by Brian Balfour
Senior Vice President of Research, John Locke Foundation
In an attempt to bolster support for the $1.4 billion appropriation proposed for it in this year’s Senate budget proposal, NCInnovation has cited several “success stories” in an attempt to inspire lawmakers to provide what would be the largest appropriation to a nonstate entity in state history. Unfortunately, several of these “success stories” have turned out to be less than inspiring.
We’ve cited how NCInnovation claimed that the highly troubled Vietnamese EV manufacturer VinFast is a recent “intentional innovation” success story. We also heard from policy experts in Ohio warning us that the Buckeye state’s experience with a similar organization should serve as a warning, not inspiration, for NCInnovation. Then we pointed out how their comparison of NCInnovation to the Massachusetts Life Science Center was misleading and as such provided no meaningful example to justify NCInnovation’s massive appropriation. Most recently, we exposed the corrupt, scandal plagued, and now defunct Texas Emerging Technology Fund, another group touted as inspiration for NCInnovation.
Now we’ll have a look at the Georgia Research Alliance (GRA), another state organization touted by NCInnovation as a successful example that supposedly serves as a role model for NCInnovation’s funding.
According to NCInnovation, GRA was created in 1990, and since has received $690 million in state government funding. It’s important to note, however, that GRA consists of a few different projects, only one of which closely resembles the primary intended functions of NCInnovation.
The early years of GRA were dominated by a program to recruit top academic researchers to Georgia universities. It wasn’t until 2002 when GRA launched its “VentureLab” program “in an effort to facilitate the formation of companies around university-based technology.” This program is what most closely resembles the goals of NCInnovation.
At least for its first decade, VentureLab was beset by a lack of transparency and a low success rate. According to an audit produced in 2013 (the only one this author could find), the impact of VentureLab’s commercialization efforts were hard to analyze because “GRA does not have complete data on participants funded through the VentureLab Program,” adding that “(d)ata on this program from its inception in 2002 to 2007 was not maintained.”
What the audit did find, however, was a poor track record of those businesses that received funding from VentureLab. The audit found that “50% (101) of the 201 known participants in VentureLab (from 2003 to 2011) were actively doing business in Georgia or in the process of starting a business at the end of calendar year 2011,” which means that the other half were either “inactive” or “had no evidence to indicate they were active in Georgia in 2011.”
Moreover, the funding levels for GRA – and in turn VentureLab – have been much smaller than the spending commitment the North Carolina Senate hoped for for NCInnovation.
For instance, the 2013 audit disclosed that only a total of $23 million had been “invested” in the VentureLab participants between 2003 and 2011.
More recent audited financial documents show that GRA spent only $4.1 million and $5 million in each of the last two fiscal years on the “commercialization” of new technology.
Even total funding for GRA has, since its inception, been on a much smaller scale than what NCInnovation is requesting – and has been falling. The average annual state appropriation over its 30-year history is $22.8 million; the last time funding was that high was 2010. State appropriations have fallen to an average of less than $10 million annually over the last seven years.
These appropriations are nowhere near the sizeable taxpayer appropriation NCInnovation seeks, so the GRA hardly seems like an appropriate comparison. And, like the Massachusetts Life Science Center, the GRA features several university presidents on its Board of Trustees – while NCInnovation would legally prevent any state employees to be on its board.
From funding levels to organizational oversight, GRA doesn’t present a fair comparison to justify NCInnovation receiving substantial sums of taxpayer money. GRA also lacks transparency and – at least in its first decade – a poor track record of “investments.”