Legislature(2019 - 2020)BELTZ 105 (TSBldg)

01/31/2019 01:30 PM LABOR & COMMERCE

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Audio Topic
01:31:00 PM Start
01:32:04 PM Presentation: Opportunities for Innovation in Alaska Pacific Northwest Economic Region
02:34:26 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Teleconference <Invitation Only> --
+ Presentation: TELECONFERENCED
Opportunities for Innovation in Alaska
Pacific Northwest Economic Region (PNWER) by
Nirav S. Desai, Innovation Committee Co-Chair &
Steve Myers, Senior Program Manager PNWER
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        January 31, 2019                                                                                        
                           1:31 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lora Reinbold, Chair                                                                                                    
Senator Mia Costello, Vice Chair                                                                                                
Senator Chris Birch                                                                                                             
Senator Elvi Gray-Jackson                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Click Bishop                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: OPPORTUNITIES FOR INNOVATION IN ALASKA - PACIFIC                                                                  
NORTHWEST ECONOMIC REGION                                                                                                       
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
NIRAV DESAI, Senior Partner                                                                                                     
Moonbeam; Co-Chair, Innovation Working Group                                                                                    
Pacific Northwest Economic Region                                                                                               
Seattle, Washington                                                                                                             
POSITION   STATEMENT:   Participated   in   a   presentation   on                                                             
opportunities for innovation in Alaska.                                                                                         
                                                                                                                                
STEVE MYERS, Senior Program Manager                                                                                             
Pacific Northwest Economic Region                                                                                               
Seattle, Washington                                                                                                             
POSITION   STATEMENT:   Participated   in   a   presentation   on                                                             
opportunities for innovation in Alaska.                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:31:00 PM                                                                                                                    
CHAIR  LORA  REINBOLD  called  the   Senate  Labor  and  Commerce                                                             
Standing Committee meeting  to order at 1:31 p.m.  Present at the                                                               
call  to order  were Senators  Costello, Gray-Jackson,  Birch and                                                               
Chair Reinbold.                                                                                                                 
                                                                                                                                
 ^PRESENTATION: Opportunities for Innovation in Alaska Pacific                                                                  
                   Northwest Economic Region                                                                                    
 PRESENTATION: Opportunities for Innovation in Alaska, Pacific                                                              
                   Northwest Economic Region                                                                                
                                                                                                                                
1:32:04 PM                                                                                                                    
CHAIR REINBOLD  announced that the  only order of  business would                                                               
be  a presentation:  Opportunities for  Innovation in  Alaska, by                                                               
the Pacific Northwest Economic Region.                                                                                          
                                                                                                                                
She remarked that Alaska has an  abundance of water and she hoped                                                               
that connections could  be made between Alaska and  the Lower 48,                                                               
which has suffered from a lack of water.                                                                                        
                                                                                                                                
1:33:23 PM                                                                                                                    
STEVE MYERS,  Senior Program Manager, Pacific  Northwest Economic                                                               
Region  (PNWER),  provided a  background  on  PNWER, which  is  a                                                               
statutory public  and private  nonprofit organization  created in                                                               
1991  by  western states  and  Canadian  territories. He  related                                                               
PNWER  participants include  Alaska,  Washington, Idaho,  Oregon,                                                               
Montana   and  the   Canadian   territories   and  provinces   of                                                               
Saskatchewan, Alberta,  British Columbia,  Northwest Territories,                                                               
and  the  Yukon. In  addition,  PNWER  is  comprised of  over  20                                                               
different working  groups and  initiatives that  examine segments                                                               
of the economy to identify  best practices for collaborative work                                                               
on challenges  across the  region. The  PNWER works  with federal                                                               
partners in Washington, D.C. and  Ottawa to promote the voices of                                                               
the region, he  said. The Innovation Working Group  has worked to                                                               
identify ways to leverage resources  and assets in the region and                                                               
to better work  collaboratively. Mr. Desai will  give an overview                                                               
of what may help the future of the region.                                                                                      
                                                                                                                                
1:35:16 PM                                                                                                                    
NIRAV  DESAI,  Senior  Partner,  Moonbeam,  Co-Chair,  Innovation                                                               
Working  Group, Pacific  Northwest Economic  Region (PNWER  began                                                               
his  PowerPoint   presentation,  "Building   Connections  between                                                               
Alaska and  Innovation Economies  in the Lower  Forty-Eight." His                                                               
goal is help connect the  innovation economy, particularly in the                                                               
Lower  48,  so states  can  benefit  from the  environmental  and                                                               
cultural aspects of Alaska, he said.                                                                                            
                                                                                                                                
He  reviewed his  background.  He formerly  worked  for a  global                                                               
consulting  firm, leading  the innovation  hub  strategy. He  has                                                               
worked on  four innovation economies, in  San Francisco, Seattle,                                                               
Boston,  and Austin,  seeking ways  to  make connections  between                                                               
start-up  activities   in  these  cities  and   large  enterprise                                                               
customers. In the  past five years his focus has  been on mapping                                                               
innovation locations throughout the country.                                                                                    
                                                                                                                                
MR. DESAI  began his own  business in Seattle, [Moonbeam]  and he                                                               
has networked  throughout the start-up  ecosystem in  the Pacific                                                               
Northwest,  including  mentoring  TechStars  Seattle,  a  startup                                                               
accelerator, and  the University  of Washington's  CoMotion Labs.                                                               
He offered  his belief  that this type  of technology  could have                                                               
implications for  remote parts of  Alaska. More recently,  he has                                                               
focused  on  establishing  an  innovation  brokerage  to  connect                                                               
innovation supply  and demand  entities with  unique capabilities                                                               
and enterprises to transform incumbent businesses.                                                                              
                                                                                                                                
1:37:59 PM                                                                                                                    
MR.  DESAI   moved  to   slide  2,   "Alaska  from   a  Startup's                                                               
Perspective." Prior to coming to Alaska,  he spoke to a number of                                                               
startup CEOs  in Seattle to  get their perspective on  Alaska. He                                                               
summarized the  "pros" for startups in  Alaska. Primarily, Alaska                                                               
presents  opportunities, has  a prevalence  of domain  expertise,                                                               
and  risk  is   taken  and  tolerated.  He   said  that  Alaska's                                                               
engineering talent and  knowledge is recognized in  the Lower 48.                                                               
A significant number  of large corporations operate  in Alaska in                                                               
energy,   mining,   land   management,   fishing,   health,   and                                                               
agriculture.  It is  important to  note  that risk  is taken  and                                                               
tolerated in  Alaska, since risk-averse enterprises  often do not                                                               
innovate.                                                                                                                       
                                                                                                                                
He turned to the cons  or challenges from a startup's perspective                                                               
of operating  in Alaska. It  relates primarily to  investment and                                                               
access to capital,  he said. Alaska ranks at the  bottom, 49th in                                                               
the  nation,  for  access  to  early  stage  funding.  Given  its                                                               
distance  from  the  rest  of  the  country,  Alaska  also  faces                                                               
engineering  challenges.  In  order  for  startups  to  integrate                                                               
economies,  it means  they must  find  ways to  overcome some  of                                                               
these challenges, he said.                                                                                                      
                                                                                                                                
1:39:44 PM                                                                                                                    
CHAIR REINBOLD asked for the source of the study.                                                                               
                                                                                                                                
MR. DESAI offered  his belief that Forbes magazine  did the study                                                             
to review  accessibility of capital  in states. Last  year Alaska                                                               
funded three venture  capital startups for a total  value of $3.7                                                               
million. Although some angel investment  networks are being built                                                               
and  some venture  capital funds  occur in  Alaska, it  is pretty                                                               
nascent. This may  have had some bearing on  the state's ranking,                                                               
he said.                                                                                                                        
                                                                                                                                
1:40:29 PM                                                                                                                    
SENATOR  GRAY-JACKSON asked  how the  lack of  sales or  business                                                               
taxes affect startups.                                                                                                          
                                                                                                                                
MR. DESAI  said business taxes  do not  matter as much  early for                                                               
startups  since they  do not  expect to  make a  profit in  their                                                               
first three  to five  years. However, it  does matter  later, and                                                               
income tax is important since it leads to recruitment of talent.                                                                
                                                                                                                                
SENATOR  GRAY-JACKSON asked  for further  clarification on  sales                                                               
taxes.                                                                                                                          
                                                                                                                                
MR.  DESAI  answered  that  it  would have  a  larger  impact  on                                                               
consumer-end businesses.                                                                                                        
                                                                                                                                
1:41:30 PM                                                                                                                    
SENATOR BIRCH recalled he mentioned  distance and remoteness as a                                                               
hindrance; however, Anchorage and  Fairbanks represent the number                                                               
one cargo hub in the  western hemisphere. He recalled that Fed-Ex                                                               
and  UPS [United  Parcel Service]  previously  had 700  wide-body                                                               
flights  weekly  in and  out  of  these  airports. He  said  that                                                               
significant  innovation occurs  in  the  transportation arena  in                                                               
Alaska. He  said he is  interested in Mr. Desai's  perspective on                                                               
how Alaska can  leverage its access to  transportation to markets                                                               
to build, develop, and distribute products.                                                                                     
                                                                                                                                
MR.  DESAI  responded  that he  would  discuss  unmanned  systems                                                               
later.  He clarified  that when  he spoke  of remoteness,  he was                                                               
referring to  how it relates  to channel partnerships  with other                                                               
innovators. In fact,  the reason that many  entrepreneurs move to                                                               
the  [San Francisco]  Bay  area  is to  gain  proximity to  other                                                               
startups and investors.                                                                                                         
                                                                                                                                
1:43:09 PM                                                                                                                    
CHAIR  REINBOLD  asked  what  Alaska  could  do  to  improve  its                                                               
national ranking, besides its current "angel funds."                                                                            
                                                                                                                                
MR. DESAI replied he would cover this later in his presentation.                                                                
                                                                                                                                
1:43:24 PM                                                                                                                    
MR. DESAI  turned to slide  4, "How do  we bridge the  divide and                                                               
diversify  the  Alaskan economy?"  He  quoted  from CityLab,  The                                                             
Atlantic,  which said,  "Cities  that have  the greatest  startup                                                             
activity also have  the greatest job growth." He  said the window                                                               
is 5-10 years,  and while many fail the ones  who succeed greatly                                                               
eclipse  incumbent  hiring.   Secondly,  Alaska  has  significant                                                               
federal spending and  one avenue Alaska could explore  is to look                                                               
for ways  to connect  the federal spending  to provide  a cushion                                                               
for startups.  He cautioned that  he is  not trying to  provide a                                                               
solution since  he is still  trying to learn more  about Alaska's                                                               
economy. He pointed out his  comments highlight some "seeds" that                                                               
are worth considering, he said.                                                                                                 
                                                                                                                                
1:44:59 PM                                                                                                                    
At-ease.                                                                                                                        
                                                                                                                                
1:45:24 PM                                                                                                                    
CHAIR REINBOLD reconvened the meeting.                                                                                          
                                                                                                                                
1:45:40 PM                                                                                                                    
MR. DESAI turned  to slide 5, "Moonbeam has  conducted a national                                                               
study  of  where innovation  is  sourced  in the  U.S."  Although                                                               
Alaska is not  on the list, he would like  to help Alaska achieve                                                               
this. He  acknowledged that  San Francisco and  San Jose  are the                                                               
leaders  but  pointed out  that  innovation  clusters in  certain                                                               
areas. For  example, Seattle has  a large center  for "artificial                                                               
Intelligence" (AI),  "cloud computing,"  and high  technology, he                                                               
said. It  is now  moving toward  "space flight"  and "development                                                               
technology" (DevTech).  Chicago is  more focused on  Industry 4.0                                                               
and  manufacturing, which  are  the  traditional industries  that                                                               
built the  city. Austin is  well connected to Houston  and Dallas                                                               
in the  oil industry, so Austin  has positioned itself to  be the                                                               
"innovation capital"  of Texas. In  fact, many of  the innovation                                                               
companies  that  start in  Austin  are  deployed by  Fortune  500                                                               
companies  in  Houston and  Dallas.  He  suggested Alaska  should                                                               
consider  this model  when it  thinks  about connections  between                                                               
these hubs.                                                                                                                     
                                                                                                                                
1:47:00 PM                                                                                                                    
MR. DESAI turned to a  sub-slide, "Cascadia Innovation Corridor."                                                               
He  mentioned an  initiative  led by  Brad  Smith, Microsoft,  to                                                               
connect the  Cascadia cities of Portland,  Seattle, and Vancouver                                                               
to cooperate  on innovation, linking angel  and venture investors                                                               
to governments. The goal is  to build infrastructure to help ease                                                               
travel  between these  cities, he  said.  He has  spent the  last                                                               
three  years  immersed in  virtual  reality.  Initially he  spent                                                               
significant  time  in  Los  Angeles.  However,  as  the  Cascadia                                                               
Innovation Corridor has taken off  and Vancouver has transitioned                                                               
from its  entertainment industry  to embrace virtual  reality, he                                                               
finds he  can accomplish  his work in  Vancouver. He  offered his                                                               
belief  that  these  cities  are  more  similar  now  that  their                                                               
economies are better able to collaborate.                                                                                       
                                                                                                                                
1:47:51 PM                                                                                                                    
MR.  MYERS  highlighted  sectors  that  the  Cascadia  Innovation                                                               
Corridor  has  broken  out.  He   noted  that  PNWER  chairs  the                                                               
Efficient People/Goods  Movement Across  Border Working  group to                                                               
help  address cross-border  economies.  This initiative  examined                                                               
the  economy  and  broke  it   into  "buckets"  and  to  identify                                                               
champions in  those sectors.  The goal  is to  figure out  how to                                                               
build up those networks up and eventually connect those silos.                                                                  
                                                                                                                                
1:48:59 PM                                                                                                                    
MR. DESAI turned  to slide 6, "Technology Valley  of Death" which                                                               
describes the difficulty of  commercialization of new technology.                                                               
This  slide illustrated  how  a startup  goes  from inception  to                                                               
defining an  economy. In particular, scientific  startups receive                                                               
early-stage  academic   grants  from  the   government.  Academic                                                               
programs often  work on cutting-edge technology,  which typically                                                               
happens  about 5-10  years away  from commercialization.  At that                                                               
point, angel investors step in to  take the risk for the startup.                                                               
Once it has achieved a  certain level of success, venture capital                                                               
will step  in, followed by  traditional banking. The  gap between                                                               
venture capital and  banking is called the "Valley  of Death," he                                                               
said. In  fact, roughly 80  percent of startups fail  during that                                                               
time or prior to that time.                                                                                                     
                                                                                                                                
1:51:07 PM                                                                                                                    
MR. DESAI turned to slide  7, "We have classified economic payers                                                               
in four  categories based  on their  likelihood to  innovate." He                                                               
said  that a  number of  tactics can  be employed  to bridge  the                                                               
divide  and  acquire  the right  partners  to  develop  prototype                                                               
solutions.  He  said the  disruptor  must  work with  traditional                                                               
businesses to help them create  efficiencies or gain new markets.                                                               
However, filling that gap is  difficult. Some startups succeed by                                                               
serendipity and are able to  interact with other innovation labs.                                                               
If  it is  possible to  organize serendipity  in niche  areas, it                                                               
could  make  sense for  Alaska's  economy,  and could  create  an                                                               
avenue that would lead to some success, he ventured.                                                                            
                                                                                                                                
1:51:56 PM                                                                                                                    
CHAIR REINBOLD  referred back to  slide 6, "Valley of  Death" and                                                               
wondered if [ABC's]  "Shark Tank" has shed light  on [funding for                                                               
startups].                                                                                                                      
                                                                                                                                
MR. DESAI  agreed that  "Shark Tank"  is a  good model,  one that                                                               
demonstrates  "pitch  sessions"  for startups  trying  to  obtain                                                               
funding. He  characterized the distinction between  a startup and                                                               
a  small  business,  such  that small  businesses  tend  to  have                                                               
perpetual contracts  and revenue and are  often service companies                                                               
with a  well-developed business  model with  a stable  return, he                                                               
said.  "Shark  Tank"  makes  it seem  like  these  investors  are                                                               
immediately  going to  make an  investment decision.  However, it                                                               
really takes a  lot of follow-up for investors  to understand the                                                               
founders, their vision, and their  grit, to better understand how                                                               
likely they are  to force their way into new  market share before                                                               
they invest.                                                                                                                    
                                                                                                                                
MR. DESAI  turned to slide 8,  "Exchange." He said a  lot happens                                                               
due to  serendipity, when an investor  happens to be in  the room                                                               
with the startup. Startups typically  seek 10-100 times return on                                                               
their investment.  They seek  to disrupt  the economy  and create                                                               
new  market  space,  desire  quick growth,  and  create  a  large                                                               
economic impact. This is why  they need venture capital, he said.                                                               
Accelerators and  incubators help  entrepreneurs prepare  for the                                                               
pitch  sessions. Typically,  investors see  as many  companies as                                                               
possible and  churn through 20-50  five-minute pitches in  a day,                                                               
but only make one or two investments.                                                                                           
                                                                                                                                
MR.  DESAI offered  his  understanding that  the  state has  been                                                               
investigating ways  to get natural  gas in the northern  parts of                                                               
Alaska for a  fleet of vehicles. That raises the  question of how                                                               
to  compel startups  to focus  on that  challenge throughout  the                                                               
nation.  These  startups  must  line up  with  the  right  buyers                                                               
willing to be an "early  stage customer" to potentially invest in                                                               
the  development of  that capability.  Still,  many founders  are                                                               
looking for a great business  challenge and it all centers around                                                               
data, he said.                                                                                                                  
                                                                                                                                
1:56:00 PM                                                                                                                    
SENATOR GRAY-JACKSON asked if he had been on ABC's "Shark Tank."                                                                
                                                                                                                                
MR. DESAI answered no. He worked  at a large consulting firm that                                                               
mentored startups, so he has attended many pitch sessions.                                                                      
                                                                                                                                
1:56:48 PM                                                                                                                    
MR. DESAI  said, "Data is king."  His primary interest is  how to                                                               
provide  subject  matter  expertise  to  broker  connections  for                                                               
startups. Startups  are looking for lead  generation and tailored                                                               
opportunities that really apply to  their area of expertise. They                                                               
want  to  gain  exposure  across   the  investment  community  on                                                               
potential customers.  He has reviewed  the ratio exchange  of all                                                               
federal  government procurements,  which  includes all  companies                                                               
doing business with  the federal government, he  said. He related                                                               
he has also  worked on partnerships with  various venture capital                                                               
funds,  incubators,  and  accelerators  to  foster  relationships                                                               
between  companies and  investors on  this platform.  He said  he                                                               
would love to see Alaska involved in this platform.                                                                             
                                                                                                                                
1:57:23 PM                                                                                                                    
MR. DESAI discussed  slide 10, "Use Case  1: Alaskan SBs/Startups                                                               
Seeking  Contracts." He  related a  scenario in  which [Moonbeam]                                                               
helped an  Anchorage business,  Ocean Bay,  LLC. His  company was                                                               
able  to  review  and  find  prime  contract  holders,  determine                                                               
contract ceiling on  contracts, and assess other  factors to help                                                               
Ocean Bay,  LLC connect  to customers.  His focus  is to  free up                                                               
time for startups and help them make those connections, he said.                                                                
                                                                                                                                
MR. DESAI  turned to  slide 11, "Use  Case 2:  Incumbent Business                                                               
Scouting  Innovation."  He  related   a  scenario  in  which  his                                                               
business  helped  the  Copper  River  Native  Corporation  (CRNC)                                                               
determine what  patents were held  in an Indiana  university. The                                                               
goal  was to  see if  the corporation  could market  some of  its                                                               
capabilities,  and he  was ultimately  able to  help them  source                                                               
that  innovation. The  CRNC currently  has about  $23 million  in                                                               
government  contracts  and  it  wants   to  brand  itself  as  an                                                               
innovator, he said.                                                                                                             
                                                                                                                                
1:59:57 PM                                                                                                                    
MR.  DESAI turned  to slide  12, "Use  Case 3:  Regional Economic                                                               
Development  Council."  He worked  with  South  Bend, Indiana,  a                                                               
region  with a  historic agriculture  and manufacturing  base, to                                                               
repurpose large  unused factories. Many companies  understand the                                                               
distribution  of  consumer-packaged  goods, and  this  region  is                                                               
trying to build excellence in that arena.                                                                                       
                                                                                                                                
He pointed  out Alaska's  prevalence of cargo,  with the  Port of                                                               
Anchorage's equidistant proximity to  Asia, Europe, and the Lower                                                               
48.  Alaska could  work  to leverage  the  existing supply  chain                                                               
expertise to market  the next generation of  unmanned systems, he                                                               
said.  For  example,  a  Seattle company  works  on  sensors  for                                                               
autonomous  vehicles  for  the  automotive  industry,  and  these                                                               
sensors  could be  tested  in Alaska.  This  is relevant  because                                                               
Alaska has volcanic  activity, so the company  could test whether                                                               
vehicles  with  its  sensors  can  operate  in  the  presence  of                                                               
volcanic ash.  He concluded that  Alaska could analyze  and pivot                                                               
off data to develop those types of industries in the state.                                                                     
                                                                                                                                
2:02:35 PM                                                                                                                    
MR. DESAI reviewed slide 13,  "A potential Alaskan Innovation Hub                                                               
Network."  In   his  preliminary   research  of   the  innovation                                                               
ecosystem  in  Alaska,  he identified  several  opportunities  in                                                               
which  Alaska could  connect to  the  innovation proving  ground,                                                               
including  unmanned systems,  industrial  internet, and  industry                                                               
4.0.  For  example, Alaska  could  become  an innovation  proving                                                               
ground for  various technology  companies in  Seattle, especially                                                               
to  test  equipment  that  must function  in  cold  or  inclement                                                               
weather. Alaska  could also  use its  expertise with  large scale                                                               
equipment in  the mining sector.  In addition, it  could identify                                                               
opportunities   to  collaborate   between  mining   and  additive                                                               
manufacturing, with  potential partners  in South  Bend, Indiana.                                                               
Further, with  the prevalence of  federal dollars in  Alaska, the                                                               
state could  develop unmanned systems and  partner with companies                                                               
who  work  with the  U.S.  Department  of  Defense (DOD)  at  its                                                               
military bases.  Finally, he suggested Alaska  could connect more                                                               
with Austin, to support innovation in Houston.                                                                                  
                                                                                                                                
2:04:26 PM                                                                                                                    
SENATOR  COSTELLO  said  she appreciated  the  presentation.  She                                                               
offered  her  belief  the PNWER  offers  many  opportunities  for                                                               
Alaska.  Recently, the  committee  heard from  the Department  of                                                               
Labor and Workforce  Development (DOLWD) on the  jobs forecast in                                                               
Alaska.  Alaska  continually  looks  for  ways  to  innovate  and                                                               
diversify its economy. She acknowledged  that many jobs have come                                                               
from startups  in Alaska.  She asked  him what  government's role                                                               
should  be.  She  asked whether  it  should  provide  leadership,                                                               
abilities to  network, or if government  should provide something                                                               
else.  She   recalled  government  investment  in   the  bio-tech                                                               
industry in  the Lower 48,  which did  not work out.  She further                                                               
recalled the startup bio-tech companies  would launch in a region                                                               
but would be taken elsewhere once the companies took off.                                                                       
                                                                                                                                
MR. DESAI  said government  is not good  at picking  "winners and                                                               
losers." However, government plays a  central role in setting the                                                               
conditions, creating  ecosystems for startups to  thrive and make                                                               
it   to  the   next  level.   For  example,   Vancouver  actively                                                               
collaborated  with Seattle  to  secure  investment and  encourage                                                               
U.S. companies to open "back"  offices there. Further, Austin has                                                               
encouraged technology  companies to  pivot to  its lower  cost of                                                               
living and  open "back" offices.  Finally, Walla Walla  worked to                                                               
develop its  expertise in the  work force for the  wine industry.                                                               
Now Columbia  Valley is  one of the  top wine-producing  areas in                                                               
the country,  he said. He cautioned  against government providing                                                               
incentives to companies  to startup in Alaska  if these companies                                                               
will  ultimately  need to  move  elsewhere  once they  experience                                                               
growth. Distribution tends to be  centered by companies in Boston                                                               
and New Jersey, he said.                                                                                                        
                                                                                                                                
MR. DESAI acknowledged  that drug development is  often done with                                                               
incentives  and connections  to medical  schools and  Seattle has                                                               
had  some success  in  this  arena. However,  in  one instance  a                                                               
startup was ultimately bought out  and their exit strategy was to                                                               
relocate.  All those  jobs were  lost and  that is  a gamble  the                                                               
state would not  want to mimic. Instead,  Alaska should reinforce                                                               
its existing economy but move in a slightly different direction.                                                                
                                                                                                                                
2:09:09 PM                                                                                                                    
SENATOR COSTELLO  stated the Juneau Economic  Development Council                                                               
(JEDC) hosts an annual Innovation  Summit in Juneau. She recalled                                                               
Mr. Desai stating that government  is not good at picking winners                                                               
and losers.  She asked  whether he  meant that  government should                                                               
pay  attention and  allow  growth to  happen  organically, or  if                                                               
government should  look for  clusters in  Alaska that  might have                                                               
opportunities for development and support them.                                                                                 
                                                                                                                                
MR.  DESAI offered  three  conditions that  must  be met.  First,                                                               
government could study to figure  out what opportunities exist in                                                               
the economy  and identify  key areas for  startups. That  type of                                                               
research is typically difficult  for startups to perform. Second,                                                               
government could  create an environment  for success  by bringing                                                               
in  the  right  partners.  For example,  Alaska  could  bring  in                                                               
delegations from industries to showcase  what is available in its                                                               
state.  Third, government  could create  or organize  early-stage                                                               
funding  opportunities to  overcome the  first $50,000  financial                                                               
barrier. He  cautioned against  government making  the decisions,                                                               
but it should  create an environment to allow  angel investors to                                                               
come together and pool funds to help startups.                                                                                  
                                                                                                                                
2:11:32 PM                                                                                                                    
MR. MYERS said that representatives  from Trail, British Columbia                                                               
attended a  summit in Spokane  last summer. One company  works in                                                               
metallurgical  research with  an  initiative  called "Metal  Tech                                                               
Alley," he said. The area once  had a large smelting plant, which                                                               
has  subsequently  disappeared.  In   its  place,  the  community                                                               
transitioned  to become  expert  in metal  research and  testing.                                                               
This  has  led  in  a "pseudo-government"  method,  which  is  an                                                               
example of current best practice.                                                                                               
                                                                                                                                
2:12:22 PM                                                                                                                    
CHAIR  REINBOLD  recalled  that  Senator  Bishop  emphasized  the                                                               
importance  of affordable  energy and  infrastructure in  Alaska.                                                               
She  offered  her  belief that  amazing  opportunities  exist  in                                                               
geothermal and hydro-electric energy in  the state. She asked him                                                               
to discuss the importance of affordable energy to businesses.                                                                   
                                                                                                                                
MR. DESAI  pointed out that  Iceland has transformed  its economy                                                               
by  harnessing its  geothermal energy.  He  reiterated that  data                                                               
drives  technology, but  that some  industries  are dependent  on                                                               
energy,    including   data-warehousing    and   high-competition                                                               
activities.  He said  he  thought  that was  a  great avenue  for                                                               
Alaska to explore.                                                                                                              
                                                                                                                                
2:13:57 PM                                                                                                                    
CHAIR   REINBOLD  reiterated   the  immense   hydro-electric  and                                                               
geothermal potential in Alaska.  She emphasized the importance of                                                               
infrastructure  in Alaska,  such as  Alaska's Roads  to Resources                                                               
program.  She  asked  about  the new  Arctic  channels  that  are                                                               
opening up in northern Alaska due  to ice melt. She further asked                                                               
him to discuss any opportunities for Alaska on the North Slope.                                                                 
                                                                                                                                
2:14:42 PM                                                                                                                    
MR. MYERS  related that Alaska is  a member of the  Arctic Caucus                                                               
PNWER  formed in  2009.  This caucus  has  examined sharing  best                                                               
practices throughout  the region. The Northwest  Passage has been                                                               
discussed in terms of how  to leverage opportunities. He reported                                                               
that  PNWER has  met with  U.S. Congressional  Delegation members                                                               
and  Canadian members  to consider  opportunities for  deep water                                                               
ports  and infrastructure,  such  as icebreakers.  Last week  the                                                               
group met with Prince Rupert's  mayor, since many vessels transit                                                               
its   port.   Prince  Rupert   is   also   interested  in   these                                                               
opportunities and is  well positioned to participate  in them. He                                                               
agreed that  Alaska needs to  continue to look  for opportunities                                                               
to leverage. He  expressed a willingness to  share anything PNWER                                                               
learns with its Arctic Caucus members.                                                                                          
                                                                                                                                
2:16:36 PM                                                                                                                    
MR. DESAI  said he is  not aware of  any issues related  to North                                                               
Slope shipping. However,  he said that most  entrepreneurs in the                                                               
Lower  48 do  not have  any knowledge  of the  issues related  to                                                               
shipping via the Northwest Passage.                                                                                             
                                                                                                                                
CHAIR REINBOLD  interjected and  asked him  to please  watch this                                                               
issue.                                                                                                                          
                                                                                                                                
MR. DESAI went on to explain  that he has experience working with                                                               
the  U.S.  Navy,  which  has   given  him  familiarity  with  its                                                               
processes.  Most   entrepreneurs  do  not  know   how  to  access                                                               
opportunities  with  the  U.S.  Navy or  identify  the  types  of                                                               
technologies that could be commercialized.  He offered his belief                                                               
that   identifying    potential   business    opportunities   and                                                               
challenging them to create solutions  applicable to industries is                                                               
a  great  way to  obtain  innovation  that could  shape  Alaska's                                                               
economy.                                                                                                                        
                                                                                                                                
2:17:44 PM                                                                                                                    
CHAIR REINBOLD asked  him to touch on  national and international                                                               
security  issues,  public  safety, and  recycling  opportunities,                                                               
especially  for recycling,  since  Alaska wants  to maintain  its                                                               
pristine environment.                                                                                                           
                                                                                                                                
MR.  MYERS referred  to  the term,  "circular  economy." In  this                                                               
manner, entrepreneurs look at the  life cycle of the product, how                                                               
it will  be reused,  and how  it will be  sourced. He  offered to                                                               
share more  information on what  some entrepreneurs are  doing in                                                               
terms of  the products they are  creating and how it  impacts the                                                               
economy.                                                                                                                        
                                                                                                                                
2:19:53 PM                                                                                                                    
CHAIR  REINBOLD said  that the  mining  industry and  mariculture                                                               
offer other opportunities  in Alaska. She said she  hopes to hold                                                               
a hearing  on the oil and  gas processes from start  to finish to                                                               
better understand the industry and look for other opportunities.                                                                
                                                                                                                                
MR. DESAI  asked to delve  into the  mining industry. He  said he                                                               
did not feel  qualified to offer solutions for  each industry she                                                               
mentioned; however, he suggested it  could be crowdsourced into a                                                               
broader community. He has trained  soldiers using virtual reality                                                               
in  conjunction with  the DOD,  he said.  Virtual reality  can be                                                               
used to  provide the  needed expertise  for the  military without                                                               
risking soldiers' lives. Similarly, while  it is not practical to                                                               
train  mining industry  personnel to  fix mining  equipment using                                                               
very expensive mining  equipment, it is important  that miners to                                                               
be adept at  doing so when something goes  wrong. Virtual reality                                                               
can  provide   that  expertise,  he  said.   He  related  several                                                               
scenarios to illustrate virtual reality applications.                                                                           
                                                                                                                                
2:22:33 PM                                                                                                                    
SENATOR BIRCH  said he attended a  PNWER/LEHI (Legislative Energy                                                               
Horizon Institute) program in Richland,  Washington last fall. He                                                               
recalled  that a  high-voltage  direct-current  (HVDC) line  runs                                                               
from  Central   Washington  to   Southern  California.   He  said                                                               
discussions on how to monetize  natural gas resources on Alaska's                                                               
North  Slope   are  ongoing.  Some   people  have   talked  about                                                               
developing  a  HVDC  to  access  markets.  Given  his  electrical                                                               
engineering background, he asked whether he had any suggestions.                                                                
                                                                                                                                
MR. DESAI  said he would  love to challenge  electrical engineers                                                               
across the country to tackle  that issue. He offered one approach                                                               
he  would  take  is  to  offer graduates  prizes,  and  spin  off                                                               
companies,  who could  potentially  test their  solutions in  the                                                               
field.                                                                                                                          
                                                                                                                                
2:24:41 PM                                                                                                                    
SENATOR  COSTELLO recalled  the  PNWER  Innovation Working  Group                                                               
considered  declassifying  DOD's   information  and  making  that                                                               
unclassified information  available to entrepreneurs. This  is an                                                               
exciting  opportunity  because  it could  lead  to  entrepreneurs                                                               
creating a  business or  product, she said.  She asked  what that                                                               
process  would look  like if  the  committee or  state wanted  to                                                               
pursue it.                                                                                                                      
                                                                                                                                
MR.  DESAI said  he would  broaden the  scope of  the project  to                                                               
encompass  all   technology  that  the  federal   government  has                                                               
developed.  He said  there  is  a process  companies  can use  to                                                               
leverage government  technology and  build a  technology transfer                                                               
platform.  He mentioned  the  Creative  Cooperative Research  and                                                               
Development Agreements (CRDA). [A CRDA  is an agreement between a                                                               
government agency  and a  private company  or university  to work                                                               
together  on  research  and  development.]   It  is  possible  to                                                               
identify what  the government procures, but  not necessarily what                                                               
technology  it  owns,  particularly  in the  labs.  Some  of  the                                                               
information  would be  mineable  by startups,  at  the point  the                                                               
research and development led to  commercialization, he said. From                                                               
a  policy  perspective,  the  state  could  make  it  easier  for                                                               
startups  to   set  up  CRDAs,   so  that  startups   could  work                                                               
collectively with  the state and  federal government  to leverage                                                               
that technology  and commercialize it. However,  the CRDA process                                                               
is  challenging and  research and  development  is expensive,  he                                                               
said.                                                                                                                           
                                                                                                                                
2:27:33 PM                                                                                                                    
CHAIR  REINBOLD reiterated  the  topics  covered. She  emphasized                                                               
that Alaska  offers numerous opportunities. She  asked who serves                                                               
on the Arctic Caucus.                                                                                                           
                                                                                                                                
MR. MYERS  responded that Representative  John Lincoln  serves on                                                               
the Arctic Caucus.                                                                                                              
                                                                                                                                
CHAIR   REINBOLD  said   she  attends   the   Council  of   State                                                               
Government's (CSG)  meeting on behalf  of the state,  and western                                                               
states have substantial water resource  issues. She asked whether                                                               
he had suggestions on how Alaska can export its water.                                                                          
                                                                                                                                
MR. MYERS  identified PNWER's Water Working  Group (WWG), chaired                                                               
by Senator  Jim Honeyford  (WA), and  David Hill,  [Alberta Water                                                               
Research  Institute], who  serves as  the academic  co-chair. The                                                               
WWG  has  reviewed  challenges   in  Washington.  He  noted  that                                                               
significant work has  been done on the Columbia  River Treaty. He                                                               
explained that reservoirs  have been created due to  the dams and                                                               
Washington has been  examining ways to move  water throughout the                                                               
state  for agriculture.  He characterized  it as  more of  an in-                                                               
state issue. He said was unsure  if the incentive to do so exists                                                               
right now.                                                                                                                      
                                                                                                                                
He elaborated  that several initiatives  in Tacoma  have examined                                                               
how to use  current technology to protect water,  using Alaska as                                                               
a proving ground.  In addition, PNWER has  looked at contaminated                                                               
water between  British Columbia and Washington  and "tech mining"                                                               
worked  on water  testing methods  in the  area. However,  he was                                                               
interested in  learning more about  how to market  Alaska's water                                                               
interests, he said.                                                                                                             
                                                                                                                                
2:30:48 PM                                                                                                                    
CHAIR REINBOLD pointed  out that people cannot  water their lawns                                                               
in some states,  so it did not make sense  to her that incentives                                                               
did not  exist. She  asked for  further clarification  the reason                                                               
that water resources were not being incentivized.                                                                               
                                                                                                                                
MR. MYERS clarified that viability  was the issue, that currently                                                               
it is too expensive to transport water.                                                                                         
                                                                                                                                
CHAIR REINBOLD offered her belief that this is a worthy topic.                                                                  
                                                                                                                                
2:31:41 PM                                                                                                                    
CHAIR REINBOLD asked for a list of the PNWER committees.                                                                        
                                                                                                                                
MR. MYERS  answered that  PNWER has 18  working groups  that meet                                                               
during  its annual  meeting. Some  of the  PNWER working  groups,                                                               
include   energy,    water,   mining,    workforce   development,                                                               
innovation,   agriculture,  livestock   health,  border   issues,                                                               
tourism,  and  invasive  species.   He  offered  to  provide  the                                                               
complete  list to  the committee.  In addition,  some initiatives                                                               
that  PNWER  hosts are  separate  from  the working  groups,  for                                                               
example, the  Legislative Energy Horizon Institute,  mentioned by                                                               
Senator Birch, and the Arctic Caucus, previously discussed.                                                                     
                                                                                                                                
2:33:13 PM                                                                                                                    
CHAIR   REINBOLD   remarked   that  Alaska   also   has   immense                                                               
opportunities for  agriculture given the 24-hour  daylight it has                                                               
in the summer.  She noted that the presentation did  not touch on                                                               
some opportunities, including business interests; for example,                                                                  
importing Canada's cattle and pigs in order to achieve more                                                                     
self-sufficiency.                                                                                                               
                                                                                                                                
CHAIR REINBOLD made committee announcements.                                                                                    
                                                                                                                                
2:34:26 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Reinbold adjourned the Senate Labor and Commerce Standing                                                                 
Committee meeting at 2:34 p.m.