Grand Rapids SmartZone. Business Plan

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Grand Rapids SmartZone

Business Plan

Executive Summary 2

Background 2

Mission, Objectives, Benefits 3

Organizational Structure 4

Service Offerings 5

Client Selection 6

Facility 9

Implementation 9

Marketing and Communications Plan 12

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Executive Summary

The strategic vision for the Grand Rapids SmartZone℠ is to be a primary strength of emerging life sciences and medical device business development in Grand Rapids, Michigan through accelerated technology commercialization. The primary purpose of the SmartZone℠ is to provide business incubation and acceleration services to business start-ups and helping them succeed in the marketplace.”

As defined by the Michigan Economic Development Corporation, SmartZones℠ provide distinct geographical locations where technology-based firms, entrepreneurs and researchers locate in close proximity to all of the community assets that assist in their endeavors. SmartZone℠

technology clusters promote resource collaborations between universities, industry, research organizations, government and other community institutions, growing technology-based businesses and jobs. New and emerging businesses in SmartZone℠ technology clusters are primarily focused on commercializing ideas, patents and other opportunities surrounding corporate, university or private research institute R&D efforts.

Under the original structure, the Grand Rapids SmartZone℠ was centered on life-science technology commercialization. Moving forward, while there will continue to be a focus on the life-science start-up opportunities, opportunities in the emerging technologies are also going to be pursued and included with the incubator system. By serving as a catalyst for the various startup entities in the Grand Rapids area, the Grand Rapids SmartZone℠will take the lead in helping support the development of new commercially viable products and services. This success will translate into a viable economic development platform that will benefit the area for many years ahead.

Background

The Michigan SmartZone℠ program was created in 2000 by the Michigan Economic

Development Corporation (MEDC) through amendments to the Local Development Financing Act. The purpose was to allow municipalities to use tax increment financing for property acquisition, infrastructure, business incubators and other facilities, as well as management and marketing. The Grand Rapids SmartZone℠was formed in 2003, and covers an area along Michigan Street, from College Ave to Monroe, and north along Monroe to Coldbrook. Since its establishment, this area has seen significant business creation and activity, including the

construction of the Meijer Heart Center, Helen DeVos Children’s Hospital, Spectrum Health, The Van Andel Research Institute, Michigan State University College of Human Medicine and

numerous other businesses.

Within the Grand Rapids SmartZone℠, a business incubator was established to help serve as a resource for emerging ideas originating from local physicians and scientists. The West

Michigan Science and Technology Initiative (WMSTI) was created to leverage the expertise of these professionals and focus on life science startups. Over the years, WMSTI has helped

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numerous start-ups by offering mentoring resources, access to state funds and most importantly, access to millions of dollars of laboratory equipment.

Under new leadership, the goal is to build on this success and expand it into other industries with additional “clusters”, or incubator space for other areas of emerging technology, be it medical devices, high tech development or software development.

Mission, Benefits, Objectives

The Mission Statement for the Grand Rapids SmartZone℠ reads as follows. “The strategic vision for the Grand Rapids SmartZone℠ is to be a primary strength of emerging life sciences and medical device business development in Grand Rapids, Michigan through accelerated technology commercialization. The primary purpose of the SmartZone℠ is to provide business incubation and acceleration services to business start-ups and helping them succeed in the marketplace.”

By providing access to mentors, industry experts, shared office equipment and space, a

complete network of business supporting consultants, access to funds (both inside and outside the SmartZone), etc… the Grand Rapids SmartZone℠ significantly increases the chances of a startup’s success.

Over the next 5 years, the Grand Rapids SmartZone℠ is committed achieving these goals;

Outcomes 5 Year Results

Total Ideas and Technologies

commercialized (20/year) 100 ideas/technologies Number of Assists/service referrals

and assists (120/year) 600 assists

Number of Companies formed—new business start-ups in SmartZone℠ (10/year)

50 companies

Jobs Created (5/company) 250 jobs

Capital Raised ($1.5M/company) $75 Million Along with maximizing the existing life science incubator, the long-term vision is to create industry specific clusters throughout the SmartZone℠, with each cluster specializing in a particular industry. Medical equipment, high tech, and software design are a few examples of what each cluster will specialize in. Located throughout the SmartZone℠, each cluster would represent an area that an individual could go to receive support and guidance in successfully growing their company, regardless of what industry they are targeting.

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Organizational Structure

The Grand Rapids SmartZone℠will be overseen by an Executive Director, and supported by a Business Development Manager, a Contract Manager, a Marketing/PR manager, a web and social media person, and several Entrepreneur in Residence (EIR). EIRs will be very valuable members of the Grand Rapids SmartZone℠ with experience in the cluster domain they are assigned to and will be responsible for managing the startups, providing mentorship and sponsoring and running domain events.

The Executive Director will report directly to the Board of Directors. The Grand Rapids SmartZone℠ Board of Directors will consist of the same members as the Local Development Financing Authority (LDFA) Board;

 Mr. Jerry Kooiman – Michigan State University College of Human Medicine

 Ms. Lisa Freiburger – Grand Rapids Community College

 Mr. Jim Bachmeier – Grand Valley State University

 Ms. Julie Davis – Grand Rapids Public Schools

 Mr. Ben Emdin

 Mr. Walter Gutowski

 Mr. Brent Mulder – Van Andel Research Institute

 Mr. Richard Ortega

 Ms. Mary Swanson – Kent County

 Ms. Therese Thill - The Right Place, Inc.

The Board of Directors will serve to help guide the Executive Director in the growth and stability of the Grand Rapids SmartZone℠. Annual meetings, as well as bimonthly meetings throughout the year, will be held to update the Board on the budget, status of current activities and future plans for the upcoming year.

As part of the restructuring of the Grand Rapids SmartZone℠ the organization will be

reclassified as a non-profit, 501(c)3. This legal structure will allow organizations to financially participate in the organization. Creating this legal separation from both the LDFA and GVSU will allow the Incubator to seek private funding.

As part of the Client intake process, there will be the establishment of a smaller Investment Advisory Board to help review and approve potential Incubator Clients. The Investment

Advisory Board will consist of 3 to 5 members with significant experience in the domain of their “cluster” and will work with the Executive Director to determining recommendation of all

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Additionally, the Grand Rapids SmartZone℠ will work with and have the support of two other startup entities. One group, HUB Grand Rapids, will focus on social entrepreneurism and will work directly with individuals on startup ideas centered around social responsibility. Supported by fees and equity investments, The Hub will serve as a lead point and work space for new enterprises until they are potentially ready for space in the Incubator.

Service Offerings

The Grand Rapids SmartZone℠ will offer a wide variety of services to help their clients grow and turn their startup into successful businesses. Services included, but not limited to, are;

 Subsidized office rent

 Access to shared office equipment

 Access to high tech equipment

 Access to over $2.5M worth of laboratory equipment

 A deep resource network of consultants to help startups become successful – attorneys, CPAs, marketing experts, business development, web design, SEO, coders,

programmers, etc…

 Industry Mentors

 Networking with other startup organizations – StartGarden, HUB Grand Rapids, iStart, The Factory

 Relationship with Colleges and Universities – who can provide students and professors to help in various areas, from engineering a prototype, to marketing and web design, etc…

 Access to Capital – Business Accelerator Funds (BAF), pre-seed equity and pre-seed loans, along with a variety of other programs that provide financial help for startups based in Michigan

 Network that works with the MEDC to attract out-of-state talent to the Grand Rapids area.

 A link for US Sourcelink, a website that is an entrepreneur-friendly database website the will help provide all the regional partner programs on one website.

 iStart – another startup program located in the SmartZone℠, iStart, will serve in a similar role but will help provide mentorship and minimal funding to individuals jump start their ideas. Modeled after Bizdom in Detroit, this model is showing significant progress as it helps individuals transform their idea into a business and will be a key partner within the Grand Rapids SmartZone℠.

Virtual Incubator

Startup companies fall into two categories. The first are companies that need a daily physical location. These companies become in-house incubator clients. Other companies need occasional access to the incubator facilities but also need the network, support, finance and services that the incubator provides. For those Clients, The Grand Rapids SmartZone℠will offer a Virtual Incubator to serve as a resource for those looking to startup their own company but

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who are not at the stage yet where they are ready for daily office space. The Virtual Incubator will be a very important part of the Grand Rapids SmartZone℠.

A successful Virtual Incubator consists of four main areas; Central Business Support, Management/Mentorship, Process and Road Map, and Capital/Technical Resources; Central Business Support

Location/Mailing Address Meeting Resources Office Solutions Administrative Support Management/Mentorship Accelerator Management Technical Expertise Mentor Guidance Process and Road Map

Defined Intake Milestones Graduated Engagement CRM System – SalesForce Capital/Technical Resources Business Accelerator Due Diligence Consultants MicroLoans

Equipment Funds Client Selection

In order to be a successful Incubator, the intake process has to be efficient and effective. The Incubator has to have the correct process and procedures in place for review of prospective contacts, determining if they are the right fit, and providing all necessary resources to make sure they grow and have a successful exit. The following flow chart explains the Grand Rapids SmartZone℠ process for taking a Lead and converting them into an Incubator Client.

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PHASE I

Contact to Lead

Through a series of events that will be hosted by the SmartZone℠, Contacts will be pro-actively sought out throughout the community. Likewise, Contacts will also be classified as any

individual that reaches out to the Incubator via email, website, phone call or through an outside networking event. Initial conversations will determine if the Contact is a potential Client or if they would be better served by one of the other startup services in the area, such as;

 HUB Grand Rapids

 iStart

 The Factory

 SBTDC

If the Contact is considered a viable potential for the Incubator, they will be asked to complete the online Incubator Application, found on the Grand Rapids SmartZone℠ website. Information collected includes, but not limited to;

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 Contact information  Business explanation  Competitive advantage  Technology platform  Milestones  Business model  Team description  Financial plan

 What is needed from Incubator for success

All inputted information will be collected and automatically stored in SalesForce. This will allow the Grand Rapids SmartZone℠ to accurately track and follow all Leads, as well as efficiently produce the required MEDC reports. A SalesForce consultant will be retained to help build a template that specifically covers the needs of the Grand Rapids SmartZone℠.

PHASE II

Lead to Prospect

If after the initial conversation the Contact is determined to be a potential candidate for the Incubator, the Contact is considered a Lead and is assigned to a member of the Incubator. The next step involves a one on one conversation between the Lead and a member of the Incubator. If the industry or technology is outside the expertise of the staff, an outside consultant with a specialty in that industry will be brought in. Capping the work at 10 hours maximum, the consultant will help the Grand Rapids SmartZone℠ determine if the startup idea has merit and worthy of additional due diligence.

Based on the interview, the Lead could be given homework to help validate the business idea. Examples of homework that could be required include more due diligence on the industry or customer discovery. Once the Incubator team feels the Lead is ready, they will be presented to the Advisory Board to help determine if the Lead is ready to be approved and become a Client of the Incubator. The Investment Advisory Board will comprise of 3 to 5 individuals with expertise in that clusters domain. Their approval will be necessary for the Prospect to be approved and converted to a Client.

PHASE III

Prospect to Client

After completion of the proper due diligence and approval by the Investment Advisory Board, the Client will enter into contract with the Grand Rapids SmartZone℠. Lease rates will be mutually agreed upon with 1 year terms. Ideally, a Grand Rapids SmartZone℠ Client will successful exit the incubator after no more than 24 months, but that timeframe will be dictated

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by milestones that will be specific to each Client. For example, a high tech company would be expected to graduate in 12 to 18 months, where a life science Client will take more than 24 months to graduate, but it is important to state this is very specific per Client.

Upon graduation, all Clients will be considered alumni of Grand Rapids SmartZone℠and will continue to have access to the all SmartZone℠ resources. Clients will have graduated once they meet all mutually agreed upon milestones listed in the original contract. Examples of these milestones can be;

 Outgrowing incubator facilities or need for a stand-alone location

 Hiring a certain number of employees

 Achieving positive cash flow

 Merging with another company

 Obtaining short- and long-term funding (either as straight capital or by issuing shares)

 Establishing an independent board of directors Facility

The current Incubator is located on the 5th floor of the Cook – DeVos Center for Health Sciences (CHS) Building. The space consists of 6 offices, each approximately 110 sf and 3 wet labs, each approximately 660 sf each. Depending on the needs of the Client, the wet lab space can be subdivided into smaller areas.

As part of the continued growth and future sustainability of the Grand Rapids SmartZone℠

,

as emerging technology companies develop, additional industry specific “clusters” will be

established in other locations within the SmartZone℠. These clusters will be designed with more open spaces than the existing incubator and potentially could be located within HUB Grand Rapids space.

Implementation

Per the contract between the LDFA and GVSU/CEI, milestones were established to help track the growth and success of the Incubator. These milestones are;

LDFA Payment

Amount

Milestone/Deliverable Due Date

Contract with GR Collective (HUB Grand Rapids)

Re-establish Life Science Accelerator Advisory Board

Hire Interim Incubator Director Relaunch Grand Rapids SmartZoneSM

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Hire Incubator Executive Director and program staff

December 31, 2012 Establish Entrepreneur in Residence

Program, Hire First EIR $154,731 Progress Report detailing

achievement of milestones required in previous quarter and demonstrating progress toward and ability to meet milestones due in June 2013, due December 31, 2012

Payment January 2013

Establish Virtual Incubator Program – review, intake monitoring processes

March 31, 2013 Future Incubator Feasibility Study

Initiated

US Source Link Portal Live $154,731 Progress Report detailing

achievement of milestones required in previous quarter and demonstrating progress toward and ability to meet milestones due in June 2013, due March 31, 2013

Payment April 2013

20 ideas/technologies

commercialized, 120 assists or service referrals, 10 new companies formed*, 5 new jobs created per company, $1.5M capital raised per company

June 30, 2013

$154,731 Progress Report detailing

achievement of milestones required in previous quarter and demonstrating progress toward and ability to meet milestones due in June 2014, due June 30, 2013

Payment July 2013

Establish Community Based Technology Transfer Program

September 30, 2013 Non-profit Organization Established

$154,731 Progress Report demonstrating progress toward and ability to meet milestones due in June 2014, due September 30, 2013

Payment October 2013

$185,133 Progress Report demonstrating progress toward and ability to meet milestones due in June 2014, due December 31, 2013

Payment January 2014

Second EIR hired March 31, 2014

Annual Incubator Event Held Recognition of Graduating Tenants Designation of Second Industry Investment Committee

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$185,133 Progress Report detailing

achievement of milestones required in previous quarter and demonstrating progress toward and ability to meet milestones due June 2014, due March 31, 2014

Payment April 2014

Initiation of Fund Development for Incubator Clients

June 30, 2014 20 ideas/technologies

commercialized, 120 assists or service referrals, 10 new companies formed*, 5 new jobs created per company, $1.5M capital raised per company

$185,133 Progress Report detailing

achievement of milestones required in previous quarter due June 30, 2014

Payment July 2014

$185,133 Progress Report demonstrating progress toward and ability to meet milestones in March 2015, due September 30, 2014

Payment October 2014

$182,752 Progress Report demonstrating progress toward and ability to meet milestones in March 2015 and September 2015, due December 31, 2014

Payment January 2014

Annual Incubator Event Held March 31, 2015

$182,752 Progress Report detailing

achievement of milestones required in previous quarter and demonstrating progress toward and ability to meet milestones due in September 2015, due March 31, 2015

Payment April 2015

$182,752 Progress Report demonstrating progress toward and ability to meet milestones due September 2015, due June 30, 2015

Payment July 2015

20 ideas/technologies

commercialized, 120 assists or service referrals, 10 new companies formed*, 5 new jobs created per company, $1.5M capital raised per company

September 30, 2015

Future Incubator Feasibility Study Complete

$182,752 Final Report detailing achievement of milestones required in previous quarter, due September 30, 2015

Payment October 2015

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Marketing Plan

The key to a successful relaunch and branding of the Grand Rapids SmartZone℠ will be having a well thought out and thorough marketing plan. The Grand Rapids SmartZone℠has engaged Kim Bode of 834 Design to help develop and implement our marketing plan. Kim’s experience as a former marketing employee of the SmartZone will be very helpful in identifying the most practical and effective marketing and communication plan for The Grand Rapids SmartZone℠ See attached for initial draft of the Grand Rapids SmartZone℠Marketing Plan.

Budget & Financial

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Total Yr 1 Total Yr 2 Total Yr 3

Variable Costs - - -

Rent Subsidy - - -

Programs Events 12,000 24,000 24,000

Annual Event 15,000 15,000 15,000

Web site and Social Network Development 50,000

Incubator Feasibity Study - 50,000

Fund Develop Study - 30,000

Total Var Expense 77,000 119,000 39,000

Staffing--GVSU Based -

Executive Director 125,000 125,000 135,000

Admin support 50,000 50,000 51,000

Property Manager - 30,000 30,000

Web & Social Media Mngr 25,000 25,000 25,750

Bus Develop Mngr 100,000 100,000 110,000

Total Staff & Adm GVSU 300,000 330,000 351,750

Fringe Benefit 123,600 135,960 144,921 Indirect Cost 60,000 66,000 70,350 Travel/Prof Deve 24,990 24,990 24,990 Operating Exp 208,590 226,950 240,261 Entrepreneurs In Residence (1) 25,000 25,000 25,000 Entrepreneurs In Residence (2) 8,333 25,000 25,000 Entrepreneurs In Residence (3) - 14,583 25,000 Subttl-GVSU 618,923 740,533 706,011 - - Expense Reductions - -

Admin Support by GVSU 60,000 66,000 70,350

EIR State Support via Tech Trans Grant] 16,667 32,292

Subtl Exp Recutions 76,667 98,292 70,350

Total Expense Incubator

542,256

642,241

635,661

Notes to Budget:

 Additional revenue was not projected in this proforma. Expected additional revenue will derive from others sources, specifically additional grants, state funding, rent, federal funds and philanthropy. Though not listed, tenants will be expected to fund portions of their rent.

 In order to obtain long term sustainability, the incubator will continue to work on gaining private funding and/or partnerships with local companies to help fund the program. Entire incubator program will be 100% sustainable within 3 years.

 One time expenditures include development of a regional website and an incubator feasibility studies. Year 1 includes the development of a website U.S. Sourcelink (50K) that will help pull together regional resources. Year 2 includes an incubator feasibility study (50K) as well as a funding feasibility study (25K). The center

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expects to engage Lawrence Molnar of the University of Michigan who has completed extensive national studies on the feasibility and effectiveness of incubators.

 Executive director, contract manager, development manager and admin asst will be GVSU employees until a separate 501(c)3 is established. Budget includes admin and benefit costs based on GVSU allocations (41%). Benefit costs may decrease under a separate corporation.

 Entrepreneurs in residence (EIR) added as clusters are developed; part time adjunct positions at 50K each; state provides $25K subsidy via Tech Transfer agreement for 3 each through a GVSU grant. EIR’s will be independent contractors or adjunct faculty with no benefit costs.

 Indirect costs are administrative costs provided by GVSU and include marketing, office supplies, printing, telephone, internet, office equipment,etc. Rate for indirect costs is 20% which is the GVSU rate for State of Michigan contracts. Federal rate is 40.5%.

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