How will new nonprofit use $500 million from NC? Lawmakers quiz NCInnovation leader
For more than two hours Tuesday, NCInnovation CEO Bennet Waters answered questions from state lawmakers about his nonprofit, which last year received $250 million in public funding — and is slated to receive another $250 million this year.
“We have constituents who would love to know why we put a commitment of $500 million in this budget without knowing all that much about it,” said committee co-chair Rep. Harry Warren, a Rowan County Republican
NCInnovation aims to bridge the “valley of death” university researchers can face when transferring promising concepts into revenue-generating businesses. The organization has established an endowment to fund UNC System projects with an emphasis on backing the work being done outside the Triangle area. The nonprofit has set up four regional hubs at Western Carolina University, UNC-Charlotte, North Carolina A&T and East Carolina University.
State law stipulates grant recipients must operate in North Carolina for at least five years.
“An innovation arms race has broken out across the United States,” Waters said. “This underpins some of the basic need for what NCInnovation can be.”
In May, the organization awarded a combined $5.2 million in eight pilot grants across seven UNC System schools. These projects included efforts to increase honeybee hive production, improve lithium refining and create cancer treatments. Waters said the pilot funding came from the interest NCInnovation has earned on its endowment, which has so far grown at a 5.25% annual rate.
From the pilot program, Waters said his organization will adjust how it manages data and categorizes the grant applications. He said experts in each respective subject field reviewed the grants.
“Later this year, we anticipate expanding on this pilot and its lessons as we move a statewide request for proposals that would be open to any and all applied researchers at a UNC System institution,” he said.
At one point, Warren asked why the preexisting efforts of the UNC System, which includes 16 public universities and 58 community colleges, weren’t enough to ensure researchers could monetize strong ideas.
“What we have looked at in other states is that government entities and university systems and private sector entities individually cannot do this well,” Waters said. “But the notion of a public-private partnership seems to be the Goldilocks solution, if you will.”
‘We didn’t have this vetting process’
NCInnovation doesn’t take equity in startups, and Waters argued making public money available to researchers will lessen the need some may feel to sell too much of their companies to private investors.
In addition to public funding, NCInnovation was required by law to raise at least $25 million from private donors, a threshold the organization announced it surpassed in April.
Many of the more pointed questions at Tuesday’s hearing of the North Carolina House Oversight and Reform Committee revolved around how these two funding streams would be separated as well as what obligations NCInnovation had to disclose information to the public.
Several House members said they didn’t get to learn about the organization and ask its leader questions last year.
“One of the reasons back when this appropriation showed up in the budget that I did not vote for the budget was because we didn’t have this vetting process,” said Guilford County Rep. Amos Quick, the Democratic House whip.
Funding NCInnovation has been controversial, splitting leaders both across and within party lines. Last year, the GOP-controlled state Senate proposed giving NCInnovation $1.425 billion while the Republican-led House and Democrat Gov. Roy Cooper each suggested allocating $50 million.
Earlier this year, conservative businessman and political donor Art Pope, who serves on NCInnovation’s board, requested the state audit the nonprofit’s financials. Asked why Pope may have done this, Waters told the committee, “I think that’s a question better posed to that director.”
As a public-private partnership, NCInnovation has 13 board positions — eight filled by the legislature. The five other positions are held by those who had previously served on the organization’s board, with former Truist Financial CEO Kelly King as chair.
Under last year’s budget, NCInnovation must submit annual reports before Sept. 15 to the Joint Legislative Commission on Governmental Operations, which is co-chaired by Senate leader Phil Berger and House Speaker Tim Moore. These reports should include information on awarded grants, the nonprofit’s fiscal budgets, performance metrics, details on how NCInnovation determines staff salaries, and any job creation data the organization collects.
By the end of the hearing, many committee members had commended Waters for the amount of information he had shared. But that didn’t mean all believed it will achieve its mission.
“I’m skeptical about the program,” said Warren, who contended there were better ways for the state to have spent $500 million.
This story was originally published July 9, 2024 at 3:03 PM.
