Two years ago, state lawmakers allocated $500 million to a group that helps academic researchers turn their work into business startups. But as the organization issues its first grants, the legislature could soon take back the money.
The funding for NCInnovation was designed as a one-time appropriation that could sustain the organization, which also gets funding from private contributions, through an endowment model.
The House budget calls for clawing back the entire $500 million allocation to NCInnovation and redirecting the money to Helene recovery needs. House Speaker Destin Hall said it’s unclear whether that provision will be in the final budget.
“We'll see where that one ends up,” he said. “We have a number of our members who have concerns with simply the idea of giving a private entity that sort of money.”
Hall said he’s not opposing to the concept behind NCInnovation.
“As a general matter, I think the idea of investing in technology that's coming out of the UNC system in North Carolina is a good idea, and some other states have done it.” he said. “There was some evidence that we were losing startup companies to other states because we didn't have that capability here.”
NCInnovation has already issued its first grants, although those would likely not be affected by the proposal to take back the money.
UNC-Pembroke Professor Ben Bahr is one of the first grant recipients. Bahr’s lab is working on possible treatments for Alzheimer’s disease that could help patients who show early risk signs for the disease.
But the outside testing needed to get those treatments to the clinical trial stage are expensive. That’s where a million-dollar grant from NCInnovation comes in.
“The major funding from NCI is letting us do the toxicology work that's done by outside companies, because FDA wants to see that we didn't do it ourselves, because they want to make sure that an independent entity is actually doing the drug testing,” Bahr said.
So far, Bahr’s research has shown promise through tests in lab rats.
“These are rat brain slices that we can maintain alive for months, and we can mimic the early changes that happen in the brain with aging and dementia risk factors, and we've shown that the drugs make the brain tissue healthier,” he said.
Bahr’s work is one of 17 projects across 12 North Carolina university campuses that received grants from NCInnovation last month. They range from artificial intelligence agriculture research at Appalachian State to pancreatic cancer treatments at UNC Charlotte.
But the organization might not be able to issue any more grants if the state House’s budget proposal passes.
The Senate’s budget would also take back the money from NCInnovation, although it seeks to use the funding toward a new children’s hospital. But Senate leaders want to keep NCInnovation funded through a $25 million annual appropriation.
While the amount is much smaller, the group would be able to issue a similar number of research grants because it’s currently using the 2023 allocation as an endowment fund, which means it only uses proceeds from the investment for each year’s grants.
Michelle Bolas is the group’s chief innovation officer.
“At full capacity, given our funding levels, we expect to have anywhere between 50 and 60 projects a year in our working group cohort, so funding somewhere between $15 to $20 million in projects annually,” she said.
NCInnovation board member Deanna Ballard, a former state senator, said the grant applications are closely vetted to identify which research projects are most likely to lead to a successful business.
The goal, she said, is “really getting to the heart and the meat of, ‘well, where is this at in the actual development process? How close to commercialization are we at this point?’”
Bolas says the support from NCInnovation goes beyond funding.
“Each project is supplied with a paid entrepreneur-in-residence, as well as with the consultants that are needed for things like regulatory path development, business strategy and business plan development,” she said.
And while there’s a perception that most of the state’s major university research is happening at UNC-Chapel Hill or NC State, NCInnovation’s grants are spread across the state.
“Ultimately, what we need is for more of these North Carolina inventions, to grow into North Carolina businesses and stay in the regions where they're born,” she said. “And to do that, you have to have a lot of hands on deck, and you have to be really intentional about those next steps to transition into a place where they're able to then be picked up by the private sector.”
Organization faces criticism
While NCInnovation’s governing board has unanimously supported its first grant recipients, there have been divisions over how the public-private partnership operates.
Businessman and political donor Art Pope has raised concerns about the group’s transparency, including how it’s handled tax disclosures around lobbying. Other board members have criticized Pope, who has filed a whistleblower complaint.
An audit of the organization from State Auditor Dave Boliek found the group was complying with the state law governing its funding.
The House’s decision to defund NCInnovation is notable because House leaders appointed Pope to the board. House members like Rep. Harry Warren, R-Rowan, voiced concerns during an oversight hearing last summer.
“Mostly I have doubts about whether or not this is really the best use of taxpayer dollars in light of state priorities that we have in areas like transportation, mental health, education and myriad other issues that are before the legislature,” Warren said.
House and Senate leaders say they’re still far apart on a budget agreement, and NCInnovation will keep its current funding until a final spending plan is approved.
