By Tim Keller
A few weeks ago, I was overjoyed to see the news that a local company, Innerplant, had raised $16 million worth of funding in an equity round led by John Deere.
Innerplant has developed plants that can act as living “sensors” in agricultural fields, giving farmers feedback on the actual needs of plants in that field so that they can manage their water, pesticide and fertilizer decisions better. Its amazing stuff that you can read more about on their website: https://innerplant.com/
While I am happy to see any startup company in our town being successful, this one was especially heartening because Innerplant is an alumnus of Inventopia, the not-for-profit business incubator that I founded and manage with the support of the City of Davis and UC Davis’ Office of Research.
While I cannot take credit for Innerplant’s success in any real way, I CAN take credit for the fact that they are in Davis. When they came to us, there were no options for lab space in town and multiple brokers had told them they either had to try setting up shop in Woodland or West Sac.
When Inventopia expanded to its current location on Pena drive, we allowed Innerplant to take over the entirety of our previous space in order to help them bridge the gap until their current space on Cousteau was ready for them. I also helped them sublease space in the Interland complex which another company in our network needed to withdraw from.
Because Inventopia made a home for Innerplant, there is now $16 million more dollars in our local economy, which is paying property taxes to our city, paying wages for local employees who will then spend those wages at local businesses.
But the reason why I’m sharing this news here, is because Innerplant is a great example of something that I have written about in these pages before: That “Economic Development” requires a very different approach in a town like Davis than it does in most other cities.
For most people who have “economic development” in their job title, the job is about “recruitment” – finding companies that can be lured into one’s city and bring with them those jobs. This is normally done with marketing and economic incentives: tax breaks and sometimes even forgivable loans.
To no small extent, the vast amount of parking that was planned at DiSC was also because of this kind of mis-conception. They assumed that the companies that might move here would, by definition, also be having their workforce commute here every day. This ended up being incorporated in the traffic studies as well, assuming that huge amounts of traffic would be coming to DiSC “from the east”
But those assumptions simply do not line up with the reality of what has been happening in our R&D sector for the past 30 years, or what we should be encouraging to happen in the next 30 years, and the case of Innerplant demonstrates it well.
Most of the startup companies that we have today in Davis are founded by individuals who already live in Davis. This is often UCD Faculty or alumni. Innerplant is actually an exception. Innerplant was headquartered in San Fransisco when we first met them – so why did they come to Davis?
As a company in the crop tech space, the most critical thing that Innerplant needed was the expertise of plant geneticists, and where do you find that? Davis of course.
So the reality of “bringing Innerplant to Davis” is not that I “recruited” them in any way. They wanted to be here because the talent they needed to hire was here. The net change to the population of Davis caused by this company “coming here” was 1 person: A lead engineer who moved here from Half Moon Bay. The rest of their team was recruited locally.
Similar companies in our town have similar stories. Even the “big companies” that you see come to town to set up labs, like BASF and Mars / Wrigley, are mostly doing so in order to access local talent and collaborate with professors who are already here.
It is our pool of highly educated researchers and scientists which are the long-term competitive advantage for our city in terms of economic development, and thanks to the University, it will always be so.
New ideas, new technologies, new companies will always be born here and seek to grow here, and with that activity comes investment: Millions of dollars of funding from outside capital groups sending money into our economy to be spent here on our people.
Unfortunately, just because the talent lives here does NOT mean that the city of Davis automatically gets to harvest the economic value created by its residents. If a company leases space in Woodland or West Sacramento and draws Davis talent outside of our city borders, then we get nothing. In fact, given the fact that most single family housing is a long-term economic loss for the city, we end up subsidizing the economic windfall of neighboring cities in that scenario.
As I like to say: “From an economic development perspective, the City of Davis has been handed a winning lottery ticket… but we have so far failed to cash it in”.
This is the reason why the City, so many times, has come back to the idea of an “innovation park”. It is the promise of a magic bullet to repair our economy – providing space for these companies to set up shop here in town, where Davis taxes apply. It makes a huge amount of sense, especially for a City like Davis where companies like that are constantly being formed.
That said, while I hope that Davis voters will eventually find some version of an innovation center that they can support, it would be a mistake to treat the economic development opportunity of our startup sector as a big-project, an all-or-nothing proposition.
This has been my biggest critique of our city’s approach to economic development thus far: “Building more commercial space” does not equal “Having an economic development plan”.
Even if we had passed DiSC earlier this year, the city would have then have had to transition quickly to try to solve the problem of “how do we fill it” probably by hiring some economic development officer to market the city and find outside companies to sign leases. This would be quite a disconnect from the reality described above.
The better approach, which is more aligned with our actual competitive advantage, would be to nurture a pipeline of these home-grown companies and help them find interim space as they grow. That way, if we do someday approve an innovation park, we will have an idea of exactly who would be moving into that project as anchor tenants. This was one of the points levied by critics of both DiSC proposals, and they weren’t entirely wrong.
That said, no matter what the future holds, there are still a handful of things we can, (and should) be doing in the short term to keep Davis-native companies here for as long as possible, and capture all of the economic activity that we can.
Those things include:
1) Support the expansion of Inventopia. Yes I bring this up at the danger of sounding self-serving, but given the lack of commercial space in this town, particularly lab space, it makes sense.
Right now, Inventopia occupies 3 suites in our building on Pena Drive which formerly housed three different companies. As a cooperative however, with space and equipment that is shared, we are able to accommodate 20+ companies in that same footprint.
If Davis can’t create more commercial / lab space for our homegrown companies in the short term, it makes sense to facilitate “doing more with less”. That is the exactly what Inventopia has been doing for the past 5 years.
2) Focus on building more small-unit transitional space. Just like Innerplant, most startups will have an interim stage where they are too big for Inventopia, but not yet big enough to be attractive to the larger landlords like Buzz Oates, who focus on larger facilities and bigger clients.
Companies at this transitional stage only need small amounts of commercial space, in the range of 1000 to 2,000 square feet per unit with a lot of electricity, and if you can provide them THAT, they can generally figure the rest out.
As luck would have it, part of the City Council’s current goals include the conversion of city property on 5th street between L and Pole Line street to use for economic development. This part of town (and particularly the PG&E site) is what several members of the community have proposed as an infill-alternative for the innovation park.
While convincing PG&E to sell the land is an entirely separate conversation, there is no reason why we should not start getting serious about transitioning the city property along this stretch into small-unit R&D facilities to accommodate our startup sector. In fact the long, skinny nature of the city property that stretches behind Davis media access and the Redwood Barn nursery lends itself nicely to this kind of flexible small-unit commercial space development.
The only thing keeping us from getting a start on a smaller-scale innovation center for transition-scale companies at that location is political will.
3) Create a Research Farm. One of the hardest things for local startups to find, outside of lab space is farm space and greenhouse space. They need this kind of land to grow and test their new varieties of crops, or to test agricultural sensors, or irrigation systems, or robotic harvesting systems and the like. It is very hard to find local farmers who are willing to let research projects like this happen on their land, for a variety of reasons; time and liability among them.
There are not many cities who would consider the provision of farm space as part of their economic development strategy, but for Davis, which is essentially Mecca for the crop science and AgTech industry, it is a no-brainer.
The city owns multiple parcels of farmland around our periphery, and one of them presents a particularly well-aligned opportunity: The parcel known as the “Mace 25”
This 25 acre parcel was retained by the city when it sold off a larger property with the intent of eventually making it into a community farm, though there are no current proposals for how to fund such a program.
If we extend the concept of the “community farm” to include our “business community” however, suddenly there is a path to making this community farm a reality. Development of greenhouses, farm outbuildings, the establishment of wells, and highly segregated irrigation systems so that small plots can be farmed independently, could all be underwritten easily by the commercial partners. The users of Davis’ existing community gardens would be overjoyed.
I shopped this idea to the city several months ago, and even located an anchor tenant, (a local AgTech company which is currently growing exponentially) but eventually I stopped hearing back from the city. I suspect that the absence of having someone in the economic development role is the cause.
In summary: Making room in our city for high-tech companies is still our best opportunity to create a city where we can afford to maintain our bike paths, fund our schools, and get financially into the black. These kinds of companies are capable of bringing massive amounts of money into our economy from the outside, but actually realizing that potential requires a strategy that is tailored to the reality of our own unique opportunities and strengths.
The City has been guilty of treating the concept of an innovation park as some magical cure-all. It is not. It is time that we start taking a more pragmatic look at what economic development really means in a town like ours. We can’t just keep swinging for the fences; the pragmatic path forward at this point is to focus on base-hits that are within our power to accomplish today.
We are in a political season where our council candidates are treating “innovation park” as a dirty word, but the reality is that, as home to a world-leading research university, innovation is still Davis’s best opportunity for developing a robust local economy, and it always will be.
The things I mentioned above are the things we should be doing right now, innovation park or not, to keep the highly valuable companies in our R&D sector here in town for as long as possible, so that the investment revenues they generate are spent in our local economy.
Innerplant is one example of where we have been successful in doing so, but unfortunately, I could also list dozens of companies who have raised similar amounts of money, but whom we have failed to retain. It’s time we start doing something about that, even if it’s a collection of small things.
Tim Keller is a Davis resident and Founder and Executive Director of Inventopia.