Winrock's Commitment to Innovation Hub Questioned

by Sarah Campbell-Miller  on Monday, May. 14, 2018 12:00 am   7 min read

(Editor's Note: Winrock sent Arkansas Business an additional response after publication of this story. That response is included in full at the end of this article.)

Former employees, including the executive director who resigned in February, fear the Arkansas Regional Innovation Hub is bound for financial failure two years after merging with Winrock International, but Winrock insists the doomsayers don’t know what they are talking about.

“Winrock is committed to the success of the Hub and has been since our agreement came together in June of 2016, and we will continue to be a partner to the Hub for years to come,” Winrock CEO Rodney Ferguson said in a statement emailed to Arkansas Business. “Winrock believes the Hub is an important and unique part of the ecosystem of Arkansas.”

 Rodney Ferguson

Winrock declined to release its or the Hub’s unaudited financial statements for 2017, but executives say Winrock has made investments in the Hub, covered budget shortfalls and developed an overhead structure for the Hub to include in grant proposals so that the grants it receives cover overhead costs.

Joyjit Deb Roy, Winrock’s senior vice president of programs and one of three members of the Hub board, said Winrock was “very, very satisfied” with the merger, which was never intended to benefit Winrock financially.

Winrock gained the Hub’s expertise in the “makerspace” area and hoped to duplicate the Hub’s model in other cities, he added.

Deb Roy did acknowledge “bumps” along the way.

Spurred by the February departure of Joel Gordon, executive director and longtime Hub staffer, some of those who left after the merger reached out to Arkansas Business with the following concerns:

 Joyjit Deb Roy

• Winrock has not provided the financial sustainability the Hub expected to gain from the merger of nonprofits.

They say Winrock considered its financial support to be “loans” and encouraged the Hub to max out its credit line to meet budget. Winrock denies this.

• The Hub does not have an effective board because Winrock hasn’t appointed an advisory board as described in the affiliation agreement that Ferguson and the Hub’s first director, Warwick Sabin, signed in June 2016.

Winrock agreed to appoint an advisory board with at least nine of Hub’s pre-merger directors, the agreement said. Instead, Deb Roy, Ferguson and Winrock CFO Mike Myers are on the Hub board.

• Sabin, a state representative and likely candidate for Little Rock mayor, may have exchanged the Hub and its assets for a job as director of U.S. programs at Winrock. Sabin has not responded to calls from Arkansas Business over several weeks. Winrock said Sabin doesn’t speak for Winrock and said his responsibilities do not include the Hub. He was the Hub’s director until Gordon took over last June.

Deb Roy said Winrock’s legal team had examined the issue and determined Sabin’s hiring would not constitute a conflict of interest.

The former employees, most of whom spoke on the condition of anonymity, also fear that recent improvements Winrock has made to the Hub’s headquarters at 201 E. Broadway in the Argenta District of North Little Rock indicate that Winrock plans to sell or lease the building soon.

The Hub owns the building and is paying the mortgage, but Winrock owns the Hub and paid nothing for it or its assets. The Hub paid $576,000 for the building in 2015 and spent $2.5 million to renovate and equip it. Half of the $2.5 million came from public sources, including the U.S. Economic Development Administration, which granted the Hub $1 million.

Winrock said it’s been addressing maintenance issues in the 104-year-old building.

In addition, Winrock is funding strategic plans now to develop a sustainable business model for the Hub, according to the Hub’s executive director, Chris Jones.

 Chris Jones

Jones has been on the job for nine weeks and said the Hub has the mission, staff, community support and access to financial resources from Winrock that it needs to succeed.

The Hub has a multifaceted mission.The nonprofit, which opened its building in 2014 but began hiring staff in 2013, provides a makerspace where people can use the latest technology, like a 3D printer, to create. It offers classes and workshops that teach children and adults how to do things like build and program a robot, work with ceramics and more.

The Hub also gives entrepreneurs access to small-scale manufacturing, has hosted one accelerator program (HubX-Life Sciences) and offers some startup co-working space. Management of another accelerator, the Delta I-Fund, is being shifted from the Hub to Winrock.

The Hub is engaged in the maker movement, a community of do-it-yourselfers, tinkerers, craftsmen, manufacturers, artists and students. Proponents believe that, using the resources provided by makerspaces, inventors and artisans can make and sell their own products instead of being forced to sell their ideas to large companies.

Under Winrock’s business model, it competes with other nonprofits and some for-profit organizations to implement projects around the globe, usually on a cost-reimbursable basis. The nonprofit’s mission, according to its website, is to empower the disadvantaged, enhance economies and sustain natural resources by combining technical expertise and entrepreneurial innovation.

Uncertainty Led to Exit
Gordon, Jones’ predecessor, said uncertainty over the relationship between the Hub and Winrock drove him to resign. He needed clarity on it to raise funds for the Hub and felt that the Hub was on the path to financial ruin.

The former Hub employees started voicing their concerns after Gordon’s exit three months ago. He led the Hub’s makerspace from 2013 until his promotion to director last year.

In a recent interview, Gordon assessed the merger. “The funny thing about it is that, the more specific I made my questions, the less specific the answers became. The candid answer, no matter what I asked, was Winrock is not going to let the Hub fail. If I heard that once, I’ve heard it a thousand times. But that didn’t answer my questions. It was more about what is the obligation. I asked over and over and over again …”

He added: “I’ll be very honest. You know, when I left, one of the things I said was ‘Maybe I’m the problem. Maybe I just don’t get this. And, if that’s what the situation is ... I don’t need to be here.’”

Potential donors were under the impression that the Hub no longer needed funding because Winrock was funding it, Gordon said.

He also said the Hub became ensnared in national politics. When the merger occurred, Hillary Clinton was widely expected to be the next president, and her administration was expected to support organizations like Winrock and the Hub with big federal grants. Instead, Donald Trump was elected, and he has consistently targeted budget cuts toward grant programs that have supported both Winrock and the Hub in the past.

Beyond grants, the Hub gets donations and membership and class fees. North Little Rock has also provided some funding in the past and appropriated $100,000 for the Hub earlier this year.

Fees haven’t been enough to sustain the Hub, and other revenue sources aren’t a sure thing. That is why the nonprofit’s board approved the merger.

 Warwick Sabin

The Hub was not strapped when the deal was struck, former board members said, but it had suffered a $48,813 loss on $1 million in revenue for the 2016 calendar year. Winrock had a loss of $1.36 million on revenue of $108.7 million in 2016.

The board members who responded to calls from Arkansas Business said they saw the merger as a way to resolve long-term funding issues and as a way to focus on programs rather than fundraising.

Not everyone signed off though, due in part to vagueness in the affiliation agreement. It doesn’t specify Winrock’s plans for financial assistance to the Hub but states Winrock would “control, directly, as sole member, HUB [sic].”

David Moody voted against the merger because, he said:

  • The agreement lacked specifics.
  • Winrock didn’t promise to put financial resources into the Hub.
  • Winrock would get the Hub’s building for nothing.

He also feared the Hub would lose its identity in becoming part of the larger nonprofit. “I joined the board to help [the Hub] be successful and believe it still can reach its full potential,” Moody said, but he believes its leaders had tunnel vision two years ago.

He didn’t see the Hub cutting expenses or trying to raise more revenue before pursuing the merger. His view in hindsight? “I think they kind of put some financial pressure on themselves that caused, in my opinion, a decision that was maybe not as well thought through as it should have been.”

Update: Winrock's response to the publication of this story:

To the Editor:

By its own admission, the May 14th article "Winrock's Commitment to Hub Questioned" is based on former employees who "reached out" to express the "fears" and "uncertainty" that led to their departures. Unfortunately, the piece is not only wholly speculative and backward-looking by design, it is also quite misleading and, in most cases, wrong.

One concern, that the Hub "does not have an effective (advisory) board because one hasn't been appointed" is false. In fact, the Hub has an Advisory Committee in place that includes members who served on the previous Hub Board. 

Other claims, such as that the merger was "ensnared in national politics" due to funding concerns under a potential Trump presidency, the fear of anonymous former employees that "Winrock plans to sell or lease the building soon," or that there was a quid pro quo with the Hub's founder to secure a job are also all unfounded and untrue. Winrock sought out a combination with the Hub because we share a mission — to improve livelihoods and drive economic development in Arkansas and around the world.

Finally, based on a reading of Winrock's 2016 Form 990, the article also stated that Winrock sustained a loss in 2016. In fact, when our 2016 unrealized gains on investments were included, Winrock completed the year comfortably in the black. 

Winrock and the Hub are driving forward, not looking backward. Despite his admission that "maybe I’m the problem," we wish the Hub's former director — and talented maker — all the best. And we are thrilled with the Hub's new leadership under Dr. Christopher Jones, who informed your article with his perspective that "the Hub has the mission, staff, community support and access to financial resources from Winrock that it needs to succeed."

We hope we can move beyond any hard feelings with the words of Winrock CEO Rodney Ferguson, which you quoted in your story: "Winrock is committed to the success of the Hub and has been since our agreement came together in June of 2016, and we will continue to be a partner to the Hub for years to come."

Dave Anderson
Senior Director, Communications and Public Affairs
Winrock International



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