5.0. EDSR 02-13-2006 - Laserfiche WebLink

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Page 1 of 2 Steinmetz, Heidi From: TedGenesis@aol.com Sent: Wednesday, February 08, 2006 1:40 PM To: Steinmetz, Heidi Cc: TedGenesis@aol.com Subject: Recommendations and Proposal Dear Heidi: Thanks for taking the time to meet with me. The discussions with you and your colleagues were helpful to what might be called the need for'mid course' corrections. As mentioned, we have two obvious success stories at hand in Elk River and one that only strayed as far as Rogers no doubt still helping to create a good employment picture in the Elk River neighborhoods. Cymbet and K-Netica (formerly KnowledGenetica) are likely to remain and grow in Elk River although with a new CEO at the latter we need to work hard to help him gain a perspective on the value of the community as a site for its long term development plans. And Bixby Energy may yet decide to return to a site within the city limits so we should all continue to make efforts to remind them that they are welcome back at any time. With three success stories out of nine companies incubated, the Elk River EDA's sponsorship of the Elk River Incubator Program should readily be judged a success for any objective observer. And when Solar Attic is added as a home based business still operational in the community the slats are even slightly better. Having said that, there is little need at the present time for a facility to house the incubator program. The lack of seed capital (sharply absnet since the untimely demise of Roger Jensen of the Anoka Sherburne County Capital Fund (ASCCF)) has made it difficult to recruit companies from the southern metro area of the twin cities and elsewhere (the companies tend to stay in the entrepreneur's home until the seed capital is again readily available). In the old days, we were able to use space as needed (and avoid paying for space that was not needed). Until we find another building owner/manager willing to provide flex/space on an as needed basis, it is hard to justify the expenditure of community funds for the space for an incubator program. Several approaches can be taken until the situation improves (i.e., the ASCCF is again an active investor in the community thus helping various investment clubs and/or regional initiatives to 'hitch hike' on the'due diligence' of the ASCCF). When it does improve, it is highly likely that the pent up demand (from entrepreneurs now ready to leave their homes and secure a business office) will make it clear that a worthy community development purpose is being funded by EDA expenditures for rent for the incubator program. One approach would be to begin in earnest to find a real estate developer/building owner/manager who would use a new or existing building for an incubator program on his/her property as a means to getting the space leased over the long term. A developer may be able to justify a below market rate for the rent to be charged to members of the Elk River Incubator Program (ERIP) by consoling him/herself that a given building with a given level of vacancy is actually an opportunity to turn a problem into a benefit. The building owner could offer attractive rental terms for the first year of a multi year lease; While the cash rent in the first year would be below market, the balance of the lease would be at market rates or higher. It is also possible that the owner would accept a portion of the rent in cash (perhaps 2/3rds) and take stock or warrants in some negotiated amount as a trade-off for the cash left on the table. And this would eliminate the payment of real estate commissions thereby helping to justify the lower rent in the first year. The building owner might have a long rectangular building or a 'L' shaped building at which he or she could put 3-5 startup companies (members of the incubator program) into an average of 800 s.f. of space per company. These could be at one end of the building. As one would grow it could move into the middle or take space at a purposeful distance away from the incubator stage companies. 2/8/2006