Ann Arbor SPARK unveils 5-year strategic plan at annual meeting
At Friday’s Ann Arbor SPARK annual meeting, the organization will release a new five-year strategic plan developed by its executive committee.
The plan, developed through a series of retreats and facilitated discussions, was designed to make sure that the focus of SPARK’s efforts aligns with the priorities of those who provide the organization’s funding and help spur further economic growth in the region.
Ann Arbor SPARK CEO Paul Krutko stands outside the organization's central startup incubator in downtown Ann Arbor.
Angela Cesere | AnnArbor.com file photo
“Thematically we’re focusing on connecting our region and looking at global opportunities. The strategic initiatives we’re going to use to get there are the development of leadership, planning and talent along with acceleration and growth in the region.”
Krutko said the new plan gives SPARK a guiding document as it continues its transformation from a nascent economic development organization into a major player in the region’s economy.
“We talk a lot here about SPARK 1.0 and 2.0. Much like software versions, we’re in 2.0 but we're quickly headed for 2.3 or 2.4,” he said.
“There are about 330,000 people in Washtenaw County and we have helped retain, create or attract almost 12,000 jobs in the six years that SPARK has been around. That’s a pretty big impact, and it’s something we’re very proud of but we need to continue to make sure that our efforts are effective.”
According to the organization’s annual report, its efforts have been very effective in 2012. Companies that SPARK worked with, including 63 innovative startups, created 628 new jobs in the county.
Krutko said that SPARK engages with extremely early-stage startups more than most other economic development organizations across the country. Through incubators at SPARK Central, SPARK East, and the Michigan Life Science and Innovation Center that housed 73 startup tenants in 2012.
“It’s a core part of what we do and it’s great that we have so many startups to work with here in Ann Arbor,” Krutko said.
“The University of Michigan is certainly a driver of innovation but a full two-thirds of the startups we work with do not come from U-M research. That’s an amazing amount of innovation happening here from serial entrepreneurs and other inventors.”
As part of its “growth and acceleration” initiative, SPARK is planning to turn some of its attention to companies that have passed the startup phase and are looking to continue to grow in Ann Arbor.
“We’re very interested in trying to figure out what our role is and what the community’s role should be in taking companies from the point they have customers and are making revenue, then how do we accelerate their growth,” Krutko said.
“… How do we flip a switch and have them be like a Menlo Innovations, or like a ForeSee, Online Tech or http://www.llamasoft.com/, where they continue growing and hiring so that the engine of company creation turns into an engine of job creation in the region.”
Companies like those listed by Krutko help fund SPARK along with local municipalities and universities. Since SPARK's founding in 2006, the city of Ann Arbor has been SPARK’s largest municipal funder in the county, putting a total of $480,000 into the organization. The Washtenaw County government has contributed $1.2 million to SPARK in the same time period.
According to the annual report, approximately 36 percent of SPARK’s $11.5 million budget comes from local funding, with the remainder made up of federal and state grants and foundations.
“Because the nature of the funding and support that we get is so broad and diverse, we have the opportunity to try to solve problems in creative ways, and if what we’re doing doesn’t work we can shift or pivot like a startup to another approach,” Krutko said.
“We want to keep not only talking the talk of entrepreneurship and innovation but really walking the walk as well.”
One recent pivot by the organization, evident in its marketing materials and the report handed out at the meeting today, is a renewed focus on developing Ann Arbor and Southeast Michigan as a global brand. Krutko said SPARK has already been gaining traction on bringing more foreign direct investments into the region in the form of research and development centers, plant acquisitions and new facilities from international companies.
“SPARK has focused on working with companies that will grow the region’s gross domestic product,” he said.
“If we do that, those companies will buy goods and services from local companies, their employees will shop in the local retail establishments, and more jobs are created because the top of the employment food chain is being successful.”
While the Ann Arbor area is SPARK’s primary area of economic development, one of the organization’s values that serves as a foundation for their strategic plan is “open source economic development.” In software, an open source program is one where the code is shared for free, allowing other developers to use and improve upon the original and then re-share it, allowing for everyone to benefit.
“For us, open source means something very similar, that we are open to sharing how we work and what our methodologies are,” Krutko said.
“We are in a belief that if there’s success in Livingston County, that’s a success for the entire Southeast Michigan region. It’s a strength of our region and leadership that we do not have intermural competitions that can be destructive.”
Ben Freed covers business for AnnArbor.com. You can sign up here to receive Business Review updates every week. Reach out to Ben at 734-623-2528 or email him at benfreed@annarbor.com. Follow him on twitter @BFreedinA2.
Comments
RUKiddingMe
Sat, Jun 8, 2013 : 2:14 p.m.
Here's what they have for "Program Service Accomplishments" from the 990 form (thanks Kai). This is a direct copy/paste (minus all-caps). It appears to have some grammatical errors and fragments: "Talent Services Enhancing The Regional Talent Poolthrough Education, Mentoring, Networking, And Recruitment Is Part Of The Open Source Strategy For Robust Economic Development In 2010, We Offered A Diverse Line-Up Of Events And Programs Geared Toward Entrepreneurs, And Job Seekers Michigan Pre- Seed Capital Fund Supports High-Tech Start-Up Companies As They Near Commercial Viability By Providing Access To Early-Stage Capital Investment Or Micro Loans To Accelerate Company Development Michigan Equipment Depot Accelerate Company Commercialization By Providing Access To Previously Used Laboratory Equipment Useful & Valuable To A Start-Up Compnay's Product Research, Development And Manufacturing Traverwood Wetlab Incubator Boasts State-Of-The-Art Life Science And Biotech Research Space In A collaborative Entrepreneurial Environment With Established Tenant interaction And Support" So; anybody think that, if this is the highlight of what SPARK has accomplished in 2011, it's worth the 30 people that just ONE SPARK (I think this is the SPARK Central only, NOT Spark East or SPARK foundation) employs, and all the grant/tax money they absorb?
Nicholas Urfe
Sat, Jun 8, 2013 : 1:20 p.m.
"And if I recall, there is upper level A2.com staff that is also involved with SPARK, so it is very unlikely to get any help from A2.com in tracking down exactly what SPARK does." If true, then that should be disclosed as part of every mention of SPARK on this website. Is it true?
Nicholas Urfe
Sun, Jun 9, 2013 : 1:04 a.m.
It looks like the a2 staff do not want to comment one way or another on their potential involvement with SPARK?
Kai Petainen
Sat, Jun 8, 2013 : 2:14 p.m.
RU Kidding. You are correct, it is an appropriate journalistic standard to list that sort of stuff. To not do so, is not cool. All A2.com would need to do, would be to write one sentence at the very bottom of each SPARK article that states the relationship. I am a contributor at Forbes. When I write something at Forbes about a stock, then I am supposed to note if I have that stock. I also note my affiliations in the bottom of the articles as a matter of disclosure, but I also make it known that my opinions do not reflect the opinion of those organizations. I am a big fan of transparency, ethics, good accounting and journalism that is supported by facts and not marketing. You can mix opinions with the journalism, but numbers need to be supported by supporting documentation. As a result, I look at IRS forms and SEC forms when I analyze non-profits (IRS) and stocks (SEC).
RUKiddingMe
Sat, Jun 8, 2013 : 1:55 p.m.
You are correct, however, that they should state it on every article. NPR mentions whenever an entity is involved that has ties to NPR, be it a business owned several levels up by a parent organization, a person being interviewed or a sounbyte used, etc. A2.com needs to adhere to this, which I believe is a journalistic standard, no?
Kai Petainen
Sat, Jun 8, 2013 : 1:37 p.m.
I'm going to defend A2.com a bit on this one. Quite often they have indicated that there is a major staff member at SPARK. Yes, I think they should put a disclaimer at the bottom of each SPARK article, but they have noted it multiple times in the past so that relationship should be well known.
RUKiddingMe
Sat, Jun 8, 2013 : 12:16 p.m.
"Thematically we're focusing on connecting our region and looking at global opportunities. The strategic initiatives we're going to use to get there are the development of leadership, planning and talent along with acceleration and growth in the region." This strikes me as that weird doublespeak companies use when they take a lot of money and don't really do anything halpeful with it. Like when the product is synergy. I cannot help but think SPARK is just a money sponge with lots of creative accounting, and I'm getting frustrated with the lack of information about actual provable evidence that they are providing a good return on investment. WHAT HAS SPARK DONE? Besides "develop leadership and accelerate growth with global opportunities"??!! And if I recall, there is upper level A2.com staff that is also involved with SPARK, so it is very unlikely to get any help from A2.com in tracking down exactly what SPARK does.
Kai Petainen
Fri, Jun 7, 2013 : 11:31 p.m.
One of the common complaints about SPARK, has been the idea about how they say that they've created 10,000 jobs and how others wonder how they get that number. But, that mystery might have been solved by this article and the press release. The key to the answer... is that they have 'RETAINED' the jobs. Mystery solved. This isn't a complaint, but more of an explanation of how I think they got that number. "created 628 new and retained 1135 jobs in the Ann Arbor region" "There are about 330,000 people in Washtenaw County and we have helped retain, create or attract almost 12,000 jobs in the six years that SPARK has been around" Let me show you some math. 628 new + 1135 retained = 1763 jobs. 1763 jobs * 6 years = 10,578 jobs. That's how they get the 10,000+ job figure. Mystery solved.
Kai Petainen
Fri, Jun 7, 2013 : 11:24 p.m.
The press release has some other interesting items: Source: http://tinyurl.com/mqlgggb "created 628 new and retained 1135 jobs in the Ann Arbor region" " Those companies also invested $148 million in the region's economy" "Ann Arbor SPARK's work helped attract companies like Barracuda to downtown" It's neat about the jobs and the $$, but I'm not so sure about the SPARK comment with respect to Barracuda. I thought they moved downtown because of parking? According to a prior article in A2.com "Ann Arbor Mayor John Hieftje, Ann Arbor SPARK CEO Paul Krutko, Colliers' Jim Chaconas and Heiney all said there was one aspect of the deal that was most critical: parking. With the new 711-space public parking garage set to open next month on Fifth Avenue in downtown Ann Arbor, Hieftje said Barracuda was able to get access to all of the parking spaces they need at a discounted rate the Downtown Development Authority is offering"
Kai Petainen
Fri, Jun 7, 2013 : 11:36 p.m.
which means... that if Barracuda has 180 jobs, and as SPARK takes credit for moving it a few blocks downtown... then they can take the 180 jobs and bank it under 'retaining' jobs for its report.
Nicholas Urfe
Fri, Jun 7, 2013 : 7:57 p.m.
So how does the cost per job work out? And how many of those jobs still exist?
Rick Stevens
Fri, Jun 7, 2013 : 7:44 p.m.
Ben - how about the audits? That's always been the question. We taxpayers (Washtenaw County) have our tax money sent to SPARK but they refuse to allow us payers to see the audits. Don't you, as a reporter, wonder when someone refuses to let you see any audits? Past or present? What does that suggest to you? Like there's something they don't want you to see? And: how about having an independent organization validate and audit the job numbers SPARK 'self produces' - it's a crucial measure of success but it's never been validated (and been up and down and all over the place over the years). Wouldn't it be nice if all of us could tell our bosses and investors how we did by rating ourselves and not allowing any independent verification of our 'self assessment'?
Alan Goldsmith
Fri, Jun 7, 2013 : 7:41 p.m.
"Thanks for the questions, I will work with SPARK to try to find some of this information with you" Thanks Ben for attempting to do what Ann Arbor elected officials should be doing.
Nicholas Urfe
Fri, Jun 7, 2013 : 7:33 p.m.
I would like to know more about SPARK's financials, and where all the money goes. The amount of admin and salary overhead, etc. Generally you celebrate and market your good financials and you keep as quiet as possible about "inefficiencies". I just don't see much disclosure from SPARK. I'd like to believe it's all great news, but the public deserves to have very clear specifics for every dollar spent, of the many millions of public dollars in use here.
Kai Petainen
Fri, Jun 7, 2013 : 6:12 p.m.
Ben, thanks for the clarification. Basically they are combining the SPARK and SPARK Foundation stuff together. Both are located at the same address (according to tax forms at Ste. 430 S. Division). So there is a 501c3 and 501c6 in the same location. I presume they make it clear that they are the 'Spark Foundation' as well in the annual report. For those asking for 990 forms from SPARK, make sure they give you both forms. So I'm going to take what Ben said in his response and put it into an IRS 990 form perspective. I believe a lot in ethics and good accounting, so I'll look at tax forms. According to the 990 IRS form for the SPARK Foundation, SPARK is the sole member of the MLSIC, with expenses of $1,451,622. You have $950,000... so the expenses have dropped from $1.5 million to $1 million. Good, but... But last year SPARK transferred ownership of the MLSIC to the MEDC (MEDC has former members of SPARK). So I don't know why it is included in the annual report. It seems inappropriate to include the $1.5 million in the report when you don't have it anymore. Unless SPARK is speaking on MEDCs behalf. You have an operating budget of $5,475,000 and the 990 form had revenue of $4,732,284. So presumably the revenue has gone up a bit. They manage the Michigan pre-seed fund. That is used for seed investing rounds, and investing in rounds relating to series A, A1, A2 (early stage) and B. Book value in IRS form of Michigan Pre Seed Fund is $13,417,844 and micro-loan is $1,881,446. A combination of $15,299,290, but you are listing $5,079,000. SPARK's fund fell from $15 million to $5 million? That's a terrible return! Does the annual report address this massive drop?
Kai Petainen
Sat, Jun 8, 2013 : 2:52 p.m.
RUKidding... ""here is the contract we signed with SPARK promising to keep our employees in Ann Arbor" or anything?" There is a 'Statement of Understanding' that they sign. You can see it here: http://tinyurl.com/mnfhm8l There is a statement in it... that if someone leaves Ann Arbor, then SPARK gets the money back. "If the Client moves out of the City of Ann Arbor within one year of receiving services from SPARK funded by the LDFA then Client will repay SPARK for actual services provided." SPARK was asked by a council member this question: "If Spark funds a firm and the firm relocates outside Ann Arbor, does the $ revert back to SPARK or the LDFA?" From my understanding, SPARK offered no response. There might be a loophole in the system? Does this happen: Whereby money that SPARK gets from the city, goes to the people they help... but then when that company moves to the Ypsi office... then SPARK gets the money back?
Kai Petainen
Sat, Jun 8, 2013 : 2:18 p.m.
RU Kidding. I don't know the answer to your questions. In the spirit of local journalism, I'm just listing the facts and links that support those facts.
RUKiddingMe
Sat, Jun 8, 2013 : 2:01 p.m.
Thanks very much for the info, Kai. So the goal of the SPARK foundation is to support SPARK (non foundation). Both at the same address. Is this a typical and NON-fishy model? Sounds like a way to employ buddies and accept donations/grants to be immediately passed over /creatively accounted to same/similar foundation. This whole SPARK thing stinks to high heaven, man. Like big time. This seems like something needing a Problem Solvers episode, although hopefully a little more professional and taken more seriously.
Kai Petainen
Sat, Jun 8, 2013 : 1:33 p.m.
RUKidding: Walk into SPARKs office and ask for the 990 forms. I'm not a lawyer, but keep in mind that this form exists: http://www.irs.gov/pub/irs-pdf/f13909.pdf "Organization refused to disclose or provide a copy of Form 990" They are required to give both the SPARK (501c6) and SPARK Foundation (501c3) form, as both exist at the same address. But you should have no trouble getting the forms from them. Here are the IRS forms for SPARK: http://tinyurl.com/lrgensv According to the site, SPARK is: "501(c)(6) - Business leagues, chambers of commerce, real estate boards, etc. formed to improve conditions... " And the basis for a public charity of that is: "00 - All organizations except 501(c)(3) " SPARK is a S01 -- "Alliances & Advocacy" The SPARK Foundation (at the same address) is a 501c3 SPARK Foundation Forms are here: http://tinyurl.com/l8z44pg The SPARK (Foundation) is a 501(c)(3) - Public charity: Religious, educational, charitable, scientific, and literary organizations... And the SPARK Foundation is a T50 - Philanthropy, Charity & Voluntarism Promotion Basis for charity status: "17 - Supporting Organization 509(a)(3) for benefit and in conjunction with organization(s) coded 10-16 " I'm not sure which 509a3 they support. The purpose of the SPARK Foundation is (i'm not yelling, just copy/pasting) "TO PROVIDE FUNDING AND SUPPORT FOR THE ACTIVITIES OF ANN ARBOR SPARK, A NOT-FOR-PROFIT 501(C)(6) CORPORATION WHICH ADVANCES THE ECONOMIC DEVELOPMENT OF INNOVATION-BASED BUSINESSES IN THE ANN ARBOR REGION"
RUKiddingMe
Sat, Jun 8, 2013 : 12:26 p.m.
Kai, I am really liking the info you're providing here. This whole SPARK vs SPARK Foundation thing seems pretty fishy to me. Can you briefly explain how you're getting this IRS info? Googling got me some stuff, but nothing that provided these dollar amounts you're citing. Don't forget about SPARK central vs SPARK West, etc. I wonder exactly how many little islands with their own ways to get/spread money around they have. This place needs some serious looking into. Only the residents of A2 and Ypsi getting involved are going to make that happen. Can anyone provide actual information about something SPARK did that made all the money they get kind of worth it? Like any business stating publically "we would not exist without Spark," or "here is the contract we signed with SPARK promising to keep our employees in Ann Arbor" or anything?
Kai Petainen
Fri, Jun 7, 2013 : 5:07 p.m.
"According to the annual report, approximately 36 percent of SPARK's $11.5 million budget comes from local funding, with the remainder made up of federal and state grants and foundations." Ben, with regard to the $11.5 million, I believe you are incorrect. The 990 IRS forms seem to state otherwise. Some clarification is needed, please. Or perhaps I'm reading the IRS forms incorrectly. Or, is the $11.5 million an updated number? According to the IRS reports, SPARK has total assets of $18,760,101 and revenue of $4,732,284. Previously they had revenue of $7,330,381 so the revenue has dropped from a hit to 'program service revenue'. SPARK is composed of a second portion, the SPARK Foundation and that has assets of $4,148,443 and revenue of $2,411,154 3 people at SPARK make more than $100,000, but only 2 (Krutko and Simms) are listed on the IRS forms (Part VII, Line 2). I'm not sure who the third person is. Biggest expenses at SPARK? $906,067 for 'Other Salaries and Wages' $413,120 for 'investment management fees' $413,722 for 'occupancy' $428,027 for 'compensation of current officers' $125,321 for 'other employee benefits' $220,020 for 'advertising and promotion'
TB
Fri, Jun 7, 2013 : 5:38 p.m.
Tax accounting and financial accounting are completely different things. For example, many assets are depreciated on different schedules for tax purposes. Assets usually depreciate faster for taxes than reporting so companies can deduct expenses on big equipment purchases from their taxable income sooner. This feature of the tax code was designed so companies aren't penalized for reinvesting their earnings. Also, the 11.5 million is just their budget, not their total assets. This probably only includes assets they hold as investments, not the assets they own for their own operations.
Ben Freed
Fri, Jun 7, 2013 : 5:16 p.m.
Kai, The 11.5 million number (technically $11,504,000) is taken from the Annual Report that SPARK put out today. The operating budget of the organization is $5,475,000; The Michigan pre-seed capital fund and Micro-loan funds are $5,079,000. These funds come from the state and are used to fund early-stage companies across the state but are managed by AnnArbor SPARK; The Michigan Life Science and Innovation Center (a life science incubator based in Plymouth Township) costs $950,000 That brings the total budget to $11,504,000. Granted, this is not an itemized budget, but that's where those numbers come from. On the funding side, according to the report SPARK recieved $4,138,000 in Local partner funding. Of that funding, 51% came from the public sector, 9% from academia, and 40% from the private sector. The rest of the funding came from a variety of other federal and state grants as well as foundation funding. Hope this helps, Ben
Brad
Fri, Jun 7, 2013 : 4:17 p.m.
Why do they cite Menlo when there are real success stories around here? Think Accuri and HandyLab for starters.
whatsupwithMI
Sun, Jun 9, 2013 : 7:45 a.m.
life sciences research is old lameness, linked with large-scale unemployment, if you are a VC. little software ventures are the new hotness.
Ben Freed
Fri, Jun 7, 2013 : 4:36 p.m.
Brad, I think that the one's listed were just a few that popped into Paul's head. Accuri and HandyLab are certainly successes that should be applauded.
Alan Goldsmith
Fri, Jun 7, 2013 : 4:10 p.m.
"According to the annual report, approximately 36 percent of SPARK's $11.5 million budget comes from local funding, with the remainder made up of federal and state grants and foundations." And their finanials continue to be blocked from view by the public and from local government units providing funding. Will this lack of transparency be addressed in their new 'five year' plan?
Nicholas Urfe
Fri, Jun 7, 2013 : 7:31 p.m.
Thanks Ben! I am also curious about this. Without clear numbers it is easy to be skeptical about where all that money is going.
Kai Petainen
Fri, Jun 7, 2013 : 6:20 p.m.
Alan, You can find the 990 forms on the web. Look for the SPARK and SPARK Foundation 990 forms. You can also walk into their office and ask for the 990 forms. They must furnish the 990 forms to you.
Ben Freed
Fri, Jun 7, 2013 : 6:19 p.m.
Alan, Thanks for the questions, I will work with SPARK to try to find some of this information with you. It is tricky to define 'overhead' with this type of organization because while they do provide direct monetary assistance to some companies and organizations, they also provide a lot of consulting work and other services. All of that work would fall under people's salaries which depending on your definition might count as 'overhead.' That could make putting a finger on a specific overhead percentage difficult. On the latest 990 form (that Kai refers to in later comments), CEO Paul Krutko's salary is listed as $159,375. It would be difficult to tell from available forms what his benefits are on top of that. This is a start, I'll try to work to get you more numbers in later articles. Ben
Alan Goldsmith
Fri, Jun 7, 2013 : 4:48 p.m.
Do City of Ann Arbor Officials and County Commissioners have access to SPARK Ann Arbor financial records? Does the public? Are outside audit groups given access? Are their records available under the FOIA?
Alan Goldsmith
Fri, Jun 7, 2013 : 4:46 p.m.
For starters, the actually salary and benefit breakout for all staff vs. the amount of funding going directly to businesses. What percentage of overhead does it take to operate this organization for the funding they receive? What salary does the CEO make and what are his employee benefits?
Ben Freed
Fri, Jun 7, 2013 : 4:37 p.m.
Alan, I'm not sure which financials you are referring to. What specifically would you like to know about SPARK's finances? I'll do my best to shed some light on them for you! Ben