.
"This is pioneering for us," said Dan Huber, DavenportOne's president and CEO. "We're going to learn a lot."
So far, said NewVentures Executive Vice President Kim Kudrna, the center has had 10 clients, two of which are in the process of applying for "financial assistance," either in the form of private investment or grants. One client is in negotiations with a local "angel" investor, Kudrna said.
In addition, one client - Mad Shopper - moved into the NewVentures Center on March 1. It provides text-message advertising to cell-phone users who agree to receive it. Another client, Silver Beacon, specializes in electronic signage in casinos and is located in the Executive Square building in downtown Davenport.
The NewVentures center is envisioned as a one-stop shop. Entrepreneurs with an idea, some market research, and (preferably) a business plan can get assistance refining a business plan or management structure, or get help assessing a technology. The NewVentures Center attempts to identify and correct weaknesses in any of those areas. "We're really trying to grow businesses from within," Kudrna said.
Kudrna came to the NewVentures Center 18 months ago after being at Alliant Energy. According to the NewVentures Web site (http://www.newventuresinc.com), she "co-managed a $27-million investment portfolio in emerging technology-related technologies. Her activities included evaluation of deal flow, due diligence, valuations, negotiations, and technology transfer." She has also been appointed to the State of Iowa's Small Business Advisory Council. She is also a committee member with the Iowa Venture Capital Association and the Iowa Capital Formation Hot Team.
Kudrna replaced Dave Abbott as director of NewVentures in early February. Abbott was hired to run NewVentures in July 2003. Huber declined to discuss Abbott's departure, saying it was a private personnel matter.
Pete Fry is the NewVentures Center's newly hired vice president of client services, and he reviews business plans, works with clients, and conducts research and analysis. The NewVentures Web site said that he worked 10 years at Barclays Bank, where he did "credit-risk analysis, human-resources management, project management, and operations management."
The NewVentures center has small office spaces available - as little as 500 square feet but as much as 3,000 square feet - for startups. "We understand the flexibility they require," Kudrna said. It's expected that companies will "graduate" from the NewVentures Center to find space somewhere else.
Rent for space in the NewVentures Center is market rate but includes all amenities, such as utilities, a conference room, a copier, a fax machine, and an administrative assistant. The NewVentures Center can have up to 10 tenants at any given time in its 18,000 square feet.
The center's goal is to have the building completely built out within two and a half years, Kudrna said, and to consistently have 80-percent occupancy, which would be considered "full" occupancy because of anticipated turnover.
But because of the small staff, there's a limit to how many clients it can assist at any time. "What we're running into is a capacity issue," Huber said. He added that increasing the client capacity of the NewVentures Center will be one component of the second D1 Initiative fundraising effort. (See sidebar.) The center also hopes to build capacity through federal, state, and private sources.
DavenportOne is the primary funder of the NewVentures Center, and the State of Iowa is now a partial funder - giving $175,000 in grants over three years. The center's other income will come from clients and tenants.
The $5-million facility was built with nearly $3 million from Kaizen Company of America (which owns and leases the building's second floor), $1.5 million from the City of Davenport and Scott County, and $500,000 from the Iowa Department of Economic Development.
Of the 10 clients so far, three companies are from the Quad Cities, one is from the Chicago area, and the remainder come from elsewhere in Iowa, Kudrna said. Huber said the NewVentures Center is intended as a regional facility.
The NewVentures Center is a not-for-profit organization, but it does receive money if a startup gets funding. "We cap the amount we would ever charge you" at 10 percent of the amount of venture capital the company receives, Kudrna said. The fees come in three forms, all of which clients who receive funding would pay: compensation for staff time spent with each client (typically 200 to 300 hours, charged at $75 per hour); a performance bonus of less than 3 percent; and a dilutable equity stake. An equity bank would typically charge 30 percent of the amount of money raised, Kudrna said.
The center is supposed to be self-sustaining over time, she said. Huber noted that DavenportOne expects to subsidize the center for several years.
Sidebar: Measuring DavenportOne with Its Own Goals
Coming up on its fifth birthday, DavenportOne has certainly made good on its promise to be more than a chamber of commerce. In its half-decade of existence, it has been a major player in many key Davenport initiatives, from being an engine of support for River Renaissance to being a partner in the Eastern Iowa Industrial Center to shepherding the River Music Experience and NewVentures Center into existence.
"The status quo could not prevail," Dan Huber, president and CEO of DavenportOne, said last week. "We could not be an ordinary chamber of commerce doing ordinary chamber-of-commerce programs. We've been aggressive. We've been risk-takers."
DavenportOne has completed a feasibility study for a new fundraising initiative and will probably roll out the new campaign in several months. "It'll be more than the last time and maybe five years instead of four," Huber said. A "confidential discussion draft" said the campaign will try to raise $6.75 million.
Four years ago, the D1 Initiative raised $4.1 million for DavenportOne programs, staff, and initiatives. The organization also developed a set of measurable goals to be reached over four years, by July 2005. In setting specific benchmarks after the fundraising initiative finished in 2001, the DavenportOne board then extended the time frame to five years, until July 2006, Huber said. The goals were:
• 5,000 new primary jobs;
• an increase in the growth rate for Davenport's assessed property valuation, from 2 percent a year to 3 percent a year;
• an increase in the growth rate for sales-tax generation, from 2 percent a year to 3 percent a year;
• five new industrial tenants creating 200 jobs;
• an increase of 250,000 occupied square feet in downtown Davenport; and
• an increase in downtown employment from 7,451 to 8,200.
Dana Waterman told the Reader in 2001 that until those goals are met, "we don't have the right to go back and ask people to invest." Dan Portes said: "We want to be judged." At the time, Waterman and Portes were the new and past chairs, respectively, of DavenportOne. They acknowledged that even though achieving the goals would not be a function only of DavenportOne's activities, they would be a good indicator of the organization's effectiveness.
With DavenportOne exploring another fundraising initiative, now is a good time to evaluate DavenportOne's performance. While statistics for the entire period are not yet available - in many areas, the organization only has numbers for two or three years - they do give a good indication of how well the organization has fulfilled its promises.
Overall, the organization is on track to meet three of its six goals.
Huber said that 85 percent of D1 Initiative investors have said that DavenportOne has had a significant impact on improving the local economy, and 98 percent rated the D1 Initiative as effective.
5,000 Primary Jobs
In the first three years of the D1 Initiative, Davenport created 2,075 new primary jobs, DavenportOne reports. Its goals for those three years called for the creation of 2,400 primary jobs, with goals of 1,200 jobs in 2004-5 and 1,400 jobs in 2005-6.
Increasing Property-Tax Growth to 3 Percent a Year
The property-tax base in Davenport grew 5 percent in 2001-2, 9 percent in 2002-3, and 2 percent in 2003-4. Overall, the property tax base has grown nearly 17 percent over those three years. If property tax grew at a 3-percent annual rate, over three years its overall growth would have been merely 9 percent.
Increasing Sales-Tax Growth to 3 Percent a Year
The sales-tax base grew 4 percent in 2001-2, dropped 5 percent in 2002-3, and jumped 8 percent in 2003-4. Overall, that's an increase in the sales-tax base of just under 7 percent for the three years. If it grew at 3 percent each year, its overall growth over that period would have been just more than 9 percent.
Five New Industrial Tenants
The Eastern Iowa Industrial Center has one tenant employing 80 people. (See story here.) Huber said this is the one area in which DavenportOne hasn't come close to meetings its goal.
Increasing Downtown Employment by 10 Percent
DavenportOne did not provide statistics for 2001-2. In 2002-3, downtown employment increased by 151 people, and in 2003-4, it increased by 161. That exceeds those two years' goals by 11.
Increasing Downtown Occupancy by 250,000 Square Feet
DavenportOne did not provide statistics for 2001-2. In 2002-3, occupancy increased by 104,600 square feet, and in 2003-4, it increased by 62,900 square feet. The targets for those two years were 40,000 and 50,000 square feet, respectively. Even without the numbers for 2001-2, the number exceeded DavenportOne's three-year goals by more than 57,000 square feet.
- Jeff Ignatius
