When Stephanie Luster-Teasley became a professor at North Carolina A&T in 2004, it was a homecoming. The self-described “lab rat” had studied chemical engineering there as an undergrad before getting a Ph.D. in environmental engineering from Michigan State and working in the bioremediation industry for two years.
It was work Luster-Teasley loved: figuring out how to clean up chemicals that companies dumped into the environment, often in communities of color. Back at A&T, she could teach and mentor other students like her.
“We had very few faculty that were women in our classroom,” Luster-Teasley said. “I always knew I wanted to go back to an HBCU and teach—but I wanted to do it after I worked in industry for a little while.”
Her research and consulting helped seed the idea for a biodegradable, controlled-release polymer to treat contamination below ground, something Luster-Teasley likens to an “environmental pill.” She later patented and licensed the technology to a Triad venture investment firm.
Getting it off the ground took over a decade of refining and patience, not to mention networking and institutional support.
“As a researcher, I would have stayed in my lab the entire time, perfectly happy working with my students,” Luster-Teasley said. “But in talking to people on campus, our Division of Research’s Office of Technology Transfer, that was when they were like, ‘Hey, you have a great idea. Let’s vet it.’”
The path to commercializing a product can be uncertain. Luster-Teasley’s first patent took five years from its application to issuance in 2013. She worried another researcher could read her initial papers and beat her to it.
A&T’s Office of Technology Transfer paid for the patents in the U.S., Canada, and Great Britain. It also brought in outside companies to talk about licensing the technology, a goal of what is often called “innovation commercialization.”
Getting more researchers to commercialize research as Luster-Teasley did is guiding a $1.4 billion line item under consideration in the state budget, to be used for grants and creating regional hubs to support innovation and job creation. The money would go to NCInnovation, a nonprofit formed in 2020 that has so far raised $23 million in seed funding from private donors. The proposed one-time sum is the equivalent of 5 percent of the state’s budget for the next fiscal year.
Increasing funding, mentorship, and resources for researchers has strong bipartisan public support. But the major influx of funding to a small, relatively new nonprofit has raised questions about governance, transparency, and how to measure the success. NCInnovation would not be required to say which businesses receive state money nor what they do with it.
While NCInnovation has little track record, its supporters rank among the “who’s who” in North Carolina’s banking, finance, and business communities. It also has nine registered lobbyists working on its behalf this session. NCInnovation is included in the Senate, House, and governor’s budgets, but the levels of funding, as well as the expectations and governance structures, differ dramatically.
The Senate’s $1.4 billion one-time appropriation would be the biggest to an outside organization in state history, Axios wrote, and much larger than the $50 million House and governor’s budget proposals. The funding is intended to be invested in an endowment where earnings could fund the organization’s grants and expenses; a 5 percent return would equal a $70 million annual budget.
While NCInnovation’s aim to increase innovation has remained constant, some question giving so much money to an organization that has already changed its name four times as well as its funding model. Initially, the organization sought an equity stake in research it funds. It also sought annual appropriations rather than an endowment.
Bennet Waters, the organization’s president and CEO, said in a statement to The Assembly that the endowment model did away with the need for equity stakes in the research the organization helped fund.
NCInnovation’s aim to expand commercialization across the state is one that Luster-Teasley— now the interim dean of A&T’s college of engineering—supports, knowing the difference it can make for promising research.
“It allows faculty members to really come up with ideas and partner together, knowing that there is a funding source, and there’s a mechanism for them to collaborate,” Luster-Teasley said.
Weeks away from a final budget, a quick comparison of the Senate’s proposal for the statewide nonprofit with the governor’s proposal shows glaring differences in how the organization could be set up.
“I think it’s pretty clear that the two main issues are for any mechanism for oversight or transparency into NCInnovation, and who gets to appoint the board of directors,” Brooks Fuller, the director of the North Carolina Open Government Coalition, told The Assembly.
A Billionaire’s Journey
In 2018, the late Durham business mogul Bob Ingram began to drum up support for what would become NCInnovation. The retired CEO of GlaxoWellcome and general partner at the venture capital firm Hatteras linked up with other well-connected allies in business, finance, and academia to envision a research “corridor” along I-40 from the Triangle to the Triad.
They knew the government would have to foot the bill—just as it had for innovations like the internet, the HPV vaccine, Naloxone, and the state’s Research Triangle Park, a 7,000-acre campus created in 1959 to leverage Raleigh, Durham, and Chapel Hill’s universities.
A politically feasible way to expand research commercialization would be through universities.
The state Department of Commerce’s Office of Science, Technology & Innovation released a report in 2016 recommending public universities shepherd more innovation and entrepreneurship, and universities have long been involved in patenting and licensing technology.
Most research universities have staff dedicated to “technology transfer,” or bringing research to market through patenting, licensing, and creating companies. But resources have not been equally distributed. Between 2010 and 2021, 87 percent of academic research and development funding in North Carolina from federal, state, nonprofit, business, and other sources was spent at the Triangle’s three giants: Duke, UNC-Chapel Hill, and North Carolina State.
NCInnovation aims to shift this uneven playing field, said Waters, a former Homeland Security official with experience in health care and intelligence companies, joined the nonprofit in the spring of 2022.
Waters said the money should fund “regional networks” to support all the things innovators need, including help with technology transfer, intellectual property law, capital formation, and board governance.
Universities in the Triangle already have a lot of these resources, plus extensive R&D, strong reputations, a ready social network of entrepreneurs, and easier access to nonstop national and international flights. Betting on equality versus efficiency will come at a cost as schools in other areas don’t have the same resources at hand.
Some may see that as a reason not to send money to farther-flung places, but there’s reason to invest funds “even if they may be less efficiently used to get a greater outcome in those underserved areas,” said John Hardin, the executive director of the North Carolina Board of Science Technology & Innovation.
NCInnovation currently has agreements in place with four state schools: NC A&T, UNC-Charlotte, East Carolina University, and Western Carolina University. The chancellor of each school sits on the nonprofit’s board of directors. These schools currently receive just 3.5 percent of the statewide academic R&D funding, an amount NCInnovation aims to increase.
Depending on whom you ask, the idea is either a heavily endowed rinse-and-repeat of RTP, which succeeded in drawing companies like IBM, GlaxoSmithKline, and the National Institutes of Health to the region, or its 21st century equivalent.
“We have a university system that very few states can match in terms of just breadth, depth, geography, capability, uniqueness, leadership, state investment, and commitment to the success of that university system over decades, if not centuries,” Waters said. “Not every state has that.”
Increasing the reach beyond the Triangle is a major focus.
Among the regions NCInnovation is looking to support is the rural east, where the median income is below $50,000 and life expectancy is six years less than the Triangle. Outside of the public sector, many of the area’s jobs are in chicken and pork production or big-box retail.
In Greenville, a city of about 90,000, the economy largely depends on East Carolina University and the hospital system.
Purple banners on ECU’s campus boast the school’s motto of “service” in Latin, a tenet that influenced Sharon Paynter, the school’s acting chief research and engagement officer. Paynter grew up roughly 50 miles north of Raleigh in Henderson, a town of 15,000 that historically relied on tobacco, textiles, and the home-grown Rose’s department store—jobs that largely dried up in the ‘90s.
“Rose’s was competing with Wal-Mart, tobacco became dead, textiles moved to a global plane,” said Paynter.
Paynter left home for college but came home to work at a social services nonprofit. Realizing she didn’t have the tools to fix the underlying problems, she earned a master’s and Ph.D. in public administration, studying how poverty, public-private partnerships, and social safety net entities intersect.
Her background made her both an unusual and an ideal fit for her current job. Inside her exposed brick office downtown Greenville, Paynter spoke about how NCInnovation could leverage local assets. ECU may be far from the state’s largest urban centers, but it has a medical school, dental school, and engineering school, and is close to military installations.
“COVID taught us that we can work globally; we can bring the dense metropolitan areas to rural environments,” Paynter said.
But ECU currently accounts for just one percent of the state’s research and development expenditures. And ECU researchers have only received an average of three patents a year from 2018 to 2020.
There’s no set amount of funding that will go to ECU—or any individual school—through NCInnovation, which its leaders say gives them the flexibility to fund projects at the scale needed.
“If we do this right, we’re going to put companies down that sustain jobs, build wealth, build tax base; have stronger education, better infrastructure,” Paynter said. “It becomes a leveraging of successes.”
The lack of guideposts on how money will be spent, how success will be measured, and why there isn’t better transparency has made Senator Jim Perry ask for better legislation, more answers, and oppose using taxpayer money to fund the organization.
“I think they’ve juiced up the argument by saying we want to do it in the poor areas,” Perry told The Assembly. “That sounds good, but tell me how it is you’re going to push capital there, push innovators, push economic development.”
Perry questioned whether the state should be spending money on new initiatives when it has other unmet needs, and whether the state will make a return on this large investment.
One of the biggest questions will be exactly how to measure the organization’s progress at meeting those lofty goals. The Senate budget requires NCInnovation to provide a high-level annual report on its activities—but not necessarily who and what is being funded, or where in the state the money is going. The most granular reporting requirements are on sectors, like defense or life sciences.
The governor’s version includes reporting some outcomes annually, like the number of technologies commercialized, jobs created, and partnerships established. It also requires some county-level statistics, subjects NCInnovation to “all reporting requirements for entities receiving state aid,” and orders the organization to share information on recipients with the Board of Science Technology and Innovation.
The Senate version explicitly exempts NCInnovation from public records requests that could shed light on who is receiving funds, and how much. NCInnovation says the exemption is necessary to protect things like confidential business information, and to keep promising ventures in-state.
“Innovation and economic opportunity don’t recognize state lines,” Waters said. “If forced to choose between the ultimate success of their research, or remaining in a particular geography, I think the vast majority of [researchers] that are mission-driven do what is required to bring their research to market. That should scare all of us when we understand that other states are actively targeting some of our best and brightest.”
But North Carolina’s public records law already has a “trade secrets provision” that exempts agencies from disclosing certain records to the public, said Brooks Fuller, the director of the North Carolina Open Government Coalition.
“It’s used by agencies all the time to shield information—pre-registration patent information, formulas, other intellectual property that’s trade secrets,” Fuller told The Assembly. “I don’t necessarily think that a broad sweeping exemption of all records is necessary to protect records that are already exempt under public law.”
This wide-reaching exemption in the Senate’s most recent budget proposal is one Fuller says taxpayers should have “1.4 billion reasons” to care about.
“This is a really significant allocation of money and it goes directly to work that our state university system is going to be involved in: spurring business, public health opportunities, financial opportunities,” Fuller said. “The public deserves some understanding of what our government is doing.”
Other state-funded institutions are not exempt from the same laws, such as UNC-Chapel Hill’s Innovate Carolina. Recipients, funding levels, and emails are generally releasable under the Public Records Act—with the exception of redactions for confidential business information or personnel records. So are federal programs like National Institutes of Health, U.S. Department of Agriculture, and the Environmental Protection Agency under the Freedom of Information Act.
The GoldenLEAF Foundation, another state-initiated economic development organization, works to create jobs in “economically affected or tobacco-dependent areas” and publicly lists who receives funds from its annual $17.5 million appropriation.
The General Assembly’s previously established guidelines for GoldenLEAF’s board of directors are clearer than those proposed for NCInnovation. GoldenLEAF’s board appointees must represent the state’s economic and geographic diversity, and they are divided among the governor and the highest-ranking members of the state House and Senate.
Governance of NCInnovation differed among the budget proposals: The governor’s version gave himself five appointments, while leaders of the General Assembly each got two. The Senate’s version didn’t give the governor any appointments. The House simply directed the new nonprofit to create a plan for geographic and subject matter diversity.
The Senate’s budget gives eight appointments to the leadership of the Republican-dominated General Assembly and five appointments to NCInnovation’s board members. No members will be representatives of the state universities—five of whom presently are represented on the board—the Senate budget forbids appointing public employees.
Tilting the power of the board to one branch of government drew the ire of Donald Bryson, the president of the John Locke Foundation. Bryson wrote that the “concentration of legislative power raises concern about the separation of powers, as the General Assembly will significantly influence NCInnovation’s decisions, considering its majority presence on the board.”
The only requirement placed on board members by the Senate proposal is to have experience in “research, development, product commercialization, entrepreneurial business development, and capital formation.”
“Lots of different values have to be represented in public policy, you see, both represented and balanced,” Hardin said about the importance of having a board that includes representatives from different political parties, government, and business. He said his organization supports the governor’s proposal, which includes a seat for the Commerce Department and a representative appointed by the board Hardin directs.
The Republican-controlled legislature has consolidated its power on board appointments this term, including taking away the governor’s appointments for the Utilities Commission, UNC Health System, and Environmental Regulations Commission.
“If the organization is seen as unrepresentative, or unfair, it will fall out of favor eventually—and when it does, there’s a good chance it will end,” Hardin said, adding that diversifying the board is in the best interest of the organization and the state.
Keeping North Carolina Money in North Carolina
Kelly King, NCInnovation’s current board chair and the retired CEO of Truist, said he would measure the organization’s success by how well it can reduce poverty in the rural areas of the state.
“The reality is we’ve got a really bifurcated state in the east and west,” King said. “It’d be really nice to have improvement in the overall socioeconomic conditions of the entire state.”
King, 74, grew up on his family’s tobacco farm in Zebulon before studying at ECU. Speaking from his home in Winston-Salem, he attributed his interest in helping NCInnovation to discussions about how to continue North Carolina’s growth and how to balance it across the state.
“Frankly, the whole state has been struggling with how to replace, you know, the kind of jobs we’ve had in the past,” King said, highlighting that the advanced research capabilities in the Triangle haven’t been the same elsewhere.
Working with universities to spur development is a long-term commitment he views as important: getting an organization to a place where it’s ready for outside funding can require a lot of time and recurrent awards.
Rima Janusziewicz knows the commitment it takes to get research from the bench to the bedside. She has spent over five years trying to commercialize her research, and the help from UNC-Chapel Hill’s Innovate Carolina has been crucial, she told The Assembly.
In 2015, Janusziewicz was a graduate research assistant at a UNC-Chapel Hill research group that developed a 3-D printing technology which she likened to a form pulled up from a puddle, like Terminator 2’s T-1000.
The printer allows plastics to form in unique designs with custom properties, creating new ways to develop medical devices. After UNC-Chapel Hill biomedical engineering professor Rahima Benhabbour heard the lab’s director highlight the technology in a TED Talk, Janusziewicz and Benhabbour joined forces to develop and patent an intravaginal ring they later would prototype to deliver fertility treatments.
Their startup, AnelleO, has now received millions in federal grants and benefited from Innovate Carolina’s mentorship. Janusziewicz said it has allowed them to move at the pace that the project demands, as opposed to what an investor might, and helped them navigate the complicated regulatory process as rigorously and safely as possible.
“We’re in this really weird gray space; we’re not big enough to be a full-fledged, leave the nest,” Janusziewicz said. “But we’re also too big and too different from academic research to be still within the formal university system.”
AnelleO rents affordable labspace from Innovate Carolina; it’s one of the many initiatives the organization shares for university-started companies to continue their success and keep them in the state.
That’s another selling point for the legislators looking to send $1.4 billion NCInnovation’s way: the requirement that the organizations it funds incorporate in North Carolina, and locate their headquarters and primary place of business here. They must also continue to be active in the state at a “level sufficient” for at least five years—though there is no definition as to what constitutes “sufficient.”
King hopes most will exceed that horizon.
“The key in my mind is that we help them start a business, and that ecosystem in that market is such that that business person will want to stay,” King said.
If the state does that successfully, “they’ll stay way past five years—not because anybody’s making them, but because they’re really successful there.”
Ren Larson is a staff reporter at The Assembly. She previously worked for The Texas Tribune and ProPublica’s investigative team, and as a data reporter with The Arizona Republic. She holds a master’s of public policy and an M.A. in international and area studies from the University of California, Berkeley.