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GVSU to stop operating Grand Rapids SmartZone on March 31 COURTESY PHOTO

GVSU to stop operating Grand Rapids SmartZone on March 31

BY Sunday, March 06, 2016 10:00pm

GRAND RAPIDS — A key economic development program aimed at bolstering entrepreneurial activity in the Grand Rapids area will have a new administrator at the start of April.

Effective March 31, Grand Valley State University will no longer administer the Grand Rapids SmartZone, as the organization focuses on other roles in the entrepreneurial “ecosystem” in West Michigan. 

The university also will relinquish its role in operating Emerge West Michigan, a public-private partnership focused on delivering a range of services to entrepreneurs throughout a 13-county area. 

While GVSU’s exact future role in the entrepreneurial community remains undefined, the university will continue to be active through a variety of programs and business plan competitions, said Kevin McCurren. 

McCurren, who serves as executive director at GVSU’s Richard M. and Helen DeVos Center for Entrepreneurship & Innovation, added that the university will always have a role to play in crafting entrepreneurism. 

“While the nature will change, I think we as a community are just as committed to having a dynamic ecosystem that produces new businesses and new entrepreneurs,” McCurren said. “We may not be as linked as in the past but we’ll still be involved.” 

Against the backdrop of that tight March 31 deadline, stakeholders at Emerge also are working to close a complex deal to merge the nonprofit into Start Garden LLC, the venture capital and entrepreneurial services firm started by Amway scion Rick DeVos in 2012. 

With GVSU and the Grand Rapids Local Development Finance Authority mutually deciding to end a contract for the university to administer the SmartZone, the parties involved in the merger now face an added sense of urgency. 

The deal is now in “crunch time,” said Emerge Vice Chair Craig Hall. The top stakeholders — including Emerge, Start Garden, GVSU and the LDFA — are working to figure out just what the merged organizations might look like. The partners say the deal is necessary to streamline the delivery of entrepreneurial support services in the region.

“We’re trying to rationalize this so there’s not more confusion than there already is,” Hall said. “We’re trying to focus on clients, not programs, because some of the programs have not been real effective.” 

While the March 31 deadline creates additional complications, it’s not much different than other M&A deals, except that it has the added complexity of involving a for-profit company and a nonprofit organization.

“Anytime you have a merger, there’s a tunnel of chaos and you just have to get through that and adapt,” McCurren said.

Cities such as San Diego have undergone similar transitions where a university eventually has stepped back from administering entrepreneurial services, he added. 

STREAMLINING SERVICES

Multiple sources working to complete the merger acknowledged that much of the entrepreneurial support programming likely will change, but they could offer few specifics as this report went to press. 

“What is being developed is different and broader in scope and vision that what GRCurrent, Start Garden or eMerge were working on,” Start Garden COO Mike Morin said in a prepared statement. “The start-up ecosystem has changed a lot since these entities, in addition to others, were created. The collaboration group is now in the process of framing plans for future offerings. 

“Though it has taken some time, the first step was to assess past activity and identify current ecosystem assets and needs.”

Morin added that “while much has been agreed to in principle, it would be premature to communicate anything definitive at this time.”

Sources who spoke on the condition of anonymity because they had not been cleared to discuss the deal publicly said that much of the Emerge programming would be eliminated if the merger is completed and the entity becomes part of Start Garden. One source did say that the DeVos-founded 5x5 Night would most likely remain.

The partners continue to discuss which entity will administer the SmartZone under the merger, said GVSU’s McCurren. 

Any new entity that comes out of a merger will need approval from the city’s SmartZone LDFA board to administer the TIF district and be reimbursed for related entrepreneurial services. That approval could come at the LDFA’s March meeting, said Kara Wood, the board’s executive director and the director of economic development for the city of Grand Rapids.

“We’re trying to look at this more holistically and deliver a model that serves the ecosystem,” Wood said. 

While the stakeholders figure out who will administer the TIF district going forward, the Grand Rapids City Commission is also expected to vote in the coming month on a plan to revise the SmartZone boundaries to include the whole city. 

Currently, the SmartZone includes an area primarily consisting of buildings along the Michigan Street life science cluster and along North Monroe Avenue, as well as a satellite in Holland.

When MiBiz first reported on the proposed merger in October 2015, it was expected that the city’s SmartZone boundaries would be redrawn to include Start Garden’s offices on the second floor of the building at 40 Pearl St. NW in downtown Grand Rapids. 

Doing so would give Start Garden and a new nonprofit arm access to public funds through the LDFA to provide entrepreneurship programming, including the business incubator services currently administered by GR Current, said sources familiar with the deal.

LAYOFFS LIKELY

As a result of the expiring contract with the LDFA, GVSU will need to impose layoffs for positions for which funding ends on March 31. 

“GR Current and eMerge are funded by contracts with outside entities,” Diana Lawson, dean of GVSU’s Seidman College of Business, wrote in an email to MiBiz. “When contracts end, funding for any related positions also ends. Since the contract for GR Current/eMerge between GVSU and the LDFA ends on (March 31), activities associated with the work related to the contract will also end. Thus, unless other contract funding is committed positions are ended.”

University officials declined to provide the number of employees it will need to terminate, but sources with knowledge of the situation said that between six and 10 jobs — a mix of full-time and part-time positions — would most likely be affected.

Employees affected by the restructuring include Rebecca Wilson Stein, the director of Emerge Xcelerate. Stein wrote in a Facebook post on Feb. 18 that her program was being “shuttered” on March 31 and asked for leads on new positions in comparable sectors. 

However, the region will not go without a business accelerator: Start Garden COO Morin also runs the Seamless Accelerator, a for-profit limited liability company aimed at helping Internet of Things companies commercialize their innovations. 

Sources in the startup community said it would be unnecessary for the merged entity to have two business accelerators under one roof. 

Other program managers within Emerge said they remained unsure of their job status after the LDFA contract expires. For example, Catherine Creamer, the director of the Emerge Mentor Connect program, couldn’t confirm what, if any role, she would have under a merged entity. 

PUSHING AHEAD

Despite myriad unanswered questions and a tight timetable for the parties to complete the complex merger, stakeholders maintain that the deal will go forward because they want to create a better all-around network of entrepreneurial support systems. 

“The structure of the organization will be different … but in the end, this will be a stronger organization,” said Hall, Emerge’s vice chair, who wants to see more “outcomes-based” benchmarks going forward versus the activity-based programming of the past. 

Implementing those benchmarks and metrics remains a major area of focus in the merger talks. 

“With benchmarks lies a challenge,” he said. “Metrics is one of the more important discussions, and we’re not done yet because we’re not sure what they are.” 

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