Business

KTEC begins shifting work to Commerce

Less than a day after the Kansas Senate narrowly approved Gov. Sam Brownback's plan to eliminate Kansas Technology Enterprise Corp., its CEO said the transition of some of its work begins.

Kevin Carr said Thursday that the agency and its nine employees — whose numbers are down by half — have six weeks to work with Kansas Department of Commerce officials to transfer the work of a few of its programs.

The Senate voted 21-11 late Wednesday afternoon to support Brownback's plan, which goes back to the House.

The agency, which is responsible for helping to develop high-tech companies in the state, has a $6 million budget in the current fiscal year. It is funded through gaming and lottery revenues.

Brownback's plan estimates dismantling KTEC will save the state $1.7 million a year.

Under the plan, programs such as KTEC's entrepreneurial centers — including Wichita Technology Corp. —university centers of excellence, Mid-America Manufacturing Technology Center, and the angel tax credit programs will be administered by Commerce.

The Experimental Program to Stimulate Competitive Research will be transferred to the Kansas Board of Regents.

The plan also ends funding for the Kansas Pipeline entrepreneurial grooming program and KTEC's direct investments program, in which the agency provided funding to promising, early-stage technology companies in Kansas.

Carr said his goal is to "work with (Commerce) intensively to try to help them absorb the administration of programs and the culture" in a month and a half's time.

Trish Brasted, CEO of Wichita Technology Corp., said the loss of KTEC will be felt across the state.

"We're going to have to figure out how do we fill that gap now that KTEC's not part of the ecosystem," Brasted said. "They were sort of the glue that held us together."

Pipeline was launched by KTEC in 2006 and has trained 36 Kansas technology and bioscience entrepreneurs in yearlong fellowship programs. Ten are going through the program now.

Pipeline was spun off from KTEC a couple years ago and became a nonprofit organization. Although it received funding from KTEC in the current fiscal year — $471,000 — it has been seeking to raise money from other sources. Last month it received an $800,000 challenge grant from the Ewing Marion Kauffman Foundation to raise a matching amount and expand regionally.

Kansas entrepreneurs likely will feel the most impact from the elimination of KTEC's direct investment program.

The program provided small equity investments for companies early in the start-up phase that were otherwise unable to get funding. As part of the program companies had to raise matching funds in order to receive an investment from KTEC.

There is no other similar funding mechanism in the state, Carr and Brasted said.

According to KTEC, in fiscal year 2010, its direct investment program yielded a return of $3.36 for every $1 of KTEC investment. Spokeswoman Kathy Busch said those investments ranged from $30,000 to $100,000.

Carr said about 65 companies have received equity investments from KTEC since the program was started in 2002.

Returns on the investments are paid if and once a company successfully reaches its exit stage, such as being acquired by another company. The returns — six companies have successfully exited — are put back into the investment fund for reinvestment.

Carr said KTEC stopped making direct investments in December. He said the portfolio of companies in the program will be turned over to Commerce.

"There's no intent to do any new investments, and there's no funding for it," Carr said of the program.

He said that at this point, it's not clear what will happen with the agency's nine employees. Personnel decisions have not been made, said Carr, who joined the agency in 1987, the year it was founded.

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