By Tim Keller
A few weeks ago, I was overjoyed to see the news that a local company, Innerplant, had raised $16 million worth of funding in an equity round led by John Deere.
Innerplant has developed plants that can act as living “sensors” in agricultural fields, giving farmers feedback on the actual needs of plants in that field so that they can manage their water, pesticide and fertilizer decisions better. Its amazing stuff that you can read more about on their website: https://innerplant.com/
While I am happy to see any startup company in our town being successful, this one was especially heartening because Innerplant is an alumnus of Inventopia, the not-for-profit business incubator that I founded and manage with the support of the City of Davis and UC Davis’ Office of Research.
While I cannot take credit for Innerplant’s success in any real way, I CAN take credit for the fact that they are in Davis. When they came to us, there were no options for lab space in town and multiple brokers had told them they either had to try setting up shop in Woodland or West Sac.
When Inventopia expanded to its current location on Pena drive, we allowed Innerplant to take over the entirety of our previous space in order to help them bridge the gap until their current space on Cousteau was ready for them. I also helped them sublease space in the Interland complex which another company in our network needed to withdraw from.
Because Inventopia made a home for Innerplant, there is now $16 million more dollars in our local economy, which is paying property taxes to our city, paying wages for local employees who will then spend those wages at local businesses.
But the reason why I’m sharing this news here, is because Innerplant is a great example of something that I have written about in these pages before: That “Economic Development” requires a very different approach in a town like Davis than it does in most other cities.
For most people who have “economic development” in their job title, the job is about “recruitment” – finding companies that can be lured into one’s city and bring with them those jobs. This is normally done with marketing and economic incentives: tax breaks and sometimes even forgivable loans.
To no small extent, the vast amount of parking that was planned at DiSC was also because of this kind of mis-conception. They assumed that the companies that might move here would, by definition, also be having their workforce commute here every day. This ended up being incorporated in the traffic studies as well, assuming that huge amounts of traffic would be coming to DiSC “from the east”
But those assumptions simply do not line up with the reality of what has been happening in our R&D sector for the past 30 years, or what we should be encouraging to happen in the next 30 years, and the case of Innerplant demonstrates it well.
Most of the startup companies that we have today in Davis are founded by individuals who already live in Davis. This is often UCD Faculty or alumni. Innerplant is actually an exception. Innerplant was headquartered in San Fransisco when we first met them – so why did they come to Davis?
TALENT.
As a company in the crop tech space, the most critical thing that Innerplant needed was the expertise of plant geneticists, and where do you find that? Davis of course.
So the reality of “bringing Innerplant to Davis” is not that I “recruited” them in any way. They wanted to be here because the talent they needed to hire was here. The net change to the population of Davis caused by this company “coming here” was 1 person: A lead engineer who moved here from Half Moon Bay. The rest of their team was recruited locally.
Similar companies in our town have similar stories. Even the “big companies” that you see come to town to set up labs, like BASF and Mars / Wrigley, are mostly doing so in order to access local talent and collaborate with professors who are already here.
It is our pool of highly educated researchers and scientists which are the long-term competitive advantage for our city in terms of economic development, and thanks to the University, it will always be so.
New ideas, new technologies, new companies will always be born here and seek to grow here, and with that activity comes investment: Millions of dollars of funding from outside capital groups sending money into our economy to be spent here on our people.
Unfortunately, just because the talent lives here does NOT mean that the city of Davis automatically gets to harvest the economic value created by its residents. If a company leases space in Woodland or West Sacramento and draws Davis talent outside of our city borders, then we get nothing. In fact, given the fact that most single family housing is a long-term economic loss for the city, we end up subsidizing the economic windfall of neighboring cities in that scenario.
As I like to say: “From an economic development perspective, the City of Davis has been handed a winning lottery ticket… but we have so far failed to cash it in”.
This is the reason why the City, so many times, has come back to the idea of an “innovation park”. It is the promise of a magic bullet to repair our economy – providing space for these companies to set up shop here in town, where Davis taxes apply. It makes a huge amount of sense, especially for a City like Davis where companies like that are constantly being formed.
That said, while I hope that Davis voters will eventually find some version of an innovation center that they can support, it would be a mistake to treat the economic development opportunity of our startup sector as a big-project, an all-or-nothing proposition.
This has been my biggest critique of our city’s approach to economic development thus far: “Building more commercial space” does not equal “Having an economic development plan”.
Even if we had passed DiSC earlier this year, the city would have then have had to transition quickly to try to solve the problem of “how do we fill it” probably by hiring some economic development officer to market the city and find outside companies to sign leases. This would be quite a disconnect from the reality described above.
The better approach, which is more aligned with our actual competitive advantage, would be to nurture a pipeline of these home-grown companies and help them find interim space as they grow. That way, if we do someday approve an innovation park, we will have an idea of exactly who would be moving into that project as anchor tenants. This was one of the points levied by critics of both DiSC proposals, and they weren’t entirely wrong.
That said, no matter what the future holds, there are still a handful of things we can, (and should) be doing in the short term to keep Davis-native companies here for as long as possible, and capture all of the economic activity that we can.
Those things include:
1) Support the expansion of Inventopia. Yes I bring this up at the danger of sounding self-serving, but given the lack of commercial space in this town, particularly lab space, it makes sense.
Right now, Inventopia occupies 3 suites in our building on Pena Drive which formerly housed three different companies. As a cooperative however, with space and equipment that is shared, we are able to accommodate 20+ companies in that same footprint.
If Davis can’t create more commercial / lab space for our homegrown companies in the short term, it makes sense to facilitate “doing more with less”. That is the exactly what Inventopia has been doing for the past 5 years.
2) Focus on building more small-unit transitional space. Just like Innerplant, most startups will have an interim stage where they are too big for Inventopia, but not yet big enough to be attractive to the larger landlords like Buzz Oates, who focus on larger facilities and bigger clients.
Companies at this transitional stage only need small amounts of commercial space, in the range of 1000 to 2,000 square feet per unit with a lot of electricity, and if you can provide them THAT, they can generally figure the rest out.
As luck would have it, part of the City Council’s current goals include the conversion of city property on 5th street between L and Pole Line street to use for economic development. This part of town (and particularly the PG&E site) is what several members of the community have proposed as an infill-alternative for the innovation park.
While convincing PG&E to sell the land is an entirely separate conversation, there is no reason why we should not start getting serious about transitioning the city property along this stretch into small-unit R&D facilities to accommodate our startup sector. In fact the long, skinny nature of the city property that stretches behind Davis media access and the Redwood Barn nursery lends itself nicely to this kind of flexible small-unit commercial space development.
The only thing keeping us from getting a start on a smaller-scale innovation center for transition-scale companies at that location is political will.
3) Create a Research Farm. One of the hardest things for local startups to find, outside of lab space is farm space and greenhouse space. They need this kind of land to grow and test their new varieties of crops, or to test agricultural sensors, or irrigation systems, or robotic harvesting systems and the like. It is very hard to find local farmers who are willing to let research projects like this happen on their land, for a variety of reasons; time and liability among them.
There are not many cities who would consider the provision of farm space as part of their economic development strategy, but for Davis, which is essentially Mecca for the crop science and AgTech industry, it is a no-brainer.
The city owns multiple parcels of farmland around our periphery, and one of them presents a particularly well-aligned opportunity: The parcel known as the “Mace 25”
This 25 acre parcel was retained by the city when it sold off a larger property with the intent of eventually making it into a community farm, though there are no current proposals for how to fund such a program.
If we extend the concept of the “community farm” to include our “business community” however, suddenly there is a path to making this community farm a reality. Development of greenhouses, farm outbuildings, the establishment of wells, and highly segregated irrigation systems so that small plots can be farmed independently, could all be underwritten easily by the commercial partners. The users of Davis’ existing community gardens would be overjoyed.
I shopped this idea to the city several months ago, and even located an anchor tenant, (a local AgTech company which is currently growing exponentially) but eventually I stopped hearing back from the city. I suspect that the absence of having someone in the economic development role is the cause.
In summary: Making room in our city for high-tech companies is still our best opportunity to create a city where we can afford to maintain our bike paths, fund our schools, and get financially into the black. These kinds of companies are capable of bringing massive amounts of money into our economy from the outside, but actually realizing that potential requires a strategy that is tailored to the reality of our own unique opportunities and strengths.
The City has been guilty of treating the concept of an innovation park as some magical cure-all. It is not. It is time that we start taking a more pragmatic look at what economic development really means in a town like ours. We can’t just keep swinging for the fences; the pragmatic path forward at this point is to focus on base-hits that are within our power to accomplish today.
We are in a political season where our council candidates are treating “innovation park” as a dirty word, but the reality is that, as home to a world-leading research university, innovation is still Davis’s best opportunity for developing a robust local economy, and it always will be.
The things I mentioned above are the things we should be doing right now, innovation park or not, to keep the highly valuable companies in our R&D sector here in town for as long as possible, so that the investment revenues they generate are spent in our local economy.
Innerplant is one example of where we have been successful in doing so, but unfortunately, I could also list dozens of companies who have raised similar amounts of money, but whom we have failed to retain. It’s time we start doing something about that, even if it’s a collection of small things.
Tim Keller is a Davis resident and Founder and Executive Director of Inventopia.
The author makes a compelling case for his ideas to improve the Davis economy. One problem of classic economic development is that it creates more work commuting because people are free to live and work as they desire, especially 2 career households where each person works for different entities.
Well, this is no longer a problem once Mr. Shwe builds his long planned bio-dome over the island of Davis. That way when those companies and their employees go to West Sac, Sac, Woodland or Vacaville; their pollution doesn’t get to us.
The alternative without the bio-dome is to send those companies elsewhere. That provides Davis with the added benefit of being able to signal to rest of the region that it’s a shining beacon of environmental integrity to the rest of the world….I mean the Woodland, Vacaville and the Sacramento region doesn’t environmentally effect Davis does it?
Another crazy idea that would never work….is to propose building new commercial areas for prospective companies along with nearby new housing. That way employees would have the option to live near their place of work and hopefully pollute less. I dunno…I’m just spit balling wild fantastical ideas here. I think the reason it would never work other than in fantasy land is because it doesn’t solve all of the problems completely to everyone’s satisfaction.
Another idea that I saw in documentary movie was the idea of getting rid of half the population. You could in a snap of your fingers get rid of half of the population which would solve many of the environmental problems. Once we lost half of the population, we could be more comfortable about allowing economic development and growth because it would have less of an effect on the environment. Also it would be less of an effect on the local infrastructure. No traffic problems to mitigate.
I considered that Davis needs to go to an agrarian economy (the UCD teams are called the “Aggies”). That would satisfy the hardline environmentalists and no growth people in Davis. I’d have to move because I’m not sure my back could take working in the farm fields all day. But given modern politics I think the people Davis would then start fighting over if the town should support only the farming of crops and/or the raising of cattle; because there’s an environmental impact to consider as well as the humanitarian issue of eating animals….but on the other hand we wouldn’t be fighting about traffic!
What is your point Mr. Echols other than to ridicule me?
The primary goal of any of my comments is to amuse myself and to spout of any related or random thoughts and ideas I have at the time.
But do I have a point? Yeah, I’ll have to admit that I didn’t write my comment with a clear point or points so I will try:
1. Economic growth and development are going to happen somewhere in the region if not in Davis and it will still impact Davis. So Davis may as well receive the economic benefits from that growth and development.
2. My next point was about DISC and peripheral growth. That these kinds of proposals are compromises in which the city tries to get the economic development benefits from the commercial growth. It tried to mitigate the environmental impact by providing local housing as an option. But of course then it impacts traffic. I guess my point is that there are no perfect solutions which everybody keeps looking for. There are only our best compromised solutions.
3. Ultimately when you boil it all down there are no true environmental improvement solutions unless society figures out how to function with a shrinking population. Until then all we can do is proposed mitigation solutions that aren’t perfect (see above example of DISC).
4. My last comment was more of dig at the culture in Davis and abroad about how no matter what happens it will splinter into factions that will fight each other over something.
Keith E
You are missing the most important point for having agtech startups in Davis. It’s the same reason why steel was in Pittsburgh, autos in Detroit and semiconductors in San Jose–the agglomeration effect of having similar companies, research entities and trained staff all in one place. When these companies are scattered across the region, state or nation, then that huge benefit (a positive externality in economic parlance) is dissipated. That’s why its fruitless for Iowa to try to attract semiconductor manufacturers. And the workforce has to commute further because all the different companies are scattered rather than in one location near the workforce and the research generator. So having these companies in Davis is environmentally beneficial.
I find Tim’s insight that we shouldn’t be trying to recruit outside companies and instead focusing on organic growth is enlightening. I agree with his perspective. If we do this, then we won’t have to recruit outside firms–they’ll want to locate here.
You missed my point about how the stability of larger companies helps the community financially AND helps the start ups that sprout up around them.
I worked to fund seed stage companies in the Bay Area 20 or so years ago. So I’m all too familiar with startups, incubators and all the relationships created in a start up community that supports the creation and expansion of start ups. I used to pop into Berkeley’s then Incubator and various Angel Investor Networks….(I was even briefly a member of a somewhat controversial Angel group). One of my favorite’s was In-Q-tel which was Intel’s corporate venture capital arm (which was named after…obviously Intel and James Bond’s quartermaster and inventor “Q”). Anyway….there’s a whole culture of entrepreneurship that either directly supports and creates new startups or supports them. That kind of support usually comes from established companies in the same field as the start ups.
So, the premise for this article is that there is a pool of highly-talented Davis scientists, sitting around without a job. Or, that they already live in Davis but work elsewhere, and that someone needs to step forward so that they don’t have to commute elsewhere.
And therefore, they also won’t need any parking.
And that small companies leave places like San Francisco because of all of the lack of talent there, and not because they can find a cheaper place elsewhere.
And that there is a vast shortage of commercial space throughout California, despite the impact of the pandemic and permanent telecommuting which resulted in an enormous wasteland of unused commercial space. So much so that the state is stepping in to convert it to housing.
Oh, and the DISC developers didn’t know what they were doing regarding this – multiple times.
Well then, they shouldn’t need any housing included – since they’re all (according to you) already Davis residents. (Otherwise known as “Davis scientists without jobs”.)
Of course we need housing. We need housing whether or not we develop an innovation park. It is a seperate, but related issue and its a much bigger crisis than the innovation issue, if you ask me.
If one agrees that our biggest economic asset is TALENT, then there are a variety of decisions one would make to ensure that we can retain that talent for the long term. Providing housing is just one of them.
On this we disagree. We don’t NEED housing. The HDC requires housing. I’d accept that we need more affordable housing to some degree. But we don’t really need more for market rate housing. You’d have to make a direct financial argument that the the city NEEDS more market rate housing to convince me because housing is a cost to the community.
Im what you might call “pro university”. I think our city’s very purpose is nothing more than to provide housing and community around UC Davis.
Until every student and UCD employee who wants to live here has an opportunity to do, then we don’t have enough housing.
We dont have to get there via market rate single-family housing. I think we should be focusing on “missing middle” higher density, mixed use developments… but that is a topic for an entirely different thread.
Keith E
“We” means looking beyond are individual parochial private interests (and even then that’s short sighted). “We” means statewide and society at large. Only by being this “we” have we been able to accomplish what we have as a civilization (along will all of its flaws). And right now “we” need affordable housing that is close to productive employment. That means that Davis needs more housing as our responsibility to the greater good. And in addition, our lack of housing is squeezing out the young families that both make our community vital and supplies our local workforce. And they generate more tax revenue per capita for a number of reasons which we need to maintain our public services.
Of course I agree Tim’s point that Davis and UCD are in a tight symbiotic, synergistic relationship that we must acknowledge and act on. We need to stop denying that it exists.
So you and I are on complete opposite sides on this philosophically speaking. I’m what you would call “pro city”. The city and UCD very clearly have established that they want to do their own things. It’s why they have those city limit thingies. So the city has it’s own self interests as does UCD. The city exists outside of UCD’s needs. If the city is just a suburb of UCD then the city of Davis will be nothing more than Chico and not the innovative place you want it to be like Palo Alto. I’m all for more collaboration between the city and the university that mutually benefits both parties. But I am adamantly against the notion that the city is here to service UCD.
Keith, i bet if we tease the issue out a bit we are closer than you think.
I suspect we might agree on two statements related potentially:
1) The city has no obligation to provide housing which is an economic loser for the city
2) It is in the city’s best interest to provide housing to meet local demands, if that housing creates a net benefit to the city.
Within that framework there is a LOT of work to do in terms of providing housing to allow Davis to catch up with demand from the University.
I’d elaborate… but we are off topic here. Im sure we will discuss this soon 😛
I’m not sure if you’re trying to simplify things for the voters in term of economic development? Are you worried that they will conflate your proposed expansion of Inventopia with the big research parks like DISC that were shot down?
I think your “swing for the fences” and “singles” metaphor is a political one? Because investing in start ups (be it straight up capital or in this case the support of startups by the local community) is a swing for the fences. The goal is of course for them to grow to a mushroom cloud of explosive return through IPO or acquisition. But at least 9 out 10 start ups fail. So it’s frequently an all or nothing investment. The rate of these failures goes down some by the stage of the company’s development. So seed stage companies fail more frequently than those seeking Round C of funding. I’m guessing the Inventopia companies are past the friends, fools and family seed stage of development. Are the companies in Inventopia looking for Rounds A, B or C funding?
The reality is that the local economy needs both larger companies and start ups. It needs space for both. Hopefully some of those start up companies become successful, grow and stay in Davis. Think of the bigger companies as anchor tenants in a shopping center. The smaller stores come and go but the big ones stay around for awhile. And having bigger companies in town in the same industries as the start ups can be very important for the development of start ups. All of the start ups in Silicon Valley are there because of Stanford but also because of Fairchild, Intel, HP, Oracle and later Apple, Ebay and Google. They provide ideas, employees, mentorship and funding to start ups.
But I believe you’re making a political statement about hitting a single. You just want to get some more start ups planted in Davis and then fix/expand based on needs going forward. But I’d like to think that Davis can do both. But maybe you’re right and the voters have a limited attention span and vision for growth.
On the other hand what is UCD’s appetite for this kind of expansion? I’ve thought that the smart thing to do for UCD is to expand it’s development beyond student and faculty housing. The next step would be for commercial development to service and support their student and faculty community. After that it would make sense to expand it’s commercial and industrial footprint as well. And integrated commercial component to a planned residential and commercial community could eventually pay for itself and be a positive revenue generator should any of the start ups become a hit and expand.
Keith, from the city’s perspective, the high failure rate of startups is a non-issue. If a company raises $16 million and then ultimately fails, that money has still been spend IN our local economy. The city still wins even if they fail.
That said, we do get more from the companies that DO make it out the other side of the “valley of death” as its called, so its not that we aren’t interested in helping them succeed, we definatley are. But you simply don’t get to pre-pick only the survivors. Companies that set up roots in one location and develop a team from that region seldom move away. So to get those big successes ( and we have MANY) you have to make room for the development phase companies as well.
It’s a pipeline, and it’s win for the city all along the way.
No. Im saying that we should not be thinking of economic development merely in terms of an innovation park. Right now there is no innovation park concept on the table, and no indication that there will be one soon, but that does NOT mean that we should be doing nothing. To the contrary, there are a lot of things we can and should be doing right now, regardless.
This isnt possible. Because of the Bayh-Dole act of 1980, any intellectual property created by R&D activity that is financially supported by the University is the property of the University. Inventopia exists for specifically this reason: The university needs an arms-length partner for development work that is off campus and is financially independent of the university. We work in “partnership” with them but they cannot directly support us in a financial or material sense without creating an IP conflict.
I agree, and to a large extent, that is my point. I hate stretching sports metaphors too far.. but I’ll risk it: If the innovation park is a “home run” then you want the bases loaded before that hitter comes up right? The “base hits” in this analogy are doing the small things that make room for / provide resources for the companies in the developmental pipeline, and that is good for our economy whether or not we end up developing big shiny commercial space for them in the long term.
I was talking from more of an urban planning and real estate development perspective. I’m not saying the University should directly create and expand your incubator lab or directly fund those start ups (although they usually have some arm for investment). I’m saying that they could plan for that kind of commercial and industrial expansion on their property. That expansion doesn’t have to be done and funded directly by the University. Commercial and residential developers can be independent 3rd parties that create the space on UC land that your companies and others might want. What the university would get out of it is business, (some) parcel and sales tax revenue.
The short answer: Building anything on campus is significantly more expensive than building in the private sector. I have heared complaints of “double” the cost…
5-comment rule is in effect (I realize Keith has 6 now). So any further comments that exceed 5 per person will remain in the queue and be released tomorrow.
* How much of this or any $16 million etc is actually spent in Davis? I realize that salaries are nearly always the top expenditure of a company, but in this case and others there are often huge costs for high-tech or industrial equipment or substantial modifications even of a rented facility.
^ Not all infill is the same as far as location: The residential stuff proposed for E. Covell is sort of close to an elementary school, a junior high, a Nugget, a CVS…. and a fast road at most times to I-80; the light industrial or mixed use proposed more generally for 5th St. between L and Pole Line is close to everything except an elementary school…. as not only students but UCD faculty and staff live all over Davis, for the General Plan update we really need to seriously consider the results of the Campus Travel Survey which shows that cycling starts to diminish not so far east of Pole Line…. so we need several zones based on potential travel by active transportation…