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Forging the future.

Alaska Science and Technology Foundation's Formula Business + Science = Economic Development

Alaska, 2010: The state's growing population thrives on a diversified economy based on new fishery and forest projects, high-tech companies and dynamic small businesses.

Or Alaska, 2010: The state's declining population struggles to hold on to a deteriorating economy based on dwindling natural resources and slow-growth, low-paying service-sector jobs.

Everyone wants the first vision to happen; most fear the second will occur. The question becomes: How does Alaska create a diversified economy when it's never had one?

"You cannot buy economic development. It's something you have to facilitate, to nurture," says Dr. John Sibert, executive director of the Alaska Science and Technology Foundation (ASTF).

In the last 20 years, more than 250 programs have popped up across America seeking to create economic diversity. Some blossomed into exciting opportunities; most failed.

To make it work in Alaska, the Alaska State Legislature created ASTF in 1988 and funded it with earnings from a $100 million endowment. The foundation's mandate was "to promote and enhance through basic and applied research: economic development and technological innovation in Alaska; public health, telecommunications; and sustained growth and development of Alaska science and engineering capabilities."

Or, as Sibert puts it, "We function as a catalyst for change."

With a board of directors made up of public and private-sector business experts--including two from Outside--Sibert set out to "not compete with past mistakes."

"We chose to keep the foundation small, focused, flexible and non-bureaucratic," he says. "We developed a long-range vision, one that focused on investment rather than immediate spending."

ASTF then established strict criteria for funded projects. "Start-up businesses require money, markets and management," Sibert says. "The focus is usually put on money, but the market and the management team are far more important."

Each funded project, therefore, had to show a clear benefit to Alaska, be technically sound, have an involved, competent project team and fulfill a proven market need.

ASTF also chose to work closely with each grantee. "You can't buy economic development by giving grants in isolation," Sibert says. "If you don't nurture the projects, nothing will come of them."

Every grant agreement became individually written and tied to measurable benchmarks. In addition, ASTF decided to routinely audit the projects and have its staff and consultants work closely with grantees to ensure long-range success.

What kind of projects would receive funding? To create a diversified economy, ASTF knew it had to develop a broad base of businesses. One end of this base lay in new technologies that expand uses for Alaska's natural resources. On the other end were technologies, unrelated to natural resources, envisioned by scientists and entrepreneurs. ASTF supported the entire spectrum.

As the foundation awarded grants, "we've added new programs as we've understood the needs better," Sibert says.

Circuit Riders

A business assistance program, for example, brought in consultants called "circuit riders"--to work one-on-one with grantees, providing technical assistance and business expertise. The circuit riders also act as "marriage brokers," networking to bring together all the people and agencies that can turn an idea into a profitable business.

One of the circuit riders, J.P. Godfrey, an Anchorage business consultant, says, "I firmly believe that Alaska's economy has to diversify so that we are not locked onto one industry. What needs to happen is to develop linkages between Alaska's private sector and its technology developers."

It also became clear that "we needed to go out and find people with ideas," Sibert says. "And we needed strategic planning and auditing to find out what works and what doesn't work to create economic diversification."

Working with other agencies, ASTF sponsored and co-sponsor targeted workshops and planning sessions around Alaska on subjects as diverse as creating business plans to marketing forestry and fisheries products.

Barley To Bottomfish

To fund projects under $20,000 in a matter of weeks, the foundation created a small grants program. To increase scientific literacy among state residents, ASTF set up two grant programs to encourage innovative projects by math and science teachers in kindergarten through twelfth grade.

So far, ASTF has funded more than 100 projects for a total of $12 million. The projects range from small grants--such as developing an Alaska-grown malt barley--to large endeavors, like measuring North Slope air pollution on tundra vegetation. The average project receives about $120,000.

New products take 7 to 10 years to earn profits; at most, projects funded by ASTF are three years old. Still, many of them already hint at a bright future.

One grantee, Autogenesis Inc., an Anchorage-based corporation that manufactures medical automation devices, has attracted international attention. Funded in part by $226,000 in grants from ASTF, the company has two patents for automated hardware used in bone and soft tissue regeneration and has produced 80 units in Alaska for use nationwide.

Another grant investigates the arrowtooth flounder, an abundant but little-used bottom fish. The $50,000 grant could help develop commercial uses for 500,000 metric tons of the fish each year--pumping millions of dollars into Alaska's depleted fishing industry.

Another project tests the feasibility of using certain vaccines to treat hepatitis B in premature infants, a disease endemic to rural Alaska. Five grants deal directly with village safe water issues. And the list of practical, promising grant ideas goes on and on.

"All of these projects are on the cutting edge of technology in the world," Sibert says. "If you're going to have economic development, you have to be able to compete in global markets."

While such diversification would make Alaska a player on an international scale, ASTF has already gathered a reputation on a national scale.

"An increasing number of research and development people in Washington know about Alaska's programs," says Jamie Kenworthy, an ASTF board member from Michigan who's spent years working with similar programs nationwide. "Alaska has shown a willingness not to lose its flexibility and a willingness to start and run entrepreneurial programs in entrepreneurial ways."

Madeline Grulich, executive director of Pacific Northwest Pollution Prevention Research Center in Seattle, faced the challenge of setting up a research grant program. Hearing that ASTF had a successful system, she contacted Sibert and eventually adopted the foundation's grant-making approach. "John Sibert has brought together a wide range of resources to ensure that Alaska's grant funds are wisely spent," she says.

Fighting For Funds

Despite national recognition, ASTF faces an uphill battle in Alaska. Creating economic diversification requires time and money. With its resources being depleted on all fronts, Alaska is running out of both. As state funds dry up, some legislators feel that ASTF's endowment would be better spent elsewhere. In past legislative sessions, bills have been introduced to use the $100 million for village sewers or classroom computers.

"All these programs need 'patient' capital because it takes about 10 years to see results," Kenworthy says. "Our test is going to be whether we have enough economic foresight to use the endowment for what we need."

"Economic development requires a long-term view," Sibert stresses. "Therefore, these programs tend to be the first ones cut when budgets need balancing."

Alaska has few organizations sparked by such a future focus. Given adequate time and money, ASTF can lay a solid foundation for economic diversification, Sibert feels.

"Almost all high-tech, start-up entrepreneurial companies are spun off from similar companies," he says. "It's creating that kind of atmosphere that makes a difference. You can't buy it, but you can facilitate it."

It's creating that kind of atmosphere that will make a difference in Alaska by 2010.
COPYRIGHT 1992 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Woodring, Jeannie
Publication:Alaska Business Monthly
Date:Dec 1, 1992
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