Saturday, August 13, 2011

San Jose Mercury News: San Jose City tech incubator program scrutinized

San Jose's touted incubator program under scrutiny

Two years ago, consultants told San Jose Redevelopment Agency officials that a highly celebrated program aimed at spawning technology startups was falling far short of its goals. Among their findings: The longtime program was producing few new jobs and the vast majority of the new companies didn't stay in town.
  • The redevelopment agency had reported $12 million in annual sales tax revenue to the city's general fund. But the consultants had deemed that figure "highly unlikely."

  • Although large figures are reported for the "economic impact" of the incubators -- some $515 million in total -- 79 percent of the total appeared attributable to a single company, Callidus Software. Since that time, Callidus has moved to Pleasanton.

  • Not counting Callidus, the four incubator companies that had "graduated" from the program produced a total of about 150 employees in San Jose from 1994 to 2009.

  • Reed this week said that for some time he has had misgivings about the incubators and how much money was being spent on multiple leases. After the report was issued, for example, the Software Business Cluster was closed and the SDForum moved to Menlo Park. The rest of the entities, except for the BioCenter in the Edenvale area, were consolidated into one downtown location at 100 E. Santa Clara St.

    Reed said he thought the consolidation has saved the agency almost $1 million annually.Reed on April 29 also issued a memo asking Mavrogenes and the city manager to work with the university to extricate the agency from the leases.

    Kalra said he doesn't understand Liccardo's push to investigate something he said the city already plans to end.

    Asked Kalra: "Why are we doing an audit of a program that we're no longer going to be funding in another year?"

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