REPORT TO MAYOR AND COUNCIL

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1 AGENDA ITEM NO. AGENDA ITEM NO. 5.a REPORT TO MAYOR AND COUNCIL TO THE HONORABLE MAYOR AND CITY COUNCIL: DATE: July 12, 2011 USUBJECTU: AUTHORIZING THE CITY MANAGER TO EXECUTE ALL AGREEMENTS ASSOCIATED WITH SUB-LEASING OFFICE SPACE LOCATED AT 2151 SALVIO STREET, SUITE 350, TO JOHN F. KENNEDY UNIVERSITY FOR A CONCORD BUSINESS ACCELERATOR CENTER THROUGH OCTOBER 31, 2013 UReport in Brief A Concord Business Accelerator Center (BAC) has been proposed by John F. Kennedy University s Institute of Entrepreneurial Learning (JFKU), in cooperation with the Contra Costa Small Business Development Center (SBDC). This is a new entrepreneurial program focused on developing new small businesses with a high potential for growth and job creation. The program would support the City s Economic Vitality Strategy by facilitating job creation, providing assistance and support to new and existing businesses to increase their likelihood for success, and accelerating business expansion in the community. This proposal would locate the BAC in office space currently leased by the City of Concord at 2151 Salvio Street, Suite 350 (Salvio Pacheco Square), for the Engineering Services Division. The Engineering Services Division is slated to be relocated to the Public Works Corporation Yard in the fall of In the short-term, the BAC would operate in the vacant office space and would then expand its operations within the suite once City staff has completely vacated. The proposed agreement would provide free office space to JFKU for the remaining term of the City s lease (October 31, 2013) at a cost of $134,698. Under the proposed agreement, JFKU is responsible for all remaining costs associated with operating the program. It is recommended that the Council authorize the City Manager to enter into all agreements with John F. Kennedy University (JFKU) to provide office space for a county-wide Business Accelerator Center. UBackground On May 6, 2008, a Lease Agreement was entered between Salvio Pacheco Square, LLC, ( Landlord ) and City of Concord, ( Tenant ) leasing approximately 6,236 square feet of rentable area referred to as Suite 350 on the third floor of a building located at 2151 Salvio Street, for a term period of five years beginning October 31, This space was leased to provide office space for staff supporting the Building, Engineering and Neighborhood Services (BENS) Department and Affordable Housing Program. This office space relocated staff from a different leased facility that was found to be inadequate for the departments needs. Due to staff reductions since this relocation, the BENS Department has reorganized, the office space under this lease is not fully occupied and the space is now underutilized. In addition, the Affordable Housing Program which was initially occupying 35% of the space was relocated back to City Hall in January 2010, due to decreases in the program.

2 AUTHORIZING THE CITY MANAGER TO EXECUTE ALL AGREEMENTS ASSOCIATED WITH SUB-LEASING OFFICE SPACE LOCATED AT 2151 SALVIO STREET, SUITE 350, TO JOHN F. KENNEDY UNIVERSITY FOR A BUSINESS ACCELERATOR CENTER THROUGH OCTOBER 31, July 12, 2011 Page 2 JFKU and the SBDC approached City staff with a proposal for this Business Accelerator Center on November 19, The proposal indicated JFKU s need for an appropriate location to launch this new entrepreneurial program in Contra Costa County and detailed how the program would work. JFKU s proposal, the partnership agreement with SBDC and additional program information is included in Attachment 2. UDiscussion The City no longer needs the office space located at 2151 Salvio Street. This space has been on the market as a sub-lease opportunity since spring It has received little interest due to the fact the City still occupies a portion of the space and the amount of choices tenants have in today s office market. JFKU s proposal to operate a Business Accelerator Center provides a unique opportunity to utilize the space for economic development activities. Instead of allowing this office space to remain vacant for the next two years, the City has an opportunity to support its Economic Vitality Strategy and reuse the space in a productive manner. On March 8, 2011, the City and Redevelopment Agency entered into a reimbursement agreement whereby the City agreed to take over Agency programs in exchange for the Agency s pledge of tax increment funds and the Agency s fund balance. This proposal would fall under the Agency s Economic Development programs which are now City Programs as outlined in the reimbursement agreement. At the time of this report, the Governor had signed a State budget which proposes to eliminate redevelopment agencies in the State of California unless agencies agree to make new large contributions of tax increment revenues to the State. Litigation is contemplated against this budget on behalf of California redevelopment agencies. Therefore, the ability of the state to enforce the state budget is unclear, and the Agency s future was uncertain. If the Agency is allowed to continue, the City could transfer its leasehold interest to the Agency, which could then sublease the premises to the BAC. As the proposed sublease rental payment does not cover the monthly rental payment due under the lease, the Agency could use its Tax increment Funds to cover the balance, thus relieving the burden of this lease from the City s General Fund. In the event that the State budget is found to be legal, the remaining cost of this lease would be borne by the General Fund. Business Accelerator Center JFKU will be responsible for all costs and expenses associated with operating the BAC. This center will provide technical assistance, training and consulting to small and start-up business ventures in order to increase their success, expand their products and services, and create jobs. The BAC will provide office space for five center staff and up to twenty local business owners, access to basic administrative equipment, training courses, and access to experts and peers in various industries. JFKU s Institute of Entrepreneurial Learning began in spring 2011 to provide a collaborative education and training program to entrepreneurs so that they have the skills and resources necessary to start up

3 AUTHORIZING THE CITY MANAGER TO EXECUTE ALL AGREEMENTS ASSOCIATED WITH SUB-LEASING OFFICE SPACE LOCATED AT 2151 SALVIO STREET, SUITE 350, TO JOHN F. KENNEDY UNIVERSITY FOR A BUSINESS ACCELERATOR CENTER THROUGH OCTOBER 31, July 12, 2011 Page 3 businesses, thrive and grow. This program aims to be an agent of change by creating linkages between entrepreneurs, other small businesses, government and community entities, corporations and investors. JFKU, along with the SBDC, has already developed and begun implementing the curriculum for participating businesses. The program curriculum includes intense venture training, business plan development, product development, and one-on-one consulting for the businesses. JFKU began the first training program for entrepreneurs at their Pleasant Hill campus in early 2011, and ten graduates have completed the program and received certificates. Five of those graduates are currently launching their businesses in the county. One business has already started operating and another has raised over $1.6 million in equity from investors. JFKU recently completed the second training program and would like to begin locating entrepreneurs and staff to Concord as soon as the space is available this summer. The next training program is scheduled to begin in September. A detailed explanation of the BAC s training program is included as Attachment 3. Because the BAC will be available to businesses throughout Contra Costa County and will be the only center of its kind, other cities may be interested in providing funding support in the future. JFKU and the SBDC will continue their efforts to obtain support and assistance from other cities in the county. The principals have had initial discussions with the cities of Martinez, Pleasant Hill and Walnut Creek. JFKU and the SBDC have formed partnerships with key local business groups to help ensure the success of this new program. One agreement is with the Keiretsu Forum (HTUwww.keiretsuforum.comUTH), which is a major international angel investors group. The Keiretsu Forum is the largest global private equity investment network of accredited angel investors, venture capitalists, and corporate/institutional investors. Keiretsu Forum aims to strengthen its local communities through education on angel investing and charitable and social activities. Keiretsu Forum has a Partnership Agreement with JFKU to foster educational activities and grow new businesses in the Bay Area. (Attachment 4) This program has already received approximately $50,000 from JFKU, the Everest Foundation and the Raul and Shari Deju Trust for scholarships and operating expenses for the entrepreneurship program. JFKU has received additional commitments of more than $300,000 from corporations and local businesses to fund this center as well. JFKU is currently finalizing these sponsorships, and anticipates being able to announce these major donors in the next few weeks. The BAC supports the City s Economic Vitality Strategy by facilitating job creation, providing assistance and support to new and existing businesses to increase their likelihood for success, and will accelerate business expansion in the community. This center will facilitate the development of high-quality entrepreneurs and emerging industries and encourage them to locate within our community. An article in the San Francisco Business Times (April 22, 2011) recently discussed what the East Bay needs in order to attract and retain innovative companies. In the article, Michael Cohen from UC Berkeley stated that more flexible, small, short term office space available at competitive prices was needed for start up and growth companies. Mr. Cohen also indicated that the area needed more robust people networks comprised of local business veterans, entrepreneurs and investors to nurture growing companies. The Concord BAC supports these needs by providing small, flexible space for entrepreneurs and a cooperative network of industry partners to

4 AUTHORIZING THE CITY MANAGER TO EXECUTE ALL AGREEMENTS ASSOCIATED WITH SUB-LEASING OFFICE SPACE LOCATED AT 2151 SALVIO STREET, SUITE 350, TO JOHN F. KENNEDY UNIVERSITY FOR A BUSINESS ACCELERATOR CENTER THROUGH OCTOBER 31, July 12, 2011 Page 4 encourage growth and success. JFKU and the City will be providing a much-needed and innovative environment for local entrepreneurs to collaborate and gain knowledge to take their businesses to the next level. Business Terms The terms and conditions detailing JFKU s agreement with the City are contained in Attachment 1. The following are the key business terms: JFKU will be allowed to operate the Business Accelerator Center in the City s offices at Salvio Pacheco Square until either (a) one month prior to the termination of the lease (September 31, 2013), or (b) if JFKU has executed a lease for the suite with the landlord by September 1, 2013, the term will run through the remaining term of the lease (October 31, 2013), subject to certain provisions.. JFKU will occupy the space not currently being used by the Engineering Division until they vacate the space in fall Once the Engineering Division vacates the suite, JFKU will be allowed to expand the BAC into the remaining office space. JFKU will be allowed to use any surplus office equipment and furniture in the suite throughout the remaining lease term. JFKU is responsible for any additional costs pertaining to the lease including utilities, insurance, office supplies, etc. JFKU will provide appropriate insurance naming the City as an additional insured on its policy. City will be sub-leasing a total of 6,236 sq. ft. of office space (once the Engineering Division vacates) and charging $1.00 per year in base rent in exchange for JFKU operating the BAC and fulfilling and other conditions set forth in the sub-lease documents, including paying a proportionate share of the operating expenses associated with the space. Once the master lease terminates in October 2013, all of the City property will be removed from the suite, and the BAC will become self-sufficient. UFiscal Impact Annually, the City s General fund is currently paying $87,554 and the Redevelopment Agency s Affordable Housing Set-Aside Fund is paying $47,144 for the office space located at 2151 Salvio Street ($134,698 total). If the Council approves sub-leasing the space to JFKU, this current funding arrangement will continue. Once Engineering vacates the suite and the Redevelopment Agency s future is resolved, tax increment funds could be used to cover the remaining balance of the lease, thereby eliminating all General Funds from the lease. There will be a small amount of initial costs to set up the BAC, mainly due to Information Technology security needs. These costs will include the installation of the key card system to the suite, processing of the

5 AUTHORIZING THE CITY MANAGER TO EXECUTE ALL AGREEMENTS ASSOCIATED WITH SUB-LEASING OFFICE SPACE LOCATED AT 2151 SALVIO STREET, SUITE 350, TO JOHN F. KENNEDY UNIVERSITY FOR A BUSINESS ACCELERATOR CENTER THROUGH OCTOBER 31, July 12, 2011 Page 5 key cards for staff and entrepreneurs, and installation of wireless internet for the BAC. These costs are estimated at $$3,800, and the funds will be provided from the Redevelopment Agency s Tax Increment funds. UPublic Contact Notice of the meeting has been posted. JFKU, the SBDC, TSBA, and the Concord Chamber of Commerce have received a copy of this report. URecommendation for Action Staff recommends the Council authorize the City Manager to execute the required agreements associated with sub-leasing office space located at 2151 Salvio Street, Suite 350, to JFKU for a Concord Business Accelerator Center through October 31, Prepared by: Joyce Davidson Seitz Economic Development Specialist HTUjoyce.seitz@ci.concord.ca.usUTH Daniel E. Keen Executive Director HTUdan.keen@ci.concord.ca.usUTH Reviewed by: John Montagh Redevelopment & Housing Manager HTUjohn.montagh@ci.concord.ca.usUTH Valerie Barone Assistant City Manager HTUvalerie.barone@ci.concord.ca.usUTH Attachment 1 - Agreement Attachment 2 - JFKU Proposal, Partnership Agreement with SBDC and additional program information Attachment 3 - BAC Training Program Attachment 4 - Forum Partnership Agreement

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79 Attachment 2 Contra Costa County Business Accelerator & Resource Center Project Prepared by Jon Erlandson Contra Costa Small Business Development Center and Raul A. Deju, Ph. D. Institute of Entrepreneurial Leadership at John F. Kennedy University October

80 U1. Overview and Introduction To attract, retain, and promote expansion of local business opportunities, we propose the establishment of a Business Accelerator & Resource Center (BARC) in Contra Costa County. Such a facility would provide technical assistance to small and start-up business ventures to enhance business success and thus promote both economic activity and job growth within our County. It will be similar to an incubator except that it will not be focused on high tech, but on local main street businesses with a high potential for local job creation. The BARC would be administered by the Contra Costa Small Business Development Center (CC-SBDC) in partnership with John F. Kennedy University s Institute of Entrepreneurial Leadership (IEL) a not-for-profit educational institution of higher learning. The CC-SBDC would provide the day-to-day management of the Business Accelerator Facility and would coordinate the recruitment and assignment of Advisors. Both parties will be involved in the screening of applicants and IEL would lead on providing formal training and relationships with angel investors and the possible use of these investors as mentors. IEL will capitalize on its partnership agreement with Keiretsu Forum, the largest global group of angel investors. Funds to establish and manage BARC are being sought by CC-SBDC and IEL. This proposal is for an initial program that can be reproduced at other locations within the County and can even serve as a nationwide model. This paper defines the proposed project. BARC intends to serve the following functions: It will provide space, shared office services, access to basic administrative equipment, flexible and affordable leases, and expandable space to new and existing small businesses in the County that meet basic screening requirements for suitability, growth and job creation; It will host an innovative Business Accelerator program that provides consulting, training and peer interaction to a selected group of existing and newly proposed small businesses in the local community; It will host a drop-in, small business outreach and referral center providing information and referrals to government, non-profit, and business resources available to the local business community and to those wanting to start new businesses; and 2

81 It will provide training classes and concurrent one-on-one customized business consulting from Business Advisors of the Contra Costa Small Business Development Center and the John F. Kennedy Institute of Entrepreneurial Leadership. 1.1 The Business Accelerator Concept The first phase of the Business Accelerator project will begin with approximately ten to fifteen local small businesses some of which may be start-ups. These will be housed in a conveniently located building within Contra Costa County. We distinguish our program from traditional incubators in that we will insist on serious screening and training for the entrepreneurs such that the chance of success of each business is dramatically increased. The program will begin by taking businesses and developing the skills of the entrepreneurs to more rapidly build and strengthen each business such that they can create more jobs in the local area. In a recent study of the economic impacts and federal costs of economic development activity, researchers found that business incubators are the most effective means of creating jobs - more effective than roads and bridges, industrial parks, commercial buildings, and sewer and water projects. In fact, incubators provide up to 20 times more jobs than community infrastructure projects (e.g., water and sewer projects) at a cost of $144 to $216 per job compared with $2,920 to $6,872 for the latter, the report notes. Business incubation programs provide entrepreneurs with a guiding hand to help them turn their ideas into viable businesses. The EDA study, "Construction Grants Program Impact Assessment Report," was prepared by Grant Thornton. In a recurring theme throughout the study, the authors note that "EDA's strategic focus on innovation and entrepreneurship makes sense, in that investments in business incubators generate significantly greater impacts in the communities in which they are made than do other project types." Source: Small Business Digest: 5/21/2010 HTUhttp:// IncubatorsUTH. 3

82 Our proposal involves a business accelerator concept that we believe improves the success of a traditional incubator through careful front-end screening and structured concurrent training and consulting. It should be even more cost effective than those incubators studied and referenced in the aforementioned study by Grant Thornton. While previous incubators have allowed companies to stay for extended periods, our timed exit element will ensure progress and continuous opportunities for additional new and existing businesses. This project is more like a practical university education for businesses than just a real estate based incubator Background Statement of Need Unemployment is currently about 11.3% (August 2010) in Contra Costa County. At the same time that the need for investment in the local business community has increased, city and county budgets have been cut. To reverse the current economic downturn we need to proactively develop cost effective methods to nurture and grow new and young businesses which will in turn provide local jobs, a more vibrant business community, and a thriving local economy. This proposal aims to do just that. Local Economics Local shopping patterns have changed in these tough economic times. People currently buy products or services where the prices are lower. Local residents now do most of their nonfood shopping at the big box retailers and online where they feel that they have better selection and lower prices. Many traditional local merchants find it difficult to compete. The result is a flow of shopping dollars going out of the community Everyone wants retail shops like a bookstore or a shoe store in their downtown, but those businesses don t work anymore unless they change paradigm and expand their venues for selling and increase the perceived value to their clients. New business concepts are needed to fill the gap and improve existing businesses while at the same time adding new promising businesses. We need to help new and existing business adapt to the new realities of the changed marketplace. The Business Accelerator will help reverse the outflow and demise of local businesses by focusing on businesses that represent opportunities for manufacturing, distribution, local sales and exports. Our Business Accelerator program will emphasize manufacturing and export (both out of the community and even in some cases out of the country) as one way to reverse local adverse economic trends. If you make something and sell it outside the area you create value 4

83 as well as a greater marketing opportunity. This, in turn, brings money back into the local economy. Additionally, the employees of the accelerator companies working in the community will go to lunch and shop nearby and the local economy will see further gains. Increased economic activity raises property values, increases property taxes, and creates additional retail traffic for additional sales tax revenues. Creating Jobs According to studies from the Kauffman Foundation, Ucompanies less than five years old have created most net new jobs in the United States since 1980U. In 1997, young firms accounted for two-thirds of job creation. The HresearchH shows that new and young firms have been the primary source of new jobs in the United States over the past three decades. The report, Timely Entrepreneurship Indicators, is part of the second-year results of the Entrepreneurship Indicator Program (EIP), which uses official government data to measure performance in 23 countries. (HTUhttp:// ). "Job creation is the number one issue facing families and policymakers during this economic recession, and this study shows that new businesses and entrepreneurs are the key factor in adding new jobs," said Carl Schramm, president and CEO of the Kauffman Foundation in the aforementioned work. "If the U.S. economy is going to have a sustained recovery, it will be up to entrepreneurs to lead the way." "This study sends an important message to policymakers that Uyoung firms need extra support in the early years of formation so they can grow into viable job creatorsu," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation and one of the study's authors. "Sometimes a single barrier, such as limited access to credit for business growth, can mean the difference between survival and failure. We must create an environment that aids firm formation and growth if we are going to turn unemployment around." 5

84 U2. Proposed Business Acceleration & Resource Center (BARC) 2.1 Business Accelerator We will develop BARC in partnership with a local city within Contra Costa County. This project will be the first phase for a planned network of Business Accelerators throughout the County. We have identified a team to lead BARC by drawing from the resources of the two partners in this proposal, CC-SBDC and IEL-JFKU as outlined in Section 3. The team will focus on identifying and screening start-up and small businesses that can rapidly grow within the Business Accelerator to create wealth and produce new local jobs. The project would begin by selecting ten to fifteen local businesses and giving them access to office or virtual space. The key is enrolling them in a specific package of business classes while at the same time helping them to better focus on their business. The first phase of the educational and mentoring program would take approximately 4 months during which the proposed entrepreneurs would develop a clear business plan designed to address the obstacles and opportunities of the changed economy. Although intensive, the classes during this phase are part-time and will allow existing business owners the ability to continue to operate and grow their business during the instruction period. In addition, they would receive concurrent one-on-one customized business consulting from Business Advisors of the Contra Costa Small Business Development Center and the John F. Kennedy Institute of Entrepreneurial Leadership. Program participants would pay a tuition fee for training and share limited facility expenses such as electricity and access to the internet during the training phase of the program (up to the first 4 months in the Business Accelerator). Scholarships would be available to pay or partially pay tuition costs for those with a demonstrated need. After the four months in the Business Accelerator participants would graduate from their initial educational phase to a Mentoring phase where they can be housed within the Business Accelerator but would see modest increases in rent consistent with their ability to pay as discussed in Section 3. We believe continued support is critical for our graduates, and the program will continue to offer ongoing consulting to the graduates and also monthly mastermind group meetings through the CC-SBDC after the initial 4-month period. Wikipedia defines a mastermind group as "A small club of like-minded advanced talents who meet periodically for mutual brainstorming and accountability sessions." The mastermind meetings will allow them to build support networks and to continue the relationships they have developed in the class. 6

85 2.2 Resource Center Outreach and Referral Center BARC will also provide small business outreach and information regarding the government, non-profit, and business resources available to the local business community. It will also provide space for Advisors such as the CC-SBDC and outreach specialists such as those from the One Stop Career Centers to reach out to local businesses. This will be a real benefit to the local business community as it will provide one-on-one real time assistance to local businesses looking for current, localized, information about city services events, consulting, rebates and tax credits, training, service providers, and other resources available to the business community. This information will be made available by phone, in person, or by the internet. With cuts in city staff, this could be a benefit to the city personnel in that many of the simple questions could be handled through the resource center freeing up staff time for the more difficult problems. The Resource Center can also host classes and training coordinated by JFKU, and CC-SBDC. Such training could include topics such as Meet the Lenders, Regulatory Assistance, Tax Information, etc. These classes will be available to program participants, graduates, and the business community. Classes will in certain instances have a fee. 2.3 Elements of Program Success The Business Accelerator would be located in a city willing to sponsor the project by providing suitable office space for the Accelerator. We expect that a minimum of 3,500-4,000 square feet should be sufficient, but additional space in the same building would provide growing space for the graduates and in time rental income for the building owner. The plan would be to fill a building with graduates and then move to a new building or a separate part of the same building and begin the process all over again. The Business Accelerator program will be principally designed for local businesses that have the potential to expand and create local jobs. Manufacturing, distribution and exporting will receive special emphasis. BARC will not accept start-ups unless they have a strong potential for rapid job creation. 7

86 The Business Accelerator concept will be anchored in four important elements essential for success: (A) Selection, (B) Education, (C) Individual Business Consulting and (D) Access to Capital. A. Selection If we want to create jobs and wealth, selecting the right companies is important to the success of the program. We need to select businesses that make or export a product or can create many jobs. Candidates will be interviewed to look at concept, experience, capitalization potential, likelihood of success, scalability and character. Scalability is important because it refers to the potential to grow the business into a larger, job producing company. We will have the ability to include businesses outside our target focus if they have exceptional job creation potential. Our program is not for everyone. Some programs want to include everybody and try to help all comers. The sad truth is that many new businesses fail. If we try to help everyone without screening, we will waste precious assets on companies that will probably fail anyway. To make the program successful and sustainable, we must be selective. Successful completion of a business incubation program increases the likelihood that a start-up company will stay in business for the long term. Historically, 87% of incubator graduates stay in businessp P(Business Incubation Works.: National Business Incubation Association, 1997). B. Education There is so much to be learned. Most local business owners do not have an MBA. Many started their business with little or no formal business training. MBA programs are designed for business of a much higher level. Seat of the pants, guerrilla marketing and guerrilla financing classes are not usually taught in business school. They will learn these strategies in our program and can then expand their knowledge into a full blown MBA if they separately so desire. Participants will be enrolled in an intense venture training program and, in the classes, will work on their business opportunity from new perspectives and develop a dynamic business plan designed for growth. The program will offer 11 weeks of classroom instruction with additional homework. One of the issues with incubators in the past has been a lack of progress by the individual businesses. Our program will offer additional support for those who fall behind. We will use volunteer mentors and consultants to help with specific problems. 8

87 Graduates of the Business Accelerator will receive a certificate of achievement from John F. Kennedy s Extended University and will be able to continue their relationship with their peers during monthly facilitated mastermind group meetings with their classmates. Individual business consulting from the Contra Costa Small Business Development Center Advisors supported by the staff of John F. Kennedy University s Institute of Entrepreneurial Leadership will be available as well. C. Individual Business Consulting. Individual one-on-one consulting sessions will be an integral part of the Accelerator experience. Small business owners will meet with their Advisors and discuss their ideas and will receive individual assistance in relevant topics such as business analysis, management, planning, government contracting, finance, marketing, competitive strategies, technology and access to capital. The Small Business Development Center Advisors and the JFKU faculty have a vast array of talent and decades of experience and will be matched based on the needs of the business. D. Access to Capital Growth requires capital. Many small businesses that would otherwise be successful are stymied by the lack of access to capital. If they are successful in marketing their business, they will have orders to fill; often needing the capital to buy the materials and to make the product. Businesses that once relied on home-equity lines of credit for capital now have to look elsewhere. Current, lower sales volumes have made it difficult for companies to secure bank loans. Alternative capital resources will be researched and catalogued, and access to the lending criteria and lender representatives will be provided to the Accelerator participants. We will promote the programs offered by the SBA, TMC Development Corporation, OBDC Small Business Finance, Opportunity Fund, Superior Funding, Borrego Springs Bank, and the programs of local, regional and national bankers. We will access angel investors such as members of the Keiretsu Forum (a partner of IEL) especially for more advanced entrepreneurial ventures. In addition, we hope to include access to a revolving loan fund (RLF) which would be an important element in the program. The Small Business Jobs Act of 2010 provides up to $1.5 billion to States to support state run small business lending programs. Having the possibility of access to capital would provide motivation for the entrepreneurs to go through the program. If you talk to entrepreneurs, they are not focused on learning the tools to become effective CEO s; they are focused on getting funded. What they need is capital and education. 9

88 The We can use the opportunity of access to capital as the motivation to bring them into the program. From a RLF lender s perspective, the program will help sort out who is really willing to work hard at their business and who is not. If they can work hard and complete assignments in the class, this will carry over into the real world. 2.4 Not a Traditional Incubator The incubators that have been tried in Contra Costa in the past were significantly different from this program. The major differences include: UA. Previous incubators focused on high tech businesses.u In previous incubators, the focus of the business was high-tech. The plan was usually to develop a technology, get a patent, get funded, and sell the company. Even if successful, this process did not always result in jobs for the local community. If sold, the buyers determined the location of the jobs and more often than not, those jobs were located outside of the County. Our program focuses on what we call main street businesses. Many will not have significant proprietary technology and may not be candidates for acquisition. We want local residents who have roots in the community or that are willing to make the local area their home. The prime directive is not leading to an acquisition, it is jobs. UB. Entrepreneurs in previous incubators carried a real estate burden. U heavy rent burden carried by previous incubators (after a period of free or low rent) eventually influenced selection decisions based on the need for cash flow and not just on the prime directive of selecting the best entrepreneur candidates. Our program has free rent as a prerequisite from a Host City in the County. We can thus offer such a rent break to entrepreneurs for a brief period growing up modestly as the business ability to pay increases. We do not require prime space or locations. UC. Education was not a requirement of prior incubators.u Previous incubators did not require a concurrent, structured educational element as part of the program. They did not require completed assignments integrated with classroom learning experiences. UD. Intensive consulting and mentoring wasn t always available.u While the directors of prior incubators provided excellent individual consulting, most of the burden was placed on one person sometimes challenging the ability to meet the needs of all the participants as well as managing the program. At certain times, participants do need special mentoring attention; such as when they face a big contract or a presentation. 10

89 Our program will call on outside consultants, advisors and mentors from the CC-SBDC, JFKU-IEL, Keiretsu Forum, SCORE, the Woman s Initiative and other local sources based on the needs of the business. It will also integrate a (categorized in a database by expertise) network of volunteer mentors from the local business community. This will not only provide industry appropriate assistance, but will introduce the participant to the local business community and enhance networking opportunities. UE. Previous incubators faced longer development times because they were dealing more with patents and advances in technology.u This program is designed to bring the companies up to speed quickly. It is not designed to help with the long process of developing technology. It works with already available technology that just needs to be sold. Therefore, the incubation period is much shorter. For most companies, the time involved is only the 11 week Phase One program. After that, they will be out in the community doing business. While they will apply what they have learned; they will continue to receive mentoring and consulting; and they will be interacting with their mastermind peer group. All this support gives them a tremendous leg up with their business. Even start-ups get a quicker start. No start up will be accepted unless we can see an executable Business Plan that can quickly lead to jobs. Think of the Business Accelerator as a short but intense Business Entrepreneurship training class with extensive support during and after the class. 11

90 U3. Staffing, Organization, and Structure BARC is being structured as a 501c3 not-for-profit organization. It will be operated through a Board including members of CC-SBDC, JFKU s IEL and independent Board Members. From a day to day standpoint the site operations of BARC will be housed by the city and managed by CC-SBDC. Core training will be conducted under a subcontract between BARC and JFKU s IEL. The Contra Costa Small Business Development Center (CC-SBDC) is a partnership program with the U.S. Small Business Administration (SBA). The goal of the CC-SBDC is to encourage, and support the growth of small businesses in Contra Costa County, by offering business management tools and one on one business advising to the owners of small businesses throughout Contra Costa County. The services of the CC-SBDC are made possible through funding from the SBA and Community Development Block Grants from Contra Costa County and Walnut Creek. The CC-SBDC is hosted by the Workforce Development Board of Contra Costa County. The Institute of Entrepreneurial Leadership (IEL) at John F. Kennedy University works with both JFKU s Extended University and the College of Professional Studies to drive and support a range of initiatives and activities including degree program specializations, professional certificate programs, and cross-sector partnerships focused on regional job creation, local entrepreneurial ventures, and a strong support for social entrepreneurship. Working intimately across industries and sectors, IEL intends to brand a new collaborative model of entrepreneurship education and training in the Bay Area s higher education landscape. John F. Kennedy University itself was among the first institutions of higher education in California committed to lifelong learning. Today, the University s three Colleges and its Extended University division provide innovative higher education opportunities to more than 2,000 professionals who, despite a full range of life responsibilities, are determined to advance their education and improve their future. A pioneer of education that integrates theory and practice, John F. Kennedy University and its students touch the lives of more than 30,000 people in Bay Area communities every year through their support of outreach centers and public programs. John F. Kennedy University is an affiliate of the National University System. BARC will be established and a Leadership Team will head the operations. Two key executives in BARC are: 12

91 Jon Erlandson, Director of BARC for day-to-day operations, CC-SBDC consulting and mentors, and Raul Deju, Deputy Director of BARC and Director of Training Programs and Scholarships Jon Erlandson is currently a small business consultant providing one-to-one business consulting through the SBA sponsored Contra Costa Small Business Development Center. He brings thirty years experience in business consulting with small businesses, turnarounds, and start-ups in a variety of fields; often via angel investor groups. He has worked for several consulting organizations and was the resident mentor for the two incubators in Contra Costa County. He has run a retail chain, a distribution center for the Gap, and multiple departments for Joseph Magnin. He has spent seven years in commercial real estate sales and leasing and has extensive experience in community-based businesses. Mr. Erlandson will serve as the Initial Director for the Business Accelerator & Resource Center responsible for its day to day operations. Dr. Raul A. Deju is the Director of the Institute of Entrepreneurial Leadership and Professor of Business at John F. Kennedy University. He has formerly served as Chairman, CEO or COO of major international public companies. Dr. Deju, a former adjunct faculty member at JFKU and St. Mary s College and a seasoned executive, brings his entrepreneurship experience having created from startup or through consolidation a number of large companies traded in major stock exchanges as well as serving in advisory committees for the Secretary of Commerce and the EPA Administrator. Dr. Deju s companies have created thousands of job opportunities on a global scale. Dr. Deju is the author of over 200 peer-reviewed articles and four books and was listed in 2005 as one of the 25 Leading Hispanics in the San Francisco Bay Area. He is also a recipient of recognitions for his philanthropy and social entrepreneurship in the Latino community. Dr. Deju will be in charge of Core Training for the Business Accelerator and lead scholarship fund-raising and administration. 13

92 U4. Proposed Timetable and Process to Launch the Project Pre-Operations Phase Prior to starting operations of BARC we must undertake a pre-operating phase that includes three major steps (1) securing office space for the Business Accelerator; (2) securing significant grants and other forms of financing to make sure we can successfully operate the Business Accelerator for the first months; and (3) selecting the first class of entrepreneur occupants for the Business Accelerator. Each of these three steps is detailed in the following sections. USecuring Office Space- Targeted to be completed by December 31, 2010 The first step is to secure sufficient office space with essentially no capital improvements needed in order to house the Business Accelerator and its first class of entrepreneur occupants. It is estimated that depending on configuration about 3,500-4,000 square feet will be needed to house a small lobby, a resource room (library), a training room, two break-out meeting rooms, two small staff offices, a storage area and flexible space for entrepreneur occupants. Alternative accommodations will be considered and can affect the amount of space needed. The Business Accelerator is seeking space Uat no costu to BARC for months. The preferred space would be unoccupied space owned or leased by a city in the center of the County. BARC could then use this space to house its offices and the entrepreneurs. Entrepreneurs would pay no rent during the first 4 months increasing to $150/month at the beginning of the fifth month and a tiered set of increases moving to 90% of the normal rental rate at the end of year 2. Rental receipts from entrepreneurs for the first 18 months would be used by BARC to cover minor upkeep and utility costs. USecuring Sufficient Operating Funds- Targeted to be completed by January 31, 2011 BARC would be set-up as a 501c3 non-profit operated by CC-SBDC with training for entrepreneurs provided under a subcontract arrangement by the Institute of Entrepreneurial Leadership (IEL) of JFKU. 14

93 Funding to initiate the operations of BARC would have to be secured to include: 1. Basic utilities and minor building upkeep; 2. Salaries for overhead and administration; 3. Minor administrative supplies; and 4. Staff costs for advising the entrepreneurs. With a minor contingency, these operating costs are estimated to average $9,000/ month and it would be desirable to secure operating funds sufficient to cover months of operation. The BARC will work with county, city, and federal agencies to try to secure these funds. The Core Training program would be subcontracted to IEL-JFKU and entrepreneurs would pay a nominal cost for the training (tuition), subject to reductions based on ability to pay. We would base the first year program on training up to 50 entrepreneurs including allocating some time for one on one advising. The curriculum and the training material have already been developed and tested and the instructors are well versed in the planned curriculum. We, however, require a pool of monies for scholarships/ student assistance for the incoming entrepreneurs. A commitment by a donor of up to $20,000 has been made if it can be matched 3 for 1 by January 31, IEL will seek additional funds from Foundations, private businesses, individuals and government entities involved in both the County and the host city. This scholarship fund together with limited tuition receipts should ensure sufficient funds are available for training. For training and scholarships we would like to obtain commitments of at least $80,000 by January 31, USelecting the First Class- Targeted to be completed by February 28, 2011 Subject to positive progress in securing office space and adequate funding we anticipate beginning to advertise the selection process for outstanding entrepreneur candidates to put in applications for the first group to be hosted within the Business Accelerator. Applications will th be available November 15P P, 2010 (In connection with Global Entrepreneurship Week) and marketing would start assuming the site selection and the funding identification are advanced. Subject to completing the site selection and the step to secure funds we would conduct interviews starting either upon completion of site selection and funding identification or February 1, 2011 whichever is the latter. A preliminary selection would be completed by February 28 with notifications to the candidates. 15

94 UOperating Phase The first class of entrepreneurs would start in April 2011 and graduate by mid July These dates are subject to timely completion of all the steps in the Pre-operating Phase. It is anticipated that a second class of entrepreneurs would enter the Business Accelerator by September Delays in the Pre-operating phase will have a day for day impact in delay the start of the first Entrepreneur class in the Business Accelerator. Fund raising will continue through the operating life of the Business Accelerator and if successful other physical locations within the County can be considered. The nature of the value of this process is easy to understand. If as a result of the first year of operations employment from the businesses accelerated increases by 25 jobs (a very modest number), the payroll impact from the additional employees exceeds $1.5 Million and the economic impact to the County approaches $10 Million. Considering basing this output on an investment of $238,000 valuing the real estate contribution, and the donations and grants at full value. Clearly, such a Business Accelerator is an excellent way to generate jobs, wealth and economic impact to our County. The program will be promoted through efforts of John F. Kennedy University, The Contra Costa Small Business Development Center, The County of Contra Costa County, the Host City, the County agencies, the Chamber of Commerce, The Woman s Initiative, and many others. A series of articles in local papers will also help promote the program as would blogs, internet material and announcement in local entrepreneurial entities. Information would be sent to all small businesses registered in the County. The growing businesses will make a difference in the local economy and have a ripple effect as they hire to create jobs and spending throughout the community. As we continue the program, it will continue to help grow the local economy. The participants will be registered with the CC-SBDC and, using their CATS tracking program, we will be able to report: jobs created, jobs retained, increases in sales, loans, and investments. We will learn from our experience and continue to develop the details of the program with the input and advice of stakeholders 16

95 P of U5. Financial Resources Needed To start this Business Accelerator certain resources in kind or in cash are needed: 3,500-4,000 square feet of space at no cost and in moving condition are needed for at least months in a central city within the County; Free or nearly free partitions, tables, chairs, dividers, phones and file cabinets and other basic supplies; We have assumed that each entrepreneur housed at BARC would bring in computers and would arrange for their phone services; We need the Host City to provide Reception Services at BARC or we need monies to cover these costs; We have assumed that the Workforce Development Board and SBDC would continue to pay for Jon Erlandson s salary and the consulting cost of advising to the entrepreneur will be paid by the CC-SBDC; Cash resources to pay for basic operating support are needed and are estimated to average $5,000/month; and A Scholarship fund of $80,000 is needed to supplement training tuition in cases of need. th 1/4P the fund has been pledged. 17

96 9. Appendices A. Contra Costa Small Business Development Center Summary B. John F. Kennedy University Institute of Entrepreneurial Leadership Summary 18

97 UCONTRA COSTA SMALL BUSINESS DEVELOPMENT UCENTER About the Small Business Development Center What is an SBDC? The Small Business Development Center (SBDC) is a partnership program of the U.S. Small Business Administration (SBA). A Small Business Development Center (SBDC) conducts research, counsels, and trains business people in a wide variety of business topics and provides comprehensive information services and access to experts in many fields. Consulting is provided free of charge to all small business owners. Each SBDC encourages unique local efforts, region to region, state to state, and community to community, to meet small business needs in its area. SBDCs develop and maintain partnerships among community organizations and local, state and federal agencies, providing a focal point for a broad network of public and private resources at the community level. SBDC partnership programs and activities serving small businesses have contributed significantly to economic growth in California and across the nation. About the SBDC The Small Business Development Center is currently the largest management and technical assistance program serving the small business sector in the United States. The U.S. Small Business Administration (SBA) administers the overall program while implementation of the program rests with each SBDC State Director and the participating organizations within the state. The California Small Business Development Center program began operating in 1989 and the California SBDCs make up 31 of the 1000 SBDCs throughout the nation. SBDCs are located in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Guam. Over the past three years the Contra Costa Small Business Development Center has created 729 new jobs, retained 481 jobs, increased sales of our clients by $34, and has helped clients obtain loans and equity investments of $18,738,472. Eligibility for SBDC Services and Programs 19

98 SBDC services and programs are open to all small business owners in Contra Costa County. Nondiscrimination SBDC services and programs are open to all persons without discrimination. Our Mission The mission of the Contra Costa Small Business Development Center, (CCSBDC) is to encourage and support the growth and success of small businesses in Contra Costa County by providing professional consulting services and a wide variety of educational programs. Our services are made possible by funding from the U.S. Small Business Administration, Contra Costa County and Walnut Creek Community Development Block Grants and the Cities of Brentwood and El Cerrito. Services are available to all residents of Contra Costa County without discrimination. The Contra Costa SBDC is hosted by the Workforce Development Board of Contra Costa County Contra Costa Small Business Development Center 300 Ellinwood Way #300, Pleasant Hill, CA Phone: , Fax:

99 UInstitute of Entrepreneurial Leadership at John F. Kennedy University John F. Kennedy University s Institute of Entrepreneurial Leadership was founded for the purpose of building entrepreneurs and leaders in our community. An entrepreneur is a person who starts a new business venture. If the person has a business degree or a reasonable level of entrepreneurial education his/her chance of success increase to 87% from generally less than 10%, definitely a sound step to take. In addition, entrepreneurs who understand and exercise leadership can truly increase their chance of success even more. When entrepreneurial leaders succeed, they create wealth and jobs and generally are inspired to help others. It is this cycle that John F. Kennedy University aims to positively influence. The Institute of Entrepreneurial Leadership is based on the Pleasant Hill Campus but serves the entire Bay Area. It houses all of the University s resources to make Entrepreneurs successful including: MBA Studies geared toward those wanting to start a business including traditional businesses such as those of lawyers and doctors. The University for example, offers a joint JD/MBA program; Certificate Studies designed to more quickly bring in to an entrepreneur the tools he/she needs to succeed. For example, participants can enroll in an intense venture training program and, in the classes, will work on their business opportunity from new perspectives and develop a dynamic business plan designed for growth. 21

100 Ties with other organizations that provide practical experience to those participating in the programs of the Institute for Entrepreneurial Leadership. Here are some examples: 1. Through a partnership with the Keiretsu Forum we are able to provide our students attendance to presentations by entrepreneurs who seek angel investor and equity investor financing and our students can come in contact with hundreds of mentors who are experienced investors and corporate officers themselves. We work with Keiretsu to bring real life practice into the classroom. 2. Through a collaboration agreement with Contra Costa Small Business Development Center we can provide our students access to the government resources available to help them start a business. 3. Through collaboration agreements with incubators throughout the Bay Area we can assist our students locate in various incubators and business accelerators in our area. 4. In collaboration with various Bay Area partners we schedule Awareness programs and events bringing together lenders, investors, entrepreneurs and government officials. UPCOMING EVENTS UEntrepreneur Blog: Global Entrepreneurship Week- November Watch our blog evolve in November and December 2010 and bring you news of our Institute as well as the world around us. Watch us during Global Entrepreneurship Week November as we join more than 100 countries and millions of people around the globe in the third year of this important event. New initiatives of the Institute of Entrepreneurial Leadership will be launched this week. 22

101 U UPU 2011 Institute of Entrepreneurial Leadership UEntrepreneur Day April 30UPU th at the Pleasant Hill Campus This special event brings together people with a business dream or idea, starting entrepreneurs, successful entrepreneurs, angel investors, lenders and government representatives to help create successful ventures that lead to job creation in the Bay area. The program brings together everyone involved in entrepreneurship. For more information contact HTUrdeju@jfku.eduUTH Venture Capital/ Entrepreneurship Certificate Training offered in the Spring Quarter at the Pleasant Hill Campus This immersion program is offered together with the Contra Costa Small Business Development Center and aims to train entrepreneurs who have a business idea or small business owners who do not desire the rigor of an MBA program but want to increase their chance of business success. For more information on any of the Institute s programs contact: 23

102 Dr. Raul A. Deju Professor, MBA Program and Director, Institute of Entrepreneurial Leadership John F. Kennedy University 100 Ellinwood Room S-205 Pleasant Hill, CA 94523Phone:

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106 Attachment 3 Business Accelerator Center Training Program Details The first phase of the business training program will be four months entrepreneurs will be selected to begin the program during each four-month training period. One-on-one customized business consulting will occur during this four-month period which will be crucial for start-up businesses. Classes are part-time so the business owners will have time to operate and grow their business during the instruction period. Tuition and office fees will be required for the participants to ensure buy-in by the business owners, and to bring in revenue to support the center and cover administrative costs. Tuition for the eleven-week training program followed by up to 15 weeks of mentoring (six months total) will be $3,000 plus a $500 office fee per participant. Tuition and fees will be reduced on a sliding scale for lower-income candidates, and scholarships are offered to potential entrepreneurs that show promise. Continued support from the center s advisors, entrepreneurs that have gone through the program, and other participants, will be encouraged throughout the year as business owners graduate from the instruction phase. The emphasis of the Business Accelerator Center is on businesses in manufacturing, distribution, local sales and exports. Businesses that have the greatest potential to create jobs will be given priority. Access to lenders will be provided to the participants; this will be a key component to their long-term success. In addition, a revolving loan fund (RLF) is also being proposed for the future. All of the programs and services being offered at the Business Accelerator Center will be administrated by JFKU. This center will be a great resource for the City s existing small and home-based businesses, and will assist in current retention/expansion efforts. This program will not be appropriate for some businesses that apply, so it will be selective. If there are potential participants whom are not ready for this program, these business owners will be sent to the SBDC in Pleasant Hill for more training, advising and courses to prepare them (or convince them not to start a business at this time).

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