Log in
updated 2:54 PM CDT, Jul 28, 2018

FlynnsHarp logo 042016

Art Harrigan played legal role that helped save Seattle Mariners, Seahawks

..

The community thank you last week to former Sen. Slade Gorton for his instrumental role in saving major league baseball in Seattle was an appropriate reminder of his signal accomplishment for the community. But without detracting from Gorton's role, it may also be appropriate at some point to recognize the Seattle attorney whose legal victory set the stage for the search for a local owner.

That would seem particularly appropriate since the Seattle attorney, Arthur Harrigan Jr., had key legal roles in saving two of the Seattle professional sports franchises

Art Harrigan not only succeeded in forcing Mariners owner Jeff Smulyan to give business and community leaders four months to find a local buyer, but five years later he paved the way for a local sale of the Seattle Seahawks by preventing owner Ken Behring from moving the team to Los Angeles.

The legal confrontations with the owners of two of Seattle's professional sports teams came about because Harrigan's law firm, Calfo Harrigan Leyh & Eakes, long represented King County on an array of issues. And both owners came into conflict with the county because they sought to abandon the county-owned Kingdome and their leases there.

The venue for resolving the future of the Seattle Mariners franchise was what amounted to an arbitration hearing before Arthur Andersen, the national accounting firm agreed to by both sides to decide some key issues relating to the lease.

Since it wasn't a court process, which would have gotten large visibility for the battle between attorneys, Harrigan's maneuvering over the meaning of wording in Smulyan's contract regarding an attendance clause that was key to the final outcome was little noted, thus little remembered.

Harrigan's argued interpretation of the lease-requirement wording was accepted by the Andersen firm, so Smulyan was required to give an opportunity for a local buyer to be sought.

Of perhaps equal importance, Harrigan successfully argued that there should be a local value lower than the open-market value. The accounting firm agreed and set a "stay-in-Seattle" valuation at $100 million, rather than the national open-market value of $135 million that it had determined.

That created the opportunity for Gorton and others leading the effort to keep the team in Seattle to find a local buyer for $100 million, rather than $135 million, within four months.

No one knows if, at $135 million, Ninetendo's owner would have opted to pick up the cost of saving the Mariners for Seattle.

With respect to the effort to block the Seahawks' move, King County hired Harrigan's firm to keep Behring from fulfilling his widely publicized intent in the winter of 1996 to leave Seattle and move the team to Los Angeles.

Behring made the argument, after some tiles had fallen from the Kingdome roof, that he had concerns about seismic security of the facility as he announced that he was moving the team to Los Angeles.

Harrigan recalled the February meeting at the Woodmark Hotel at Carillon point at which he, King County Executive Gary Locke, Gary Locke, his assistant, and chief civil deputy Dick Holmquist with Behring's attorney, Ron Olson (who he noted was also Warren Buffet's attorney).

"Olson read from a yellow pad, explaining that the team, fearing earthquakes might impact the Kingdome, had to be moved to the comparative safety of Southern California and the Rose Bowl," Harrigan said. "Holmqust and I were trying not to laugh."

"We were poised to file a temporary restraining order the moment the trucks began rolling up to the team's offices in Kirkland," Harrigan said.

"So when Behring and Olson left the room, I made the call and the restraining order was filed," he added. "Had that not happened, we would have had to go to California and ask a California judge to send them back."

Behring had quickly, after the restraining order, filed suit in Kittitas County, so as part of the legal process, Harrigan also had to get the state Supreme Court to toss out that suit.

A few weeks later he and Behring attorneys met with NFL owners who were considering whether to allow the team to move, in the event Behring could escape the Kingdome lease, and made their presentations.

"I had brought Jon Magnusson and two other renowned structural engineers with West Coast seismic design expertise who explained that the idea that Southern California was safer than the Kingdome in case of earthquake was ludicrous," Harrigan said.

The legal maneuvering all came to an end when it was announced that Paul Allen had purchased the Seahawks.

While Harrigan, 72, is ranked as Seattle's top commercial trial lawyer by Chambers & Partners, which ranks the world's best lawyers and law firms, his legal activities have ranged well beyond the courtroom.

He worked with Craig McCaw in his early Eagle River Investments days, helped create the wireless company Nextel, which became a $7 billion public company, is a member of the boards of several public companies. His is chair, and was a principal fund raiser, for an interesting new company that will generate energy by storing electricity on trains.

Harrigan, a Harvard graduate with his law degree from Columbia, served as Senior Counsel to the U.S. Senate Select Committee on Intelligence, worked on an investigation of CIA intelligence activities related to Vietnam.

Most intriguingly, and perhaps as important as his later pro sports involvements in Seattle, he headed the committee's investigation of IRS intelligence operations, discovering that the agency was giving individuals' tax returns, under the claim of national security, to other intelligence agencies who were then misusing the information in sting operations.

.

Continue reading

Attracting investors to Montana's Big Sky Country and its entrepreneurs

.

Those who have watched or experienced Liz Marchi's commitment to provide funding for Montana entrepreneurs and startups for a decade might suggest that the term "angel investor" was coined specifically to describe her.

It was 2003 that Marchi, who had arrived in Montana with three daughters and her then husband and settled in the Flathead Valley, decided to create the state's first angel fund, Frontier Angel Fund I. The fund closed in 2006 at $1.7 million, $300,000 more than she had hoped.

She eventually guided the Kalispell-based fund, which had attracted investors from around the country who were either fans of or summer residents in the Big Sky Country, to lead three deals and gather a total of 12 active investments and was soon also overseeing angel groups that had sprung up in Missoula and Bozeman.

Because she successfully syndicated her deals with a number of other angel groups outside the state, she jokes that she has become "the grandmother of crowd funding." She's not referring to the formal definition of crowd funding but rather the syndication efforts she initiated that attracted a crowd of angels from numerous groups making small investments.

Now Marchi, who grew up near Jackson Hole, WY, but who had never been to Montana when she arrived here in 2000, says she is looking forward to making the investor-leader handoff to Will Price, whose roots in the state brought him back from Silicon Valley to create Next Frontier Capital, at $20 million the largest venture fund ever raised in the state.

Price, on the board of or a key executive with a number of Bay Area tech companies, did his due diligence on the attitudes of national venture and mergers & acquisitions firms toward Montana before making the move to Bozeman.

Price's fund, which closed last April a year following his decision to bring his family to the state where his father, Kent Price, is well known as Montana's first Rhodes Scholar and University of Montana board member, has already made two investments.

I've kidded Liz and her husband, Jon, who in 1978 founded Glacier Venture fund as the first venture fund in Montana and presided over it for 29 years, about being "Mr. and Mrs. Montana Money." To which she once responded: "We are more like Mr. and Mrs. Montana risk capital since we share a very high risk tolerance...and often share the consequences."

Although Marchi talks about making a handoff to Price, as well as "the next generation of angels, including some members of Fund II in their '30s, who slay me in terms of their abilities," she was completing the formation in August of $2.7 million Frontier Fund II, which has already invested $900,000 with syndication adding $300,000 for a total of $1.2 million already invested.

"We have 48 investors in 10 states and meet physically in Bozeman and the Flathead, alternating with a WebEx option," Marchi said, noting that investors met in Bozeman today, with investors from two continents and four states, including Montana investors from Bozeman and Kalispell to review three Bozeman companies.

That sounds less like "handing off" for the 62-year-old Marchi than welcoming the potential follow-on investment opportunity that venture capital can represent for angel. And she hopes Price's fund will provide.

She says she does have an agreement with Fund II to be the key administrator only for the next two years, but could opt to remain longer. And she is down to business cards representing her current five involvements.

But Marchi is genuinely pleased at the implications of the arrival in Montana of Price, who did his homework before deciding a venture fund could work in Montana.

Price shared with me the research he did with and his thoughts about how "changing values" will benefit Montana's ability to attract capital.

Montana was often dismissed as a "fly-over" state, meaning that the most viable potential investors on the east and west coasts usually just fly over on their way to the other coast.

But Price's SurveyMonkey sampling of both venture and merger & acquisitions firms and found that the appeal of the big sky to many increasingly disenchanted with urban challenges was strong but that direct air access is a challenge Montana must come to grips with.

Fully 70 percent of responding M&A firms said they would consider buying a company in Montana, even though 80 percent said they had never been to the state. And a third of the venture firms said they would consider doing a deal in Montana, although 47 percent said they had never been there.

The import of improved air access to a state that has no direct flights currently to the major markets was dramatically indicated with the response of M&A firms, 90 percent of whom said it was "important" or "Moderately important" to have direct air access to the market of their investment.

"That's something the state is going to have to address," Price said. "But I think it will be addressed."

Among venture firms, almost two thirds sad the quality of the local syndicate partner would determine their involvement.

Although Marchi herself has attracted investors from around the country, she observes that "Being away from the noise of the coasts keeps us grounded in an important way.

"The entire conversation and perception needs to move about rural America, what is going on here and its role in making our economy and our country work better," she said, expressing the principle that has guided her commitment to Montana entrepreneurs.

Continue reading

Montana's 'angel' investor sees changing values boosting state's investor appeal

Those who have watched or experienced Liz Marchi's commitment to provide funding for Montana entrepreneurs and startups for a decade might suggest that the term "angel investor" was coined specifically to describe her.

Liz Marchi
Liz Marchi 
It was 2003 that Marchi, who had arrived in Montana with three daughters and her then husband and settled in the Flathead Valley, decided to create the state's first angel fund, Frontier Angel Fund I. The fund closed in 2006 at $1.7 million, $300,000 more than she had hoped.   
     
She eventually guided the Kalispell-based fund, which had attracted investors from around the country who were either fans of or summer residents in the Big Sky Country, to lead three deals and gather a total of 12 active investments and was soon also overseeing angel groups that had sprung up in Missoula and Bozeman.

Because she successfully syndicated her deals with a number of other angel groups outside the state, she jokes that she has become "the grandmother of crowd funding." She's not referring to the formal definition of crowd funding but rather the syndication efforts she initiated that attracted a crowd of angels from numerous groups making small investments.

Now Marchi, who grew up near Jackson Hole, WY, but who had never been to Montana when she arrived here in 2000, says she is looking forward to making the investor-leader handoff to Will Price, whose roots in the state brought him back from Silicon Valley to create Next Frontier Capital, at $20 million the largest venture fund ever raised in the state.

Price, on the board of or a key executive with a number of Bay Area tech companies, did his due diligence on the attitudes of national venture and mergers & acquisitions firms toward Montana before making the move to Bozeman.

Price's fund, which closed last April a year following his decision to bring his family to the state where his father, Kent Price, is well known as Montana's first Rhodes Scholar and University of Montana board member, has already made two investments.

I've kidded Liz and her husband, Jon, who in 1978 founded Glacier Venture fund as the first venture fund in Montana and presided over it for 29 years, about being "Mr. and Mrs. Montana Money." To which she once responded: "We are more like Mr. and Mrs. Montana risk capital since we share a very high risk tolerance...and often share the consequences."

Although Marchi talks about making a handoff to Price, as well as "the next generation of angels, including some members of Fund II in their '30s, who slay me in terms of their abilities," she was completing the formation in August of $2.7 million Frontier Fund II, which has already invested $900,000 with syndication adding $300,000 for a total of $1.2 million already invested.

"We have 48 investors in 10 states and meet physically in Bozeman and the Flathead, alternating with a WebEx option," Marchi said, noting that investors met in Bozeman today, with investors from two continents and four states, including Montana investors from Bozeman and Kalispell to review three Bozeman companies.

That sounds less like "handing off" for the 62-year-old Marchi than welcoming the potential follow-on investment opportunity that venture capital can represent for angel. And she hopes Price's fund will provide.

She says she does have an agreement with Fund II to be the key administrator only for the next two years, but could opt to remain longer. And she is down to business cards representing her current five involvements.

But Marchi is genuinely pleased at the implications of the arrival in Montana of Price, who did his homework before deciding a venture fund could work in Montana.
Price shared with me the research he did with and his thoughts about how "changing values" will benefit Montana's ability to attract capital.

Montana was often dismissed as a "fly-over" state, meaning that the most viable potential investors on the east and west coasts usually just fly over on their way to the other coast.

But Price's SurveyMonkey sampling of both venture and merger & acquisitions firms and found that the appeal of the big sky to many increasingly disenchanted with urban challenges was strong but that direct air access is a challenge Montana must come to grips with.

Fully 70 percent of responding M&A firms said they would consider buying a company in Montana, even though 80 percent said they had never been to the state. And a third of the venture firms said they would consider doing a deal in Montana, although 47 percent said they had never been there.

The import of improved air access to a state that has no direct flights currently to the major markets was dramatically indicated with the response of M&A firms, 90 percent of whom said it was "important" or "Moderately important" to have direct air access to the market of their investment.

"That's something the state is going to have to address," Price said. "But I think it will be addressed."

Among venture firms, almost two thirds sad the quality of the local syndicate partner would determine their involvement.

Although Marchi herself has attracted investors from around the country, she observes that "Being away from the noise of the coasts keeps us grounded in an important way.

"The entire conversation and perception needs to move about rural America, what is going on here and its role in making our economy and our country work better," she said, expressing the principle that has guided her commitment to Montana entrepreneurs.
Continue reading

Gil Folleher, who built strong business-leader support for JA, remembered for his legacy

Junior Achievement, as an organization focused on enhancing young people's understanding of business and finances, has had a natural appeal to business executives and their companies. But Gil Folleher, who died over the weekend at the Eisenhower Medical Center in Palm Springs at the age of 75, brought business-leader support for JA in the Seattle area to a near-evangelical level over his years guiding JA locally.

folleher
Gil Folleher 
Most importantly, perhaps, in the words of PEMCO CEO Stan McNaughton, he "left a legacy of footprints that will be followed for a long time. He was a king-maker-and the kids were the kings (and queens)."

The JA footprints in Washington state have left larger marks than the organization's impact in other states and that has been due to Folleher guiding involvement by executives at the highest levels of their companies.

In fact, he set a model for other non-profits to aspire to with a pattern from the late '80s through his retirement in 1998 of presidents or CEOs chairing, and being actively involved on, JA's board.

There are many important non-profit causes in this region, ranging from the needs of children or the sick or elderly to arts groups and causes to advance the community. And the most successful ones are blessed to have business executives supporting with time and dollars to help point them in successful directions.

And this is a time of the year when business people and others of means should pause to remember the cause or causes that are fortunate enough to have their attention and even affection.

But few organizations have been more successful over the years than JA in keeping focused on its cause: helping guide the understanding of the free enterprise system among young people and, recently even more vital in the view of many JA supporters, teach the importance of financial literacy.

Folleher, who moved from his Seattle leadership position to a role with the national JA organization in 1998 before retiring to Palm Springs, is being remembered by both active and retired business leaders who were closely involved with JA and who thus knew him best for the value he brought to the economic education of young people.

Folleher's strategy of creating close relationships among his board members included the Puget Sound JA chapter sending the largest delegation each year to the National Business Hall of Fame, an experience that he understood would contribute to the bonding strategy. Thus he made the trips an important part of each year's JA activities.

During his second tenure with JA in Seattle the number of students impacted by JA programs quadrupled to more than 60,000, deficits became surpluses and the annual budget grew to more than $2.4 million.

And in the manner of the best of non-profit executives, he groomed his successor well and thus David Moore, JA President for what has grown to be JA oversight for all of Washington state, says of Folleher, "he was my mentor, friend and inspiration." 

Under Moore, who spent a decade as Folleher's marketing director before succeeding him in 1998, JA programs have grown and come to reach a dramatically expanding number of students around the state each year. 
 
It was through involvement with JA as publisher of Puget Sound Business Journal to create a local Business Hall of Fame in a partnership between the newspaper and his organization that I came to be close friends with Folleher and eventually served as chair of the JA board.

Ken Kirkpatrick, retired president of U.S. Bank of Washington, knew Folleher the longest because it was Kirkpatrick, along with his future wife SaSa, who met Folleher at the airport when he arrived in Seattle in 1972 for for his first stint guiding JA's Seattle operations.

Kirkpatrick recalls that he was only 17 at the time, but was serving as JA's temporary executive director, "along with my janitor job there. He treated me like a king and he gave me my first ever Christmas gift from an employer-a very fancy shoeshine kit that I used just last week."

Woody Howse, then guiding Cable & Howse Ventures and now described as "the grandfather of Seattle's venture-capital community" was incoming board chair when Folleher arrived in 1987, returning to Seattle after serving as JA's Senior Vice President in charge of programs and marketing nationally. 

"Folleher's network through all of JA was unparalleled and as a result we got the benefit in Seattle of a world-class sponger of Best Practices," Howse said.

Lasting friendships was true for me, and this column is an unabashed good-memories reflection on a man who not only became a good friend, but who was responsible for many of my closest friendships formed over the mutual connection to JA and the work we all did together to build and promote the organization and its cause.
 
Scott Harrison, retired president of Barclay-Dean Interiors, who also served a term as JA board chair, praised Folleher for guiding board members to "embrace the vision that Gil and his team had for JA."

And John Fluke, of Fluke Venture Partners (another top executive who took his turn as JA board chair) and the son of the man described as "The Father of JA" in this region, said "I know Gil would want all of us to do our part to advance JA's mission to bring economic and personal financial literacy to all K-12 students."

Rather than merely recall Folleher after his death, friends from around the country were able to be on hand in Palm Springs last January for his 75th birthday celebration where, as Moore recalls with a smile, "we partied for three days."

Now those who were close to Folleher will gather again, despite his insisting there be no service or memorial, for a toast and sharing of memories January 13 at 5:30 p.m. at the Waterfront Marriott.
 
In what amounted to an appropriate summing up, Moore noted: "I have always said we are warming by a fire we did not build since what JA is today is a legacy for Folleher's passion and leadership."'
Continue reading

A rural economic development strategy focused on entrepreneurs

 

If Global Entrepreneurship Week, the annual worldwide celebration of innovators and job creators, had been a competition among nations, states and regions, Washington State could have laid claim to being the hands-down winner. And that would be appropriate recognition for the man who has guided much of this state's effort to advance entrepreneurship, particularly in rural areas and particularly with young people, for 25 years.

 

 

 

 

Maury Forman, senior manager for the Washington State Department of Commerce, is proud of the fact that in this state, GEW 2015 was actually Global Entrepreneurship Month and extended to every corner of the state with activities in all 39 counties. Four years ago, when Forman plugged the state into GEW activities, three counties participated.Forman says "we are changing the way communities look at economic development." That's an outgrowth of his effort, over much of his quarter century overseeing key economic-development sectors, to develop a culture of entrepreneurism in rural areas.

Global Entrepreneurship week was founded in 2008 by the Kauffman Foundation, the Kansas City-based 501c3 that is the nation's pre-eminent entrepreneur-focused organization, to create an annual celebration of innovators and job creators who launch the start-ups that drive economic growth.

 

Forman, who joined what was then the Department of Trade and Economic Development in 1991 in a career transition from healthcare at the age of 40, says "No other state can claim that every part of the state had at least one event that celebrated entrepreneurship."

 

 

"One of the exciting aspects of this year's celebration of entrepreneurship was the number of high school programs being held throughout the state," Forman said. "In many cases, college isn't the natural next step it was once for high school students so these programs expose them to the idea of starting their own business once they graduate. Or if they do go on to college, they can focus their education on skills that will allow them to start a business in the years to come."

 

 

Forman says he has kept his primary focus on rural economies because "they need the assistance much more than urban communities," as well as because he has become convinced that the strategies for growth of many rural areas that has been focused on recruiting companies from out of state is outdated.

 

 

"That has to change if rural communities are to survive," Forman said. "Communities have to be shingle ready and not just shovel ready."  

 

 

In a recent article in Governing, a national magazine covering state and local government news, Forman wrote about Washington's three-year-old program called Startup Washington that focuses on building local economies "organically" by serving the needs of local startups and entrepreneurs.  

 

 

Forman is likely among the national leaders in the conviction that programs to enhance local economic development "must nurture the belief that young people who grow up in rural communities can be guided to start businesses in their own community rather than moving to urban centers."

 

 

"Just as young people are looking at new ways to enter the work force other than working for someone else, so too are communities looking for ways other than recruitment of businesses from elsewhere to grow their economies," Forman said.

 

 

One of the ways he is seeking to do that "is by matching those students that are serious about being entrepreneurs with mentors, especially in rural communities."

 

 

Indeed matching students who hope to be entrepreneurs with mentors is becoming the model for successful communities, particularly rural ones, to pursue.

 

 

Some communities have long been employing that model, as chronicled in the oft-quoted book written by Jack Schultz, founder and CEO of Agracel, a firm based in Effingham, IL, that specializes in industrial development in small towns.

 

 

It was in pondering why some small towns succeed where others fail that Schultz set out on the backroads to rural America to find out as he became the nation's guru of rural economic development and wrote of his travels in Boomtown USA: the 7 ½ keys to Big Success in Small Towns.

 

 

I emailed Schultz about entrepreneurism's role in small town success and a possibly emerging role for mentor programs.

 

 

"Embracing entrepreneurism in communities has been a key factor that differentiated great communities from also-rans," he emailed back. "Increasingly, we are seeing those great communities taking it a step up by tying their local entrepreneurs up with their young people, educating them on both entrepreneurship and also the great things happening in the private sector of their towns."

 

 

Schultz' successes in believing in small-town entrepreneurs and small-business lending is partly responsible for the fact the Effingham-based bank he helped found and now chairs the board, has grown eight fold to $2.9 billion in assets and gone public.

 

 

"At Midland States Bank, we have very much focused on small business lending and it has been a major factor in our growth over the last several years," Schultz said.

 

 

In an unusual and innovative commitment to the dozens of communities it serves, the bank has funded a not-for-profit institute to expand an entrepreneurship class that was started in Effingham eight years ago and has now expanded to 27 other towns.

 

 

Forman seemed intrigued by the details Schultz provided:  The class meets each day during the school year from 7:30 to 9 am; meets in local businesses; is totally funded by local businesses with a maximum contribution of $1,000 per business or individual.  Each class has a business and each student must also start a business.  

 

 

Meanwhile, Forman approaches his 25th anniversary with the department on January 1 having collected numerous regional and national awards for his work and successes. Those include last year winning the international Economic Development Leadership Award and recognitionby the Teens in Public Service Foundation with the Unsung Hero Award for his work with at risk kids.   

 

 

He has authored 14 books related to economic development, and has also designed and developed creative "game show' learning tools, including Economic Development Jeopardy, Economic Development Feud and two board games for the profession.

 

 

Forman credits the directors who have guided the department over his time there for allowing him "to be intrapreneurial," meaning behaving like an entrepreneur while working in a large organization, noting "not many government agencies allow the freedom to take risks in an effort to solve a given problem."

 

 

 

 

Continue reading

Rural economic development and young people

 

If Global Entrepreneurship Week, the annual worldwide celebration of innovators and job creators, had been a competition among nations, states and regions, Washington State could have laid claim to being the hands-down winner. And that would be appropriate recognition for the man who has guided much of this state's effort to advance entrepreneurship, particularly in rural areas and particularly with young people, for 25 years.

https://mlsvc01-prod.s3.amazonaws.com/f9d31d49001/30a3ef8d-4001-4795-971c-0da1ede61b9e.jpg

Maury Forman

Maury Forman, senior manager for the Washington State Department of Commerce, is proud of the fact that in this state, GEW 2015 was actually Global Entrepreneurship Month and extended to every corner of the state with activities in all 39 counties. Four years ago, when Forman plugged the state into GEW activities, three counties participated.

Forman says "we are changing the way communities look at economic development." That's an outgrowth of his effort, over much of his quarter century overseeing key economic-development sectors, to develop a culture of entrepreneurism in rural areas.

Global Entrepreneurship week was founded in 2008 by the Kauffman Foundation, the Kansas City-based 501c3 that is the nation's pre-eminent entrepreneur-focused organization, to create an annual celebration of innovators and job creators who launch the start-ups that drive economic growth.

Forman, who joined what was then the Department of Trade and Economic Development in 1991 in a career transition from healthcare at the age of 40, says "No other state can claim that every part of the state had at least one event that celebrated entrepreneurship."

"One of the exciting aspects of this year's celebration of entrepreneurship was the number of high school programs being held throughout the state," Forman said. "In many cases, college isn't the natural next step it was once for high school students so these programs expose them to the idea of starting their own business once they graduate. Or if they do go on to college, they can focus their education on skills that will allow them to start a business in the years to come."

Forman says he has kept his primary focus on rural economies because "they need the assistance much more than urban communities," as well as because he has become convinced that the strategies for growth of many rural areas that has been focused on recruiting companies from out of state is outdated.

"That has to change if rural communities are to survive," Forman said. "Communities have to be shingle ready and not just shovel ready."  

In a recent article in Governing, a national magazine covering state and local government news, Forman wrote about Washington's three-year-old program called Startup Washington that focuses on building local economies "organically" by serving the needs of local startups and entrepreneurs.  

Forman is likely among the national leaders in the conviction that programs to enhance local economic development "must nurture the belief that young people who grow up in rural communities can be guided to start businesses in their own community rather than moving to urban centers."

"Just as young people are looking at new ways to enter the work force other than working for someone else, so too are communities looking for ways other than recruitment of businesses from elsewhere to grow their economies," Forman said.

One of the ways he is seeking to do that "is by matching those students that are serious about being entrepreneurs with mentors, especially in rural communities."

Indeed matching students who hope to be entrepreneurs with mentors is becoming the model for successful communities, particularly rural ones, to pursue.

Some communities have long been employing that model, as chronicled in the oft-quoted book written by Jack Schultz, founder and CEO of Agracel, a firm based in Effingham, IL, that specializes in industrial development in small towns.

It was in pondering why some small towns succeed where others fail that Schultz set out on the backroads to rural America to find out as he became the nation's guru of rural economic development and wrote of his travels in Boomtown USA: the 7 ½ keys to Big Success in Small Towns.

I emailed Schultz about entrepreneurism's role in small town success and a possibly emerging role for mentor programs.

"Embracing entrepreneurism in communities has been a key factor that differentiated great communities from also-rans," he emailed back. "Increasingly, we are seeing those great communities taking it a step up by tying their local entrepreneurs up with their young people, educating them on both entrepreneurship and also the great things happening in the private sector of their towns."

Schultz' successes in believing in small-town entrepreneurs and small-business lending is partly responsible for the fact the Effingham-based bank he helped found and now chairs the board, has grown eight fold to $2.9 billion in assets and gone public.

"At Midland States Bank, we have very much focused on small business lending and it has been a major factor in our growth over the last several years," Schultz said.

In an unusual and innovative commitment to the dozens of communities it serves, the bank has funded a not-for-profit institute to expand an entrepreneurship class that was started in Effingham eight years ago and has now expanded to 27 other towns.

Forman seemed intrigued by the details Schultz provided:  The class meets each day during the school year from 7:30 to 9 am; meets in local businesses; is totally funded by local businesses with a maximum contribution of $1,000 per business or individual.  Each class has a business and each student must also start a business.  

Meanwhile, Forman approaches his 25th anniversary with the department on January 1 having collected numerous regional and national awards for his work and successes. Those include last year winning the international Economic Development Leadership Award and recognitionby the Teens in Public Service Foundation with the Unsung Hero Award for his work with at risk kids.   

He has authored 14 books related to economic development, and has also designed and developed creative "game show' learning tools, including Economic Development Jeopardy, Economic Development Feud and two board games for the profession.

Forman credits the directors who have guided the department over his time there for allowing him "to be intrapreneurial," meaning behaving like an entrepreneur while working in a large organization, noting "not many government agencies allow the freedom to take risks in an effort to solve a given problem."

 

 

Continue reading

Rural economic development and young people

 

If Global Entrepreneurship Week, the annual worldwide celebration of innovators and job creators, had been a competition among nations, states and regions, Washington State could have laid claim to being the hands-down winner. And that would be appropriate recognition for the man who has guided much of this state's effort to advance entrepreneurship, particularly in rural areas and particularly with young people, for 25 years.


Maury Forman 

Maury Forman, senior manager for the Washington State Department of Commerce, is proud of the fact that in this state, GEW 2015 was actually Global Entrepreneurship Month and extended to every corner of the state with activities in all 39 counties. Four years ago, when Forman plugged the state into GEW activities, three counties participated.

Forman says "we are changing the way communities look at economic development." That's an outgrowth of his effort, over much of his quarter century overseeing key economic-development sectors, to develop a culture of entrepreneurism in rural areas.

Global Entrepreneurship week was founded in 2008 by the Kauffman Foundation, the Kansas City-based 501c3 that is the nation's pre-eminent entrepreneur-focused organization, to create an annual celebration of innovators and job creators who launch the start-ups that drive economic growth.

Forman, who joined what was then the Department of Trade and Economic Development in 1991 in a career transition from healthcare at the age of 40, says "No other state can claim that every part of the state had at least one event that celebrated entrepreneurship."

"One of the exciting aspects of this year's celebration of entrepreneurship was the number of high school programs being held throughout the state," Forman said. "In many cases, college isn't the natural next step it was once for high school students so these programs expose them to the idea of starting their own business once they graduate. Or if they do go on to college, they can focus their education on skills that will allow them to start a business in the years to come."

Forman says he has kept his primary focus on rural economies because "they need the assistance much more than urban communities," as well as because he has become convinced that the strategies for growth of many rural areas that has been focused on recruiting companies from out of state is outdated.

"That has to change if rural communities are to survive," Forman said. "Communities have to be shingle ready and not just shovel ready."  

In a recent article in Governing, a national magazine covering state and local government news, Forman wrote about Washington's three-year-old program called Startup Washington that focuses on building local economies "organically" by serving the needs of local startups and entrepreneurs.  

Forman is likely among the national leaders in the conviction that programs to enhance local economic development "must nurture the belief that young people who grow up in rural communities can be guided to start businesses in their own community rather than moving to urban centers."

"Just as young people are looking at new ways to enter the work force other than working for someone else, so too are communities looking for ways other than recruitment of businesses from elsewhere to grow their economies," Forman said.

One of the ways he is seeking to do that "is by matching those students that are serious about being entrepreneurs with mentors, especially in rural communities."

Indeed matching students who hope to be entrepreneurs with mentors is becoming the model for successful communities, particularly rural ones, to pursue.

Some communities have long been employing that model, as chronicled in the oft-quoted book written by Jack Schultz, founder and CEO of Agracel, a firm based in Effingham, IL, that specializes in industrial development in small towns.

It was in pondering why some small towns succeed where others fail that Schultz set out on the backroads to rural America to find out as he became the nation's guru of rural economic development and wrote of his travels in Boomtown USA: the 7 ½ keys to Big Success in Small Towns.

 

I emailed Schultz about entrepreneurism's role in small town success and a possibly emerging role for mentor programs.

"Embracing entrepreneurism in communities has been a key factor that differentiated great communities from also-rans," he emailed back. "Increasingly, we are seeing those great communities taking it a step up by tying their local entrepreneurs up with their young people, educating them on both entrepreneurship and also the great things happening in the private sector of their towns."

Schultz' successes in believing in small-town entrepreneurs and small-business lending is partly responsible for the fact the Effingham-based bank he helped found and now chairs the board, has grown eight fold to $2.9 billion in assets and gone public.

"At Midland States Bank, we have very much focused on small business lending and it has been a major factor in our growth over the last several years," Schultz said.

In an unusual and innovative commitment to the dozens of communities it serves, the bank has funded a not-for-profit institute to expand an entrepreneurship class that was started in Effingham eight years ago and has now expanded to 27 other towns.

Forman seemed intrigued by the details Schultz provided:  The class meets each day during the school year from 7:30 to 9 am; meets in local businesses; is totally funded by local businesses with a maximum contribution of $1,000 per business or individual.  Each class has a business and each student must also start a business.  

Meanwhile, Forman approaches his 25th anniversary with the department on January 1 having collected numerous regional and national awards for his work and successes. Those include last year winning the international Economic Development Leadership Award and recognitionby the Teens in Public Service Foundation with the Unsung Hero Award for his work with at risk kids.   

 

He has authored 14 books related to economic development, and has also designed and developed creative "game show' learning tools, including Economic Development Jeopardy, Economic Development Feud and two board games for the profession.

Forman credits the directors who have guided the department over his time there for allowing him "to be intrapreneurial," meaning behaving like an entrepreneur while working in a large organization, noting "not many government agencies allow the freedom to take risks in an effort to solve a given problem."

 

 

 

Continue reading

Startup BeneSol hopes to capture Vitamin D fans with new, safer fast-dose kiosks

A Seattle-based start-up guided by a serial entrepreneur and supported by a couple of prominent businessmen with investment-success pedigrees is seeking to capitalize on the growing concern about the health impact of Vitamin D deficiency by producing a sit-down kiosk that would deliver large doses of Vitamin D in a safe manner.

 

The company is BeneSol Inc., which is completing an initial funding round to build and begin putting in place self-service kiosks designed to be a novel approach to address what the company's executive summary characterizes as "a worldwide vitamin D-deficiency epidemic."

 

Rick Hennessey 

BenSol CEO Rick Hennessey is an entrepreneur who has built and successfully exited five companies, including most recently Cequint, a Seattle wireless service provider that he sold to TNS, Inc. for over $100 million in 2010.

 

Hennessey explained that the machines, which will cost about $20,000 each, are not intended to be sold but rather to be placed into clinics and other healthcare facilities and for BeneSol to be paid for their use.

 

His ambitious goal is to put 10,000 of the machines into the marketplace in six years, which he estimates will produce up to $1.5 billion in revenue. His vision is that use of the kiosks, which he says will "take about two minutes and involve no more risk than standing in the sun for 60 seconds," will "become like brushing your teeth."

 

He and BeneSol founder Alex Moffat, whose background is in software development, have attracted a couple of experienced investors in Woody Howse, co-founder of Cable and Howse Ventures, one of Northwest's original venture firms, and Chris Ackerley, a founder of Ackerley Partners.

 

In addition, the latest addition to the company's board is Ralph Pascualy, M.D., CEO of Swedish Medical Services.

 

Although a large majority of people in this sun-starved area are Vitamin D deficient, (Hennessey says estimates are about 80 percent in Canada and about 77 percent in the Northwest), not everyone who might decide to use the kiosks is deficient. So I asked if they are going to suggest users get blood tests to verify deficiency.

 

Hennessey noted that new blood-test machines "are hitting Walgreens and other pharmacies and that will bring blood tests into the consumer space at a very low cost."

 

"We also have developed an algorithm that will predict D level accurately and will incentivize people to take a blood test as part of the process," he added.

 

It was Howse, through a friends and family connection, who met Moffat and began making key introductions and spreading the word about Moffat's personal involvement in working with manufacturers in developing a new light source.

  

Howse noted that the current fund-raising round will allow the company to go through a beta test using the device for treatment of psoriasis, which he described as "the most prevalent immune-deficiency disease in the world."

 

Howse soon went on the board of BeneSol, which was founed in 2009, and became an investor.

 

So BeneSol executives are aware they will be viewed merely as another early technology in a sector where an array of businesses are providing "The Sunshine vitamin" in one form or another in substitute for available sunshine.

 

One competing technology has already basically eliminated itself from the field, tanning devices. A unit of the World Health Organization has added ultraviolet radiation-emitting tanning beds and lamps to the list of the most dangerous forms of cancer-causing radiation.

 

Another competitor, Vitamin D supplements are taken by almost half of older adults. But a little over a year, Fortune Magazine columnist Steve Salzberg zeroed in on Vitamin D supplements in his Fighting Pseudosciencecolumn.

 

He cited two studies that he said "show that most of those people taking Vitamin D supplements are wasting their money."

 

Then there are the UVB light source devices and lamps, including those manufactured by competitors like Philips, which could become an acquirer as BeneSol moves forward, if the startup's growth approximates the investors' hopes.

 

Referring to the light-source competitors, Hennessey said "We have to complete FDA, but our initial testing and the long-established science tells us that we are far safer, require less time and are more effective then their technology."

 

I asked Hennessey about the importance of those using the kiosks maximizing skin exposure, meaning was disrobing an issue that needed to be dealt with.

 

"The more skin exposure the better, but you don't have to get naked," Hennessey replied.

 

"When we run focus groups with women, we ask the question of whether or not they would undress in our unit," he added. "Not a single woman in our focus group had an issue.  They made comments like, 'I change in dressing rooms, and many don't even have locks or often doors.' Our machine is a secure kiosk with door that locks."

 

FDA approval is still on the futures list so that becomes a cautionary note as they explain their expectations.

 

"We anticipate being the first device to go through FDA so that we can claim safe and effective production of vitamin D," he added. "Like most early technologies, there are some alternative options that will compete for the dollar, but, nothing like what we are doing."

Continue reading

Like Sinatra, Seattle developer Martin Selig's defining song could be 'I did it my way'

Frank Sinatra's defining song "I did it my way" would be equally appropriate for Seattle developer Martin Selig, except that Selig, at the age of 77, continues to do it his way.

 

"His way" includes buying or constructing buildings on his own (meaning no partners) at a relentless pace, taking far-flung solo trips on his Harley Davidson motorcycle (he recently returned from circling Switzerland) and turning out paintings that demand a high price when he donates one to a charity auction.

At a recent question-and-answer session at the Columbia Tower Club as part of the 30th anniversary activities of the club Selig founded atop the 76-story building that is his signature project, which is also marking 30 years, he reflected on his decades impacting the face of Seattle-area development.  

Selig bought his first building and founded Martin Selig real estate in 1958 while still a college student and recalled at the q and a session that he put $2,000 down on what was a $50,000 building on the edge of University Village, which came into existence later on.

That first purchase began a process of acquisition and development which today has Martin Selig Real Estate having developed more than 7.7 million square feet of first-class mid- to high-rise office space, representing about a third of the downtown Seattle office market.

Selig first got involved in shopping centers, building them then bringing in occupants before selling them.

He used the proceeds from sale of the shopping center to buy his first building, a one-story structure in the Lower Queen Anne area that in 1969 led to the development of his first commercial office building, which was a five-story, 60,000-square foot project.  

That began a process in which Selig developed a building a year over the next two decades, including the Columbia Center, which he explained to the audience was "merely like building eight buildings at a one time."

Once part of a group of local CEOs who donned leathers and rode off together on their Harleys to become known as "Hell's Rotarians," Selig has seen the group mostly retire and put away their bikes, leaving his trips to be solo ventures.

He told the audience at the Tower Club interview that he is sending one of his bikes to Rhode Island for the Newport Jazz Festival, after which he plans to travel home across Canada.

Asked what he worries about, Selig replied "I don't worry about anything."  

That despite the fact that as he remade Seattle's skyline, he was no stranger to what others might view as treading on the financial brink during several economic downturns, surviving by selling off some of his key properties including in the late '80s the Columbia Center where we were doing the interview.

 

But as a well-known Seattle real estate broker once joked, "he's been the cat with nine lives."

 

Referring to his riding, painting and other personal activities, Selig summed up "as long as you can do whatever you want to do, it makes what you have to do at work easy."

Asked about his succession plan, Selig said: "I leave the future to Goldman Sachs," noting he has no particular thought of guiding his real estate company into the hands of his kids. The answer was in response to a question about his thoughts on media mogul Rupert Murdoch's unabashed and high-profile effort to put his children into ascendant roles in his company.

"They come and go in the business," Selig said of his three children, noting that Lauren, the oldest of two daughters, is now a producer with several movies at the Venice Film Festival, and that his son, who has been living in Israel, is returning to Seattle to enroll in real estate at the UW.Youngest daughter, Jordan, still in her 20s, has been acquiring, fixing up and leasing residential properties in Germany.

 

Meanwhile, his pace of development activity shows little sign of slowing with planned future buildings sharing space with his paintings on his office walls.

I asked Selig about the total absence of partners in his years in the business and he replied that while partnerships may start out well, inevitably a disagreement will arise and that diverts attention from the business focus.

Selig is a close watcher of politics and at one point in our interview said to me: "I thought you might have some political questions."

"So if I were to ask you a political question, what would it be?" I responded.

"Who is going to win the Republican presidential nomination?' he replied. So I bit and asked that question.

"It will be a brokered Republican convention, with none of the numerous candidates having enough delegates from the primaries to capture the nomination," he predicted. "Then the convention, which won't be able to agree on any of the candidates who have been competing bitterly through the primaries, will settle on Mitt Romney."

Considering that if Selig buildings, past and present, were color coded on a perspective photo of Seattle, they would dominate the picture, he actually is less visible than people might expect, making little effort to grab the limelight.

Thus, as Mike Kunath, founder and principal at the investment advisory firm Kunath, Karne, Rinne and Atkin, and a friend of Selig's for a quarter century or more put it: "Selig's contributions and his legacy are understood or appreciated by maybe 10 percent of people here."

Putting those contributions in perspective may not happen until Selig finally slows down.

Continue reading

LSDF's comparatively tiny budget should be easy to fund, given its role in the state's future

Don Brunell, retired president of the Association of Washington Business, summed it up best as we were discussing the perilous state of the fund whose purpose has for a decade been to promote the state's life sciences competitiveness.

"A $19 million expenditure in a $40 billion biennial budget is too small a percentage to even try to calculate," said Brunell, who as longtime president of the state's largest business association guided business's side of negotiations through four governors and two dozen legislatures.

"If it's a really important issue, as it seems the Life Sciences Discovery Fund (LSDF) should be viewed, you just take the $20 million out of a major-funded item," Brunell said, "particularly at a time when the state is experiencing an unexpected surge in revenue. It's not that difficult."

Brunell's comment, borne of years of playing the game of helping lawmakers reach budget goals while finding a way to save the most important business items in the final budget, is an important comment, since it's a thought that may still occur to the small group of legislators deliberating the final form of the state budget for the coming biennium.  

To be sure, there are a lot of smaller programs whose supporters are seeking to pressure lawmakers to safeguard in the final budget."Molehills vs. the 'mountain' of holding off new taxes," as one prominent business friend of mine, whom I respect but disagree with on this, put it in referring to those various programs.

That current LSDF funding of $19 million a biennium is the small remainder of the $400 million tobacco-settlement money from which LSDF was established in 2005 by the Governor and Washington's Legislature. The goal of the fund was to support innovative research in this state to promote life sciences competitiveness, enhance economic vitality, and improve health and health care.

The challenge for LSDF at this point is that while the money to sustain its funding for another biennium is in the House (Democrat) budget, and strongly supported by the governor, there is nothing for the agency in the Senate (GOP) budget, and there apparently is even Senate talk of taking back some of the money already granted.

Word leaked out earlier this week that the four budget negotiators (a Democrat and a Republican from each house) had reached a tentative deal on the total size of the budget. That's the first step before lawmakers begin tinkering with details, hammering out individual items (like the funding for LSDF's survival) and, of course, reaching some compromises before the hard deadline at the end this month when the biennium itself ends.

There is some belated talk, but probably not nearly enough of it, from business leaders about hammering the Senate with the reality that Republicans can't abdicate the image of supporters of entrepreneurs and innovation to a Democratic governor and Democratic House members.

Brunell was one of a half dozen major business-community figures I had talked within the past week to get a sense of the depth of understanding of and interest in the LSDF and its purpose. And Brunell admitted, as others have, that he was only vaguely aware of LSDF's role (which is visible mainly to the biotech industry and its supporters) or that it was in danger of disappearing, assuming that if it was an important business issue, Republicans would be watching out for it.

 

Brunell, who in his retirement now produces a regular column that appears in several dozen newspapers, seemed struck by the lack of visibility on what he agreed seemed vital to future of an emerging industry in this state.

Noting that there are a number of issues whose backers are bombarding supporters to press their legislators, Brunell said "I am pummeled with emails and contacts from wildlife and recreation and the folks wanting a carbon tax, but besides you I am not hearing from LSDF advocates. But supporting LSDF seems like a no-brainer."

It's important to share that my belief in the importance of LSDF comes, as is usually the case, from personal involvement and commitment. I had only been generally aware, as a journalist, of LSDF and its background and role.

Then I became involved in actively supporting an emerging biopharma company named M3 Biotechnology, believing in its potential dramatic impact if it gains FDA approval for a drug that would reverse neurodegenerative diseases, and in the CEO, Leen Kawas, who has been guiding the company's successful growth.  

As one whose wife suffers from Parkinson's Disease and with a father who died of it, and relatives and friends who have Alzheimer's, the company was a natural one.

It was as a result of involvement with the company that I learned the importance of LSDF, since the then just-launching M3 received grants from LSDF that allowed it to bridge what's referred to as the funding "Valley of Death," the financially challenging period from birth of a company to the successful initial funding round.

 

I also researched what states are doing to attract biotech, which this state's sound and fund has largely substituted for commitment, and learned that others are spending millions of dollars to attract and grow what they realize will be a key economic pillar in the future.

"M3 isn't the only company that needed the LSDF funding to survive until finding conventional funding," said Chris Rivera, CEO and President of the Washington Biotechnology and biomedical Association.

"Legislators tell me 'if we give LSDF $19 million, we'll have to take it away from somewhere else," Rivera said. "And I reply, 'if LSDF goes away, and the industry begins fading and the economy is being impacted in this state a result, you'll be doing a lot more looking somewhere else to make the cuts that will be necessary.'"

Continue reading

Spokane firm seeks to bring new model to green-card-for-investment program

The EB-5 program that gives foreigners their green cards for a $500,000 investment in a U.S. business has seen a Seattle company, American Life Inc., become a national model for success of the program. Now Spokane entrepreneur Peter Chase is seeking to create what he calls a "true economic development tool" with EB-5, focused on funding new businesses across Washington State rather than just real estate.

 

Peter Chase

Both American Life's success, visible in the form of new buildings in Seattle's Sodo District and in other cities where it operates with a focus on real estate development, and Chase's initiative come at a time when Congress is mulling changes in the EB-5 program that could affect both.  

 

EB-5, officially the Immigrant Investment Program, was created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by up to 10,000 foreigners a year who must show their investment created or saved at least 10 jobs in order to earn permanent U.S. residence.

 

The law, and a key modification in 1992 to allow creation of Regional Centers to pool EB-5 capital and administer the investment projects and track results, has funneled billions of dollars into the U.S. economy though only in the past couple of years has the 10,000-investor target been reached.  

 

EB-5 turns 25 this fall and Congress must renew, change or eliminate the program. There is virtually no chance Congress would end the program but some of the changes being discussed, and advocated, including dramatic increase in the amount of investment a foreigner would be required to make, could have a serious impact on American Life's success and Chase's aspirations.

 

Chase has launched Columbia International Finance, LLC, which he intends to operate as one of those Regional Centers that are government-approved firms which administer the investment projects that seek to attract the foreign capital.

 

American Life was founded in 1996 by real estate and immigration attorney Henry Liebman, the firm's chairman and CEO, and now operates nine of the nation's 652 Regional Centers, including five in this state.

 

. It is viewed as one of the most successful and longest continuously operating regional center management companies, operating centers from Miami to Southern California, plus the Pacific Northwest.The focus of American Life, as with most of the regional centers, has been real estate development projects. 

But Chase, who founded and for more than a dozen years served as CEO of Spokane Valley-based Purcell Systems, a maker of outdoor telecommunications cabinets that grew to $140 million before it was sold last year, has a different model in mind.

 

"We plan to target projects that deliver true economic impact for communities," Chase said. "We have no intention to build hotels and we are not developers. There are just a handful of centers doing what we consider to be what the original intent of the EB-5 program was, meaning  true, ongoing economic development."

 

Chase points to the centers operated by the City of Dallas and an industrial development entity in Philadelphia as fulfilling that original mission of creating jobs and thinks he could do that in Washington State in cooperation with economic development entities.  

In fact he thinks port districts in this state could partner with his new firm as well as potential projects in Spokane's University District with the ports or organizations like the University District Development Association receiving the EB-5 funds, through Chase's firm, for projects those economic development entities need to find funding sources.

 

Chase's new company, for which he has spent the last eight months developing contacts in foreign countries who will help guide EB-5 investment hopefuls in his direction, will generate revenue through origination fees on the financing and a margin of the interest. Investors also will pay a fee for Columbia's guidance through the process.

 

Chase says the vast majority of foreign investors are from China, but Columbia International Finance will seek investors from other parts of Asia, as well as the rest of the world.  

 

The first project for Chase's firm is expected to be construction of a new Ronald McDonald House in downtown Spokane where the $26 million facility will be constructed with roughly 60 percent of the funding coming from EB-5 investors.  

He has also had discussion toward a possible involvement that would bring EB-5 money through his firm to the proposed research and development campus on the site of the old Northern State Hospital in Sedro Woolley. The proposed project would provide up to 1,000 technical jobs on what would be a revitalized campus to support Janicki Bioenergy and complementary uses.

Chase sees both projects as legitimately fitting in the Targeted Employment Area (TEA) that is the designation of a project's acceptability for the $500,000 foreign-investment rather than $1 million. The TEA designation, assigned in Washington by the State Department of Employment Security, means an EB-5 project is being located in either a rural area or a location that has high unemployment.  

Chase isn't the only one thinking of using EB-5 to help finance new businesses. The day after first talking with Chase about his project, I had a breakfast meeting in San Diego with a friend there who is using a mix of EB-5 and conventional investor funding to launch a new company.

David Jacobs is a partner with a North San Diego County law firm. His new company, Stellar Innovations, has already raised $1 million of private funds with $2.5 million in EB-5 money to come for a new business that will be located in a TEA area somewhere in the job-challenged convergence of San Diego, Riverside and Orange Counties.

The business itself will be appealing to investors of both kinds, and likely grow quickly to other metropolitan markets because, as Jacobs explained to me, "its proprietary technology can eliminate billions of pounds of nylon carpet waste bound for landfills each year."  After the initial facility in Southern California is completed,Stellar plans to rely heavily on EB-5 funding to help rapidly expand its services to other areas of the country.

The issue on the table relating to the congressional decision on EB-5 in September appears to be not whether it will be renewed, but what changes Congress will make to the program. Politicians from both major parties support the renewal of the program, but for some, only with changes.

Presidential hopeful Jeb Bush, for example, has publicly voiced his opinion that Targeted Employment Area designation should be eliminated entirely, leaving the EB-5 investment amount at $1 million. Part of the rational of Bush and others who want to eliminate TEAs is that many of the large-scale EB-5 Regional center projects are found in affluent urban areas like Manhattan, Los Angeles, and Miami, with census tracts are often manipulated to allow for a TEA designation.

Others want a cost-of-living adjustment to the two-decade-old $500,000 figure, which, if TEAs were eliminated and $1 million became the only factor, could make the cost to a foreign investor substantially greater, up to as much as $1.8 million, and would make similar programs in other countries more attractive to those seeking to buy citizenship.

Continue reading

Deal-maker Joe Schocken committed to making sure an Alaska-Delta deal never comes about

The walls of Joe Schocken's office at Broadmark Capital are filled with the financial "tombstones" of deals his firm has done over the years, but he is in the forefront of business-community efforts to make sure one deal doesn't come about. The deal that is anathema to Schocken would be the one-day disappearance of Alaska Air Group into the covetous arms of Delta Airlines.

When Schocken and I first discussed what has become Alaska's David-and-Goliath struggle with Atlanta-based, 10-times-larger Delta, he forcefully said "this community needs an anti-Delta campaign!"

We concluded the conversation that afternoon in the office at his financial-services firm with his reluctantly agreeing with me that we needed to help drive a positive campaign for Alaska because "anti" campaigns don't sell well in Seattle.

But in light of recent events, as Schocken and I visited again yesterday, I found myself saying "You may have been right the first time, Joe, given what has been unfolding of late."

The issue, of course, is growing concern within the business community in Seattle and Spokane that Delta is bent on driving Alaska, through tactical use of its dramatically greater income as one of the world's two largest air carriers, into a merger or acquisition.

But jumping ahead of the battle for passenger dollars at this stage of their competition, the current point of contention between the two airlines is the question of construction of a new international-arrivals facility at Seattle-Tacoma International Airport.

And a step that should be key to an "anti-Delta" mood in this community is Delta's blatant effort to insert one of its own onto the Port Commission that governs Sea-Tac operations, getting Des Moines resident Ken Rogers, a Delta pilot who has been on Delta's board for eight years, to seek election to the commission in the upcoming election.

Shocken shook his head as he discussed the logic for that "arrogant action, trying to directly control government decisions for Seattle from Atlanta" to instill anger in this community.

He notes that the projected cost of the international facility, which would benefit Delta more than any other airline but be paid for primarily by travelers on domestic flights of Alaska and other carriers, "isn't money for a new terminal but basically just a sky bridge to a concourse, being positioned as an international-arrival building."

How that eventually plays out, with Delta urging the Port Commission to approve the plan that has doubled in cost to an estimated $608 million with much more cost likely to come as a plan actually begins to be drawn up, is still to be decided by the commission.

  

Alaska's contention is that it's unfair that fees attached to domestic tickets would be used to benefit passengers on international flights and that the airport should go back to the drawing board to devise a less costly plan.

The commissioners are undecided on how the cost share should be parceled out, something Delta would like to influence with its own commission member.  

"Another angle that I think Alaska Airlines executives should be pointing out is how would you like to be an Alaska businessman envisioning a possible Delta takeover," Schocken observed. "As big a problem as it would be for Seattle to lose Alaska as its hometown-focused airline it would be a much bigger problem for the state for which Alaska Airlines is the lifeline and understands the needs of the state. They've grown up together."

"I doubt if the people in Atlanta even know where Alaska is," he chuckled.

"It isn't just trying to own a seat on the Seattle Port Commission that should upset people who are fans of Alaska," Schocken said. "What you have is a series of things coming together, including Delta beginning non-stop service to Sitka. There is no international traffic and little growth coming out of Sitka, thus undermining Alaska is the only purpose behind that flight."

"Finally there's the issue of June 1 reauthorization or the Export-Import Bank, something very important to our region's economy for which Delta's Dick Anderson is the key opponent, claiming it subsidizes its competitors," Schocken said. "Meanwhile Delta is buying planes from Canadian and Brazilian manufacturers and receiving subsidies from their governments. That makes Delta hypocritical, not mention anti-Boeing, but that's another subject."

Schocken emphasized, as he says he does when it makes his Alaska-Delta points in conversation he routinely has at business meetings or cocktail gatherings, to what he says are reactions of tremendous support for Alaska, that he's not hoping to see Delta lose a battle with Alaska. Rather he wants to see Seattle and the Northwest served by two successful airlines.

But in any event, he says "we're only in the first or second inning of a likely long game."

Meanwhile, Alaska keeps its focus on the goal of remaining the nation's most respected domestic carrier, last week being singled out for the J.D. Power customer-satisfaction award for the eighth consecutive year.

It was USA Today, not an Alaska press release, that noted "Alaska Airlines and Jet Blue continued their stranglehold atop the annual J.D. Power customer service satisfaction survey of North American carriers."

Alaska CEO Brad Tilden has avoided negatives about Delta in speeches he's given in recent months.

But he is the guest at next week's Business Journal Live q and a event where he will be interviewed by PSBJ Publisher Gordon Prouty, an environment where he could strategically refer to comments he's heard made by Alaska fans about Delta without saying those things himself.

Continue reading

Is Delta's focus on Alaska 'just business' or something that has long been unacceptable?

As the awareness grows of Delta Airlines' increasingly obvious designs on the business of Alaska Air, it's intriguing to see that while a majority in the business community are quickly becoming protective of what they view as their hometown airline, there are some who have said to me: "it's just business."

When I did my first column on this issue in December, suggesting that the once beneficial relationship Delta and Alaska had was turning predatory, a number of proponents of the free-market system found themselves agonizing a bit before most sided with my viewpoint.  

John Fluke, an outspoken proponent of the notion of free markets and competition, was sophisticated enough to quickly distinguish between the concept of competing to win, necessary to the success of our economic system, and competition with the goal of driving out competitors.

Fluke, and others like him I have talked to over the weeks of seeking to test viewpoints and plumb attitudes, noted that the key to the acceptability of a competitive approach is the question: "Does it benefit the customers?"

Strategies aimed at driving out competitors have been unacceptable since the dawn of the last century when that great advocate of competition, President Theodore Roosevelt, took the Sherman Anti-trust Act as a bludgeon against corporations that sought to win by gobbling up or driving out competitors.

I decided to do a bit of research on that law that became Teddy Roosevelt's tool in busting trusts and learned that the law declared illegal "all combinations in restraint of trade."

As one explanation put it: "The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself."

So is it in the spirit of competition that Delta would seek to extends its service to, for example, Alaska cities that offer one airline marginal income and offer two airlines only red ink?

Maybe, on the issue of Delta seeking to convince the University of Washington to take Delta's money in exchange for becoming Delta's travel partner. But that's a possible development that hopefully UW's regents would deem counterproductive for the university in the longer-term goal of building allegiances rather than divisiveness.

It has occurred to me that the quest by this community's leadership in seeking to determine whether the possible eventual demise of Alaska through takeover or acquisition would be good or bad for the community would be served by asking those who have been there.

Thus the idea I have been talking up is for a group of business and community leaders to set a meeting with their peers in Minneapolis-St. Paul, which once had its own hometown airline, Northwest, which was absorbed by Delta.

In fact, a city-to-city visit of Seattle-area leaders with their peers in Minneapolis-St.Paul could explore more issues than just air service, since the two regions have long shared economic roots and similarities.

It was almost exactly seven years ago, April 15, 2008, that Delta and Northwest merged to form the largest airline in the world. Has the merged airline that resulted benefitted the Twin Cities? Has it resulted in little change (other than the loss of jobs that Northwest represented to the region)? Or significant?

Might be worth finding out, guided by a recollection of philosopher-poet George Santayana's oft-recalled (and oft-misquoted): "Those who cannot remember the past are condemned to repeat it."

Continue reading

Juno and Omeros: What a difference a year makes in image of state biotech industry

A year ago Washington's biotech industry was beset by the major image hit of the departure of Amgen and the death rattle of once high-flying Dendreon. But the industry's image in this state has shifted in 2015 with positive national attention from analysts, market watchers and investors being focused on a pair of Washington companies, Juno Therapeutics and Omeros Corp.

And the companies themselves have nearly opposite stories. Juno, founded by four MDs and two PhDs less than two years ago and taken public near the end of 2014, was the Nasdaq's biggest biotech IPO of the year, while Greg Demopulos, M.D., founder and CEO of Omeros, jokes that his company has taken 20 years to become an overnight sensation.

Greg Demopulos 

Juno brought together innovative technologies from some of the world's major research institutions, including Seattle's Fred Hutchinson Cancer Research Center, in a technology that genetically engineers T-cells to recognize and kill cancer. That caught the biopharma-investment world in a storm of upbeat reaction.

The "overnight sensation" that Demopulos refers to for Omeros is the first FDA-approved product for use in eye surgery. It's called Omidria, which Omeros is on the verge of launching, that will provide ophthalmologists a product that is FDA-approved, proven sterile and safe, and reimbursable by payers. One analyst observed that physicians should soon be using it as standard of care.

Juno's key executives are already on the health care-conference trail this month, with CEO Hans Bishop presenting this week in Boston at the Cowen and Company annual Health Care Conference, and CFO Steve Harr., M.D., presenting next week in Miami at the 2015 Barclays Global Healthcare Conference.

Juno's IPO debuted the company at $24 a share, with the price soaring 60 percent the first day before closing at $35. The stock has been as high as $61 a share since then but is trading in the mid-$40s this week. Juno raised $265 million from the offering after already having raised $314 million in venture capital investments over the prior year.

Juno's growth has already created a bridge of sorts from the Amgen-Dendreon down period to this year's uptick in the image and fortunes of the state's biotech industry as Juno has been hiring some of Amgen's and Dendreon's former key employees.

Whereas Juno's rise to prominence made the company virtually an overnight success, the path for Omeros has been more challenged, but suddenly equally eye catching for analysts and investors as the stock has jumped from just under $12 per share at the end of October to just over $25 at the beginning of this week. Some analysts are now suggesting the stock will climb to $38 per share.

This is the company that was tabbed by one analyst, after its $10 per share IPO was followed within days by a 38 percent per-share drop, as the "worst performer of all the 42 companies that have gone public in the U.S. this year."  

The reason for the current excitement over Omeros is the debut of Omidria, which is used during cataract surgery and lense replacement to dilate pupils and prevent pain, replacing a solution that eye surgeons presently must order from drug compounders but is not reimbursable and is described as "a highly inefficient and risky way to treat your patients."

"The FDA approval of Omidria is the first of what we expect will be a long line of product approvals for Omeros given our deep pipeline of products, many of which are currently in clinical trials," said Demopulos.

Indeed a second visibility bump for Omeros happened in late 2014 with the second drug in the company's pipeline, positive results from phase 2 trial of a drug called OMS721. The drug would basically address some orphan diseases like Atypical Hemolytic-uremic Syndrome, a disease that primarily causes abnormal blood clots in the kidneys.

But Demopulos is candid in discussing, during the interview last week, the years of challenge he faced in building the company.

"Right now we are considered a company on its way to success, but it took a long time to get to this point," Demopulos said.

"There were a number of times when the company was significantly at risk of not succeeding. You come to a wall and you can't see around it, under it or over it, but you just have to persevere and somehow you end up on the other side of the wall."

Addressing the challenge of successfully building a biotech company in Washington State, Demopulos said it might have been easier to start his company in the Bay Area but that he felt committed to this area. But he singles out the need for the state to take a leadership role if the road to biotech success is to be made easier.

"In order to create a strong biotech community in this state, some things cleary need be done, including restoring the r&d tax credit," Demopulos said. "If we can put that benefit back in place, then we can begin to recruit biotech companies to the Northwest to make it easier to attract talent to the region."

"Currently it's difficult to attract talent, given that there are fewer biotech companies in the Northwest," he said. "Employees coming to the region have concern about future lateral mobility."

"And we don't have a formal life science or biotech initiative like Texas, Wisconsin, Florida and Massachusetts where multi-billion dollar biotech initiatives contribute to the ability to establish companies in those states," he added. "At Omeros, we are trying to support that sort of initiative by putting together a fund, in cooperation with Life Science Discovery Fund and Vulcan to use our profits to spin out biotech startups."

"But if we are really interested in building a biopharmaceutical-Life science industry in this state, then the state has to be willing to provide funding and tax incentives," he said. "It isn't a giveaway program, but rather one with an outcome that's been proven in other states where the benefits are high-paying jobs and additional revenue to the state. But it has to be done in substantial measure or it will likely fail."

Demopulos named his company after his father, Greek orthodox priest The Very Rev. Dr. Alexander Homer Demopulos, known to his flock as Father Homer, who died in 1993, a year prior to the launch of Omeros.

The name for his company (Omeros is Homer in Greek) was not only appropriate recognition of his father's role in his life, it was also ironically appropriate for the path Omeros has followed. Like the ancient Greek hero Odysseus, whose wanderings after the Trojan War the ancient Greek poet Homer immortalized in his epic poem The Odyssey, Omeros had a series of "wanderings" leading up to its 20th anniversary last June and the breakthrough that followed.

And Demopulos is clear that Omeros won't become another promising Washington biotech firm lost to merger or acquisition.

"We have no interest in being acquired," he emphasized. "If that had been part of our plan for the future, we would have built the company in a different way."

Continue reading

NIelsen calls for major education overhaul

As the 2015 Legislature looks down the double barrels of a pair of multi-million dollar education-funding challenges, one ordered by the court and the other by the voters, a new book by former Seattle school board president Don Nielsen calling for a major overhaul of the basic structure of education is attracting increasing attention.

Don Nielsen 

Nielsen, a successful businessman who turned his attention to education and began a 20-year role as education activist, including two years traveling the country in search of good ideas and a decade on the Seattle school board, says funding isn't the issue. "It is the system and the people who populate it that need to change."

But the Washington State Supreme Court, in a January 2011 ruling that ordered the legislature to fully fund basic education and last fall held the lawmakers in contempt for failing to comply with that order, says funding IS the answer. Then voters, by a bare majority, in November approved Initiative 1351 to limit class sizes. That brought an additional multi-million-dollar reality to legislative deliberations.

And as the issues relating to education funding come under increasing scrutiny, there is increasing visibility for Nielsen, who seems to be at the epicenter of discussion about the future of basic education in this state, and elsewhere. His book, Every School: One Citizen's Guide to Transforming Education, has become a national focal point in discussions about the future of public education.

The book has led to speeches before a long list of Rotary clubs and other organizations, beginning late last year before the Seattle Rotary Club. Another five rotary talks are scheduled for next month, and radio interviews are occurring on talk shows across the country.  

"Most of what we're hearing is that we need more money and lower class sizes, but we have tried that and it hasn't worked," said Nielsen. "We now spend three times as much per child in inflation-adjusted dollars as we did in 1970 and we also have four times as many adults in our schools with only eight percent more children."  

While Nielsen confides he has little hope that his ideas will ever pass muster before a legislature in this state because of the power of the forces opposed to dramatic change in the public education system, a legislature closely divided politically may decide that a dramatic education-funding change should be accompanied by other dramatic changes.

It's logical that Nielsen would take a businesslike view of analyzing what changes are needed for basic education to work since dramatic success as an entrepreneur over nearly a quarter century preceded his personal commitment to learn about education's needs, and then seek to bring those about.

His business success involved co-founding in 1969 a start-up biological and chemical testing company that he helped grow into the world's largest company in its industry by the time he had taken it public. He then helped guide its acquisition in 1987 by Corning, which kept him on as CEO of the firm, Hazelton Corp., and over the following five years he doubled the company's annual revenue to $165 million.

Newspaper editorialists, policymakers and lawmakers from both parties have begun to suggest that if more money must be spent on education, then perhaps dramatic change in the system itself should be considered.

And the fact that Nielsen is reaching audiences on talk shows in cities across the country suggests that what he describes as an "obsolete" system is facing serious scrutiny in states other than just Washington.

"Basically, my premise is that the system is obsolete and needs radical change," he told me in one of several phone conversations  in recent days. "However, like a failing business, you don't embark on radical change with the people who created the problem in the first place.  So, to fix our schools, we must first fix the people and we must do so at all levels; teaching, leadership and governance."

As a frank and to-the-point kind of a guy who has brought an entrepreneur's focus, innovation and zeal to his pursuit of improving education, Nielsen has stirred critics who were protective of the status quo while attracting respect and support from those who shared his view that the structure of education needed to change.

Interestingly, the latest Elway Poll shows that for the first time in seven years, economic issues are not at the top of the public's wish list for legislative action. Rather it is education.

Stuart Elway, president of Elway Research, says his poll shows that 65 percent of those polled think the Legislature should do as much as possible without cutting other programs or raising taxes, 51 percent think education funding is the first priority and 48 percent says it will be necessary to raise taxes to meet education's funding needs.

Nielsen, a 1960 graduate of the University of Washington, where he was student body president in his senior year, seeks to have education reform seen as an issue that transcends politics.

"Fixing our schools, so they effectively educate every child should not be a partisan issue," he told me.  "I am hopeful that the Republican Party will soon recognize that and take on education as their primary issue.   The Democrats have claimed schools as their issue for the last three decades and our schools have not improved. Time for a change."

The changes that Nielsen espouses boil down to three key steps.

"First, we have to improve the quality of teachers," suggested Nielsen, who says a key first step is eliminating certification laws, which he refers to as "the culprit" because they give "education schools a monopoly over the supply of human capital that can work in our schools."

"Next we must improve leadership," he said. "A quality principal will give you a quality school but certification laws again hinder our ability to hire top leaders for our schools."

We also must address governance, not just leadership. We need high quality, competent people governing our schools.   In urban systems, I would recommend going to appointed school boards or even eliminating them altogether and have the superintendent become part of the mayor's cabinet.  

Nielsen decided, after his decade of schools leadership at the local level, that the necessary changes couldn't be achieved locally. And he suggests the fact No Child Left Behind Act has produced disappointing results, and may be dramatically altered in this Congress, suggests Washington, D.C., isn't the place to drive necessary changes.

"To improve America's schools, we need to do so at the Statehouse," said Nielsen.

Continue reading

Concern among Seattle business people that Delta turning from Alaska partner to predator

There's a growing concern among Seattle-area business leaders that they are seeing a once mutually beneficial partner relationship between Alaska Airlines and Delta Air Lines changing to one in which Delta seems to be moving from partner to predator.  

There is an obvious agreement within the business leadership that losing Alaska would be a significant blow to the economies of Seattle and the state. And that is leading many toward a conviction that the business community can't merely stand on the sidelines to watch to see what the outcome is of a battle between the world's second largest airline and hometown Alaska.  

Thus if those expressing such concerns are accurate, then Seattle will need to shed its "Seattle Nice" image for a time to forcefully take a position in support of Alaska.

"The business community must take sides in this and do so forcefully and visibly and an important part of its message is that Delta is actually not good for Seattle," suggests Joseph Schocken, president of Broadmark Capital, a successful Seattle boutique merchant bank that focuses on emerging companies.  

"Delta is anti-Boeing, and thus anti-Seattle, with both its dollars and its political clout," Schocken said. "With its dollars, it buys Airbus planes rather than Boeing's and with its political clout it opposes the Ex-Im bank that is important to Boeing's success," he added.

As I talked with various people in the business community, there was an expression of the need to have a pro-Alaska effort, even a forceful one, but not an Anti-Delta one, lest that generate sympathy for the Atlanta-based airline since it is a very successful airline that employs a large number of people and successfully serves parts of the region's air-carrier needs.

Yet as each got into the competitive aspects of the issue, comments frequently turned from support of Alaska to negative on Delta.

As business people discuss this Alaska-Delta struggle, there is a logical defense of free-markets competition but a dark view of competitors who turn predators. And I detected growing sense that predator is what Delta's competition with Alaska has devolved into.

One who best summed up the competition issue was John Fluke, whose family's business leadership, investment focus and philanthropic involvements are widely known and respected, who said: "The notion of free markets and competition are absolutely necessary to the success of our economic system and the effort to gain advantage over competitors, ethically pursued, benefits customers."

But Fluke suggested that the current competitive activities amount to Delta "abusing" the definition of competition, saying "its tactics with everything from current pricing to their philanthropic outreach with nonprofits here are likely to last only as long as it takes to drive Alaska into submission."

"If that happens, then airline tickets will eventually cost more, route structures will become less accommodating and Delta's support of important philanthropic causes will be lower and that would be abusing the real meaning of competition," he added.

Woody Howse, whose Cable & Howse Ventures basically launched the venture-capital industry in this region, exemplified the enthusiasm of Alaska supporters when he said "Alaska Airlines is one of the most community minded, customer serving and socially contributing corporations in our region."

But his comments also quickly turned against Alaska's challenger, noting his view that "Today Alaska Air is being attacked vigorously by the Carpet Bagger Delta Airlines, coming to town with Airbus (not Boeing) airplanes and viciously attacking the Alaska Air routes with competing schedules.  Our Northwest Community must band together and support the company that has so supported us through the good as well as difficult times."

    

"With Delta's current actions and apparent ulterior motive in Alaska's hometown hub, engaging in a process intended to squeeze Alaska Airlines with the objective of acquiring, we customers need to be very alert to the probable outcome if Delta is successful," Howse added.

Mike Kunath, principal and founder of Kunath, Karren, Rinne & Atkin LLC, a successful Seattle investment advisory firm, summed it up succinctly as: "Alaska has been a true supporter of the region. Delta never will be."

Herb Bridge, longtime Seattle civic leader and philanthropist as well as chairman and CEO of Ben Bridge Jeweler for several decades before guiding the company into acquisition by Warren Buffet, notes that corporate acquisitions themselves are not evil.

"It is possible for an important local company to be acquired in a way that allows it to retain local control and oversight, as happened with our acquisition by warren Buffet," Bridge said. "But when the acquisition is pursued in a predatory rather than a friendly manner, not only the shareholders of the pursued company but the community it serves are losers. There is nothing beneficial about Delta's pursuit of Alaska."

Alaska CEO Brad Tilden, retired CEO Bill Ayer and board members are reluctant to get into any Delta-bashing conversation, preferring to focus on Alaska positives.

Ayer, who as Alaska chairman and CEO for a decade before retiring in early 2012 guided the carrier through some of the industry's most tumultuous times, told me "The question of whether Alaska could remain independent has been raised for decades."   

"Our response was that a locally based, independent airline was better for customers, the community, employees, and investors. While there were no guarantees of remaining independent, all we could control was our own performance, and our chances were much better if we did a great job for each of those stakeholders," he said.

 

And as Tilden puts it, "The transformation over the last decade has been all about cost. We're trying to balance low fares and lots of service to the destinations (passengers) want, with a strong and successful company that can grow and buy new airplanes and has the capital to add new services."

 

The financial results are impressive as the parent company for Alaska Airlines and its regional sister carrier Horizon Air made a record $508 million profit in 2013, and the stock continued a steep ascent to five times its value from just five years ago.

 

What needs to happen is for Delta CEO Richard Anderson to be convinced by those who know him well, and that includes some in Seattle, that he is risking a serious downside in creating the potential for an in-your-face attitude among Seattle business people on behalf of Alaska.

For as Schocken summed it up: "There needs to be a real corporate campaign to encourage flying Alaska, discouraging flying Delta and make it unpleasant, hurting Delta's bottomline so Anderson decides that not only isn't it going to be as he thought, but shareholders and board members are getting unhappy.'"

     

Evidence that neither Fluke, Howse nor any of those who echo similar sentiments about Delta targeting Alaska are out of line is Delta's own home page where it headlines "Exclusively for Seattle, 2x miles all year long."  

But Delta's sharpest critics could suggest with a smile that what happens when you click on that link on Delta's home page might prophetically point to where Delta would be for Seattle if they were to push Alaska into a merger. The click leads to a page that says "the requested page could not be found."

Continue reading

Newspapers a growing, not dying, industry for Sound Publishing and parent Black Press

Don't tell Gloria Fletcher, who as president of Sound Publishing guides what has become Washington's largest and fastest-growing newspaper company, that print media is a dying industry.

Bellevue-based Sound, which owns 38 daily, weekly, community and monthly newspapers in this state, assumed ownership this month of its latest acquisitions, the Daily World of Aberdeen and three weekly newspapers in Grays Harbor County for an undisclosed amount of money.

Gloria Fletcher
Gloria Fletcher

"We don't believe this is a dying industry," Fletcher said "We believe in print but understand the value of the digital component as well."

Sound, as the U.S. subsidiary of Canada's largest independent newspaper company, has become more visible since Fletcher's arrival in April of 2012 with the purchase of the Daily Herald in Everett and the Seattle Weekly and Fletcher has, without a lot of fanfare, quietly become one of the state's most influential business women.

"Influential business woman" is a designation that would be uncomfortable for the low-key Oklahoma native, a 1984 honors graduate at the University of Oklahoma, who became publisher of her hometown Woodward, OK a year later.

Within three years, she had become an executive of American Publishing Co., overseeing a group of the company's newspapers. By the time American Publishing was acquired in 1999 by Community Newspaper Holdings Inc. and she was made vice president to oversee 38 newspapers in Oklahoma and the Central Midwest, Fletcher had a 4 year old and a one year old.

In her roles as a key executive of four publishing companies, she has carved out increasingly key roles and has thus helped break the mold of what traditionally had been, with a few nationally notable exceptions like Washington Post publisher Katharine Graham, an industry dominated by men.

Fletcher's belief in the future of newspapers fits well with the philosophy of Canadian parent Black Press, the Victoria-based company founded by David Black, who ran the company and grew it to dominance across British Columbia and Alberta before elevating president and COO Rick O'Connor to succeed him as CEO of the company.

Fletcher's philosophy mirrors O'Connor's as well, as he made clear in a telephone interview we had this week in which he said "the value of print is being undersold and the value of digital is being overhyped."

"I'm not saying we don't embrace digital," O'Connor said. "But print is still king, representing 90 percent of our revenue."

He notes that the newspaper industry is beset by a "lot of uncertainty and where there is a lot of uncertainty people tend not to invest," but notes that "when you look at Warren Buffet and other non-newspaper people investing, it's a sign of how smart people are viewing the prospects of the industry."

Among those non-newspaper people getting into print is, of course, Seattle's Jeff Bezos. founder and CEO of Amazon. His purchase of the Washington Post in the summer of 2013 created conversation and conjecture across the traditional media industry.

Bezos' Post purchase created an interesting convergence with Sound in that it was about four months before the Post-Bezos announcement that Sound purchased the Everett Herald from the Washington Post Co., providing the opportunity for m to joke to the Herald's new publisher, Josh O'Connor, that he might now be sitting in the chair Bezos had hoped to be sitting in.

The fact that a move into newspapers by non-newspaper people isn't always going to be a winning proposition was emphasized by word this week that Boston financier Aaron Kushner and his 2100 Trust LLC holding company, which was formed specifically for the purpose of buying and growing major newspapers, may be having serious growing pains. Perhaps even survival pains.

This week Kushner either stepped aside or was stepped on and forced out by investors from his role as publisher of the Orange County Register a week after the Los Angeles Register folded six months into Kushner's experiment to create a daily LA to compete with the Los Angeles Times. Kushner had purchased the OC Register a year before Bezos' acquisition of the Post.

Perhaps in keeping with the premise of his Trust, for which he remains CEO, he was replaced as publisher by former casino executive Richard Mirman, who has no newspaper experience.

And naturally Kushner's travails have been greeted with great glee by traditional newspaper people, as evidenced by a column in USA Today headlined "Kushner's bold bet on print ends up as a farce."

But Black Press' O'Connor and Sound's Fletcher are not worried about the problems of those who are newspaper believers but may lack the experience to deal with the challenges.

Black Press touts itself as "home to some of the oldest, most trusted community newspapers in North America."

In fact, Black Press itself has grown in size and prestige as a newspaper company by grabbing off once-marquee titles of once-dominant but now sinking media companies, as with Honolulu Star-Advertiser, which once carried the Gannett flag, the Akron Beacon-Journal, formerly a McClatchy newspaper, in addition to The Herald from the Washington Post.

The Black, and thus the Sound, business strategy is based on newspaper clusters, as with the importance of "cluster" in the Grays Harbor acquisitions. It is clusters that mark Sounds presence in East King County with its Reporter Newspapers, in Kitsap County and on the Olympic Peninsula, where it owns the daily Port Angeles Evening News.

The cluster concept is also in place for Black in Hawaii where, as a result of acquisitions that include two dailies related to the Aberdeen purchase, it owns all the English-language dailies on the islands.

In fact O'Connor makes it clear that he is enough of a believer in the importance of clusters that he says "where we are already operating is where we intend to invest," saying in response to one of my questions that expansion in the Western U.S. outside of Washington is unlikely.

Continue reading

BankWork$, creating banking opportunity for at-risk job seekers, announces national expansion

(Editor's note: This column is being sent today as an added

"Harp" because of the going-national move of an award-winning Seattle program we have written about several years ago.)

------ 

 BankWork$, the initiative by former top bank executive Les Biller to create a career foothold in his old industry for people from inner-city and at-risk neighborhoods, is about to move from its successful launches in Los Angeles and Seattle to a national program, beginning with three new cities this fall.

 

Biller, who after his retirement as vice chairman and chief operating officer of Wells Fargo conceived the idea of training specially selected job seekers to be bank tellers and convinced a group of local banks in the two cities to get involved, has now created a multi-million-dollar plan to take BankWork$ national.

 

The national rollout commences this fall in the San Francisco Bay Area with Phoenix and Portland to come aboard in 2015 with three bank partners Bank of America, U.S. Bank and Wells each committing $1 million a year for five years with the Sheri and Les Biller Family Foundation matching that.

 

The success of BankWork$, first in Los Angeles where about 130 people a year are being placed in teller roles since 2006, then Seattle once Biller and his wife, Sheri, relocated to the Northwest and he had become chairman of Sterling Bank, spurred him to decide to take the program national.

 

To head the program and guide its growth into a national presence, Biller has hired Colleen Anderson, a long-time banking executive and a former colleague of Biller's at Wells, where she capped her 22-year career there in the roles of executive vice president and head of both business banking and California banking.

 

Biller explained that Anderson, who most recently was executive vice president in charge of all aspects of business and consumer banking for Pasadena-based OneWest Bank, "was looking at what she wanted to do next and decided that BankWork$ was an opportunity to give back."

 

The BankWork$ office will be in Los Angeles, although Biller will be highly involved in the growth of BankWork$ from his Seattle office.

 

Anderson may well serve as inspiration, as well as role model for those selected to participate in the training to become tellers since she recalls that her career began in a position called "proof operator, a position one level below teller that no longer exists."

 

Biller explained that Portland, Phoenix and the Bay Area were selected to be the first of what he expects will be a dozen or more Bankwork$ cities in five years because the three partner have substantial presences in the three cities and and those cities have substantial low-income minority communities.

 

Biller explained that as other cities are selected each year toward the 12-15 target cities, other bank partners will be brought into the program, depending on what banks have key presence in each of the cities.

 

Biller envisions that each city will need to provide a governmental entity as a third partner, with California state and Los Angeles County helping fund the Los Angeles program and federal funding in Seattle.

 

He launched BankWork$, which he envisioned as the first step on a possible career ladder for those selected, in Los Angeles four years after he retired from Wells Fargo in 2002 at the age of 54 to allow him and his wife, Sheri, to turn their attention toward philanthropic activities, including formation of a family foundation.

 

The idea for BankWork$ was borne out of Biller's commitment to education and a realization that "education is too often pretty low on the priority list in homes where there are a lot of other issues facing the families." he said in an interview we did as he launched the program in Seattle.

 

"I figured a key step was putting parents of those kids to work in jobs that paid above the minimum wage at the outset and provided career options for the future. Then education for the kids would move up the priority list," he said.

 

It was after the Billers relocated to Seattle four years ago that, with the Los Angeles BankWork$ program having successfully graduated and placed hundreds of people, that he decided it was time to launch the program in a second city, his new home.

 

He says he realized that the program offered the opportunity to marry the needs of business with the needs of the community because many of the teller jobs at banks are jobs that "are basically the same from bank to bank, and many use the same equipment to accomplish the tasks."

 

 "We had to prove that it made economic sense for the banks, as well as the city and others who would be responsible for future funding as the program went on," Biller said, adding that he thinks

the results have been the proof.

 

 "We've had about a 75 percent graduation rate, about 70 percent are being employed by banks and 10 percent hired by other businesses," he said. The per-student cost is running about $4,000.

 

"Once they're hired, we make an effort to ensure they stay with the bank, remaining in close contact with the new hires for six months," Biller said. "We have some who have already received several promotions and raises since hiring."

 

So as Biller prepares to take BankWork$ national, he thinks the concept could also grow beyond banking.

 

"A very important part of this is that in a sense it goes beyond banking," Biller said. "We could do this across a number of industries where the demand is high enough and the positions similar for various companies, thus reducing the cost of each person being trained.

Continue reading

Could job losses at Amgen and Dendreon mean opportunity for talent-seeking biotech startups?

The long death rattle at once high-flying Dendreon Corp. made this week's announcement of its likely demise less of a shock to Washington's biotech industry than last month's sudden-death announcement for Amgen's Seattle presence, but make no mistake that it represents another blow to the sector.

The departure of Amgen from Seattle by year end is due to its need to amass more cash for its continued growth and quest for new drugs while the potential demise of Dendreon is due to the fact its only drug is no longer competitive.

Dendreon, which makes the prostate-cancer drug Provenge, nearly fell off the stock-price landscape when it announced that it wouldn't be able to meet the $620 in convertible notes due to be paid in January and said the steps it was considering would leave shareholders with worthless paper. It's also likely to leave its workforce jobless.

Regardless of the causes, the job-loss result is the same for the Seattle area.

With Amgen eliminating 600 jobs in Seattle and 60 at its Bothell manufacturing plant, the demise of dendreon, which has more than 700 employees, may leave as many as 1,200 from the biotech industry out of work, possibly the most ever at one time looking for new positions.

For those who see opportunity in adversity, there is the view that this may represent an ideal time for the area's numerous biotech startups to corral some talent that would otherwise be beyond their possible reach.

The idea is that some of those biotech startups may be appealing enough to prompt some of the out-of-work talent to come on board for stock and the promise of future executive roles.

Some of the startups are at least seeking to reach out to see if such interest might be ferreted out on their behalf. And certainly there are some enthusiasm-inducing startups in the biotech space.

Historically, the Seattle biotech community has been a self-sustaining ecosystem," observes Melanie Kitzan, one of this area's most respected patent attorneys who worked with a number of small companies in the biotech space for several law firms before becoming a manager at Intellectual Ventures.

 

"Startups are bought by big pharma and, in some cases, the local shops are shuttered, which provides for a re-seeding of those biotech folks into new startups and the cycle continues," she added.

 

"There is some fear that without a big pharma anchor in the area anymore, with the closing of Amgen's facilities in Seattle, that the biotech community could decline, but it could also be seen as opening new fertile ground of great talent to start the next generation of Seattle start-ups," Kitzan suggested.

 

But James Bianco, founder and CEO of publicly traded Cell Therapeutics Inc., thinks it would be "unusual" if some of the exiting scientists and others at Amgen or Dendreon opted to join startups for stock and future roles.

 

"The critical factor for biotech employees is whether or not there is a safety net in the community, meaning a wide selection of other biotech companies that could be or are hiring," Bianco said.

"That is why it is difficult to recruit in this sector in the NW and we lose many good candidates to San Francisco or San Diego.," he added. "As such, after being laid off by the largest biotech company, it would be highly unlikely they would have risk tolerance for a startup let alone in the Noethwest."

He also suggested that "Amgen didn't likely give more than the traditional payouts, which would probably be 3-6 months on average." 

Observers point out that Dendreon doesn't even have a product to sell, but merely a $93,000 process by which the body's immune system is trained to attack cancer cells and one industry executive noted in the period of time since Provenge was approved, two other major advancements were approved for metatastic protate cancer, both pills rather than a pricey process.

"Their process will be deemed not worthy of continuing commercialization," the executive said, nothing that Dendreon has been unsuccessfully looking for a buyer for more than a year.

Whether the displaced biotech employees of the two firms opt to pursue careers in more fertile biotech infrastructures like the Bay Area, San Diego or Boston, or wish to remain here badly enough to pursue opportunity at one of the small startups remains to be determined.

But their decisions could play a key role in whether the future stars of biotech may yet emerge here because of the marriage of promising innovation with experienced scientists and executives. 

Continue reading

Angel-investor group fears SEC will change accreditation rules and shrink angel ranks

Although the Securities and Exchange Commission (SEC) hasn't yet proposed an increase in the financial resources required for an individual investor to be accredited, the Angel Capital Association (ACA) fears such a move may loom ahead and has been pressing its members to collectively protest such a step.

The ACA sees the issue as having the potential to dramatically deplete the ranks of what are officially called accredited investors, individuals who are free to make the kind of high-risk investments that fuel the funding of financially risky early stage companies that are key contributors to job creation. All angels are accredited investors

Dan Rosen

The issue is front and center right now because when Congress passed the Dodd-Frank Act four years ago, it retained the long-time "accredited investor" threshold of $1 million net worth and $200,000 of annual income but ordered the SEC to do a quadrennial review of the qualifications. The first of those four-year reviews is to be due to conclude next month.

Angel-investor groups successfully overcame an attempt to include in Dodd-Frank a change that would have basically disqualified what by some estimates would have been up to 50 percent of angel investors by boosting the accredited minimums to $2.5 million net worth and annual individual income of $400,000.

But Congress did include in what is officially the Dodd-Frank Wall Street Reform and Consumer Protection Act a change to preclude primary residences from the $1 million-net-worth calculation.

The ACA website plays the job-creation card in preparing for a possible campaign by urging members: "Do you believe in preserving the health of early stage companies and their role in job creation? Then join the Angel Capital Association campaign to 'protect angel funding.'"

Dan Rosen, chairman of the Seattle-based Alliance of Angels and a longtime leader in ACA, says "a change to make the accredited investor definition more restrictive is exceedingly bad public policy."

"This is a time when America needs to unleash innovation and create exactly the kind of jobs that high-growth startups provide," argues Rosen, who until a few months ago chaired the ACA public policy committtee . "Angels fund most of these high-growth startups, investing well over $20-billion per year." 

"We are not financial institutions in New York or Boston, we are individuals in every major city and town in the U.S. who invest not only our money, but also our knowledge and experience, to help these high-growth startups get off the ground and flourish," wrote Rosen, who is CEO and president of Dan Rosen & Associates, a technology investment and advisory firm

Although the multi-part mission of the SEC includes helping facilitate capital formation, the agency makes clear its "investor protection mission" has become most compelling, particularly after the excesses that led up to the "Great Recession."

Thus there is an amusing bit of irony as the SEC may move to "protect" a major segment of the high-net-worth angel-investor category by removing their "accredited" status while preparing to remove protections for scores or "unaccredited" investors by opening the door for them to do crowd-funding investment in startups.

Crowd funding is a concept spawned by legislation known as the JOBS Act, passed by Congress four years ago to permit entrepreneurs or a start-up business to raise up to a $1million a year by selling equity on the internet to up to 500 "unaccredited" investors. Some described passage of the bill and its signing by the president as a "democratization of investments." In essence, Congress felt those across the financial spectrum should all have a chance to own a piece of a company.

The ACA says a survey of its 12,000 members, who are the most active angel investors in the country, found that if the definition of accredited investor was changed to add an inflation factor, which is the standard being urged by those pressing for a change, more than 25 percent of its members would fall below the new threshold. The inflation factor would relate to the inflation that has occurred since 1972, when the accredited regulation first came about.

ACA, whose campaign to bring pressure against the change includes form letter and email template on its website, says such a change would be "devastating," particularly outside the angel-heavy population centers of New York, California and Boston. It claims the number of angel investors across the country outside those three areas would fall by one third.

Even so, not all angels oppose raising the bar for individuals to quality as accredited investors.

Steven J. Schueth, president of First Affirmative Financial Network in Colorado Springs, who has been a leader in the sustainable and responsible investment industry for more than 20 years and created the prominent SRI Conference that rotates annually around the West, is one who isn't sure a change would be bad.

"With my fiduciary duty hat on, I could make the argument that an investor with only $1 million in liquid, investable net worth is probably too small to be investing in private deals," Scheuth said in an email exchange. "I don't think someone with only $1 million has any business playing in this game."

I have assumed that increasing the qualification for accredited investor might have a large impact on sustainable and renewable startups seeking investment and asked Schueth if there might be less S-R investing.

"Perhaps there would be, but would that be bad?  Maybe for entrepreneurs who are looking for capital from less-than-the-most savvy investors," he said. "But would it be bad for investors who now only meet the minimum accredited investor threshold?  Not in most cases.  There's a reason those rules were promulgated in 1972-to protect some people from themselves."

There are some investors who with some portion of their portfolio seek higher positive impact and care less about risk adjusted returns," Schueth added. "When I talk with these people, I try to help them think about making these kinds of investments out of their philanthropy budget; or at least know that the likelihood of making little or no financial return is a high probability."

I asked Schueth, whom I had quoted in previous columns because of his reputation in the sustainable and renewable investments arena, whether he thought it was interesting that while Congressional direction may guide a boost in what it takes to be qualified investor, crowd-funding is opening the door, also at congressional direction, to let everyone in.

"I don't believe I have ever heard anyone claim that Congress is a rational beast," he replied. 

Continue reading

52°F

Seattle

Mostly Cloudy

Humidity: 63%

Wind: 14 mph

  • 24 Mar 2016 52°F 42°F
  • 25 Mar 2016 54°F 40°F
Banner 468 x 60 px