The headline on a recent ad in a Portland newspaper was as subtle as a Glenn Beck symposium on global warming: FED UP WITH TAXES? Come grow your organization in Vancouver. I can understand big, bad Chicago trying to poach, but now our friendly little neighbor across the river?
When the tax measures passed in late January, there were predictions that the new taxes would push businesses out of the state. A few rapid examples pointed to the reality of that fear. Two weeks after the vote a story in the Portland Business Journal cited several companies laying off workers or planning to move (and some had had relocation offers from other Washington cities!). Another story in the Mail Tribune reported that Medford-based ComNet was “among more than two dozen companies that have notified the Oregon Legislature of their intent to leave the state.”
Apparently not one to leave potential business on the table, the EastRidge Business Park in Vancouver placed the ad for a month in the business journal, according to Adam Roselli, a broker for Eric Fuller & Associates and EastRidge. After all, Washington only has a sales tax and Oregon’s new taxes raise rates on corporations and high-earning individuals.
Li-Ning is already a phenomenal sportswear presence overseas, with almost $1 billion in annual revenue and more than 7,000 stores in China. The Beijing-based retailer has grown a great deal since it was founded 20 years ago, and now Li-Ning is ready to expand its presence and step onto the North American court. Its home city of choice? Portland, naturally.
Li-Ning USA unveiled its first American showroom this week with a grand opening ceremony at its Pearl District location. With sports apparel and equipment – everything from badminton racquets to tennis shirts – lining the shelves, the two-story showroom was officially open for business. Waiters catered to the packed house with champagne and hors d'oeuvres, a DJ kept the energy level high and I even stumbled upon Portland Mayor Sam Adams putting up a rather good fight in a game of ping-pong. Needless to say, it was an extravagant party, and celebration was certainly in order.
The company was founded by – and named after – Olympic gymnast Li-Ning, who won three gold medals in the 1984 Summer Olympics in Los Angeles. Since its launch in 1990, the company has become one of China’s leading sportswear brands, moving beyond its local retail success to sponsor NBA athletes including Shaquille O’Neal and Baron Davis. Li-Ning’s business relationship with Davis eventually evolved to the development of his own basketball shoe brand, following in the footsteps of some of his NBA peers. The showroom’s grand opening this week served as the kickoff of the shoe – dubbed the BD Doom – and Davis himself was in attendance to oversee its launch. “Right now I’m pretty overwhelmed,” Davis said. “I just thank Li-Ning for having the wherewithal and the guts to come to the United States and know that there is room for more [brands], there is room for improvement.”
Going to Walgreens to pick up a generic prescription drug may only cost about $8. But while that’s the price at the transaction, the cost to you as an employer could actually be $16. Why the mark-up? Pharmacy benefits managers often use a practice called spread pricing as a revenue source, costing companies much more for their prescription benefits than they should be paying.
Terry Killilea of Wells Fargo Insurance Services held a breakfast seminar on the topic yesterday morning at the KOIN Center in downtown Portland. Having worked with PBMs in his previous careers, Killilea discussed ways employers can cut down on their prescription benefit costs simply by knowing how to negotiate a contract with the PBM – a move that can save a company at least $10 per employee per month. “It’s unfortunate that virtually every customer of a PBM is running at such a fiscally inefficient fashion,” Killilea said. “The fact is that they’re spending a large amount of money, more than they need to, on prescription benefits.”
Part of the problem lies in poorly negotiated contracts, which often allow spread pricing to take place. Spread pricing is an agreement that allows PBMs to charge employers a higher price for prescriptions than what is actually paid at the point of sale, with the PBM pocketing the difference. While PBMs historically earned revenue through administrative fees and mail-service margins, it wasn’t until the use of generic prescriptions rose in the late 2000s (and the need for manufacturer rebates diminished) that PBMs began gathering the majority of their earnings from spread pricing.
This just in from Oregon’s ever-growing beer biz: Portland-based startup Indie Hops will donate $1 million to Oregon State University to launch a new breeding program for aroma hops grown in the Willamette Valley. Add that donation to a second million-dollar Indie Hops investment to develop the first hop pellet mill in the Valley along with cold storage and distribution facilities, and you’ve got a new company that could give craft brewers the stability — and respect — that they deserve.
It is fitting that the only U.S. hop merchant dedicated entirely to aroma hops for craft breweries is based in Oregon. Oregonians have been growing first-rate hops and brewing excellent beer since statehood, but for reasons involving the corporate dominance of the Anheuser-Busch InBevs of the world, hops and beer have remained surprisingly disconnected here. Hops are grown in the Valley but processed in Yakima, Wash., where they are sold as commodities, with unpredictable and occasionally maddening price swings. The 18-month-old Indie Hops aims to improve on that inefficient system by purchasing quality hops from Valley farmers, processing them into pellets at a newly completed mill between Hubbard and Mount Angel, and selling them to brewers all over the West Coast. The mill will employ just a few people to start, but if the new local supply catches on there is huge potential for growth.
Indie Hops’ co-founders are Roger Worthington and Jim Solberg, high school football buddies from Corvallis who decided to take the start-up plunge over the course of an evening sampling the wares at the Hopworks Urban Brewery in Portland. Worthington was a successful asbestos litigation attorney who was looking for a worthwhile and fun investment. Solberg was a 16-year Nike veteran who quit his job to sail the Pacific Coast in a craft he built himself and help out with a variety of start-ups including Nutcase Helmets and Hammersurf.
Portland State University’s School of Business Administration publicly launched its new Social Innovation Incubator last week, around the time that we were considering a poll on what stifles entrepreneurship in Oregon. The business mood is a little sour these days with the tax measures battle, the enduring downturn, seemingly endless layoffs, and Main Streets pockmarked with vacancies. It has some wondering whether Oregon is a good place to do business.In the goofy-but-telling category, last Friday the chief of the state’s economic development agency fired back at Chicago’s mayor, who had invited any unhappy Oregon businesses to come to the Windy City if they were steamed that the tax measures passed. And then Beaverton's mayor piled on in a letter published Sunday in the Chicago Sun-Times. It's an economic slapfest that tells you something about how desperate states are for jobs and growth.
Outside the heat of all this, PSU's business school, widely regarded as a leader in social and environmental stewardship, was steadily and quietly building its incubator, which is designed to help established and startup business get to their triple bottom line, or “generate social, environmental and economic value.”
I don't usually cede my blog to other writers (in fact, never), but this missive I just got today from the desk of Tim McCabe, chief of the state's economic development agency, challenging Chicago Mayor Richard Daley to an economic duel was just too fun.
Growing big and growing fast is no easy feat for a startup. Particularly in this economy, just getting investment is difficult. But some entrepreneurs do manage to quickly grow their businesses, or even enter established companies and take them to new heights — but not without some bumps along the way. Still, their success stories are valuable resources for anyone thinking of dipping into the entrepreneurship pool.
The top-floor conference room at Perkins Coie’s Pearl District office was packed last night for a panel discussion hosted by the Oregon chapter of The Indus Entrepreneurs (TiE). Three panelists were on deck to share their experiences: Sudhir Bhagwan, former chairman and CEO of SnapNames; Nitin Khanna, founder and former chairman and CEO of Saber Corp.; and Matt Compton, venture partner at Madrona. Each came from different backgrounds, but agreed on many of the ways entrepreneurs can achieve solid returns for both their companies and their investors.
One of the biggest early mistakes entrepreneurs can make is not clarifying role definitions among founders. Compton knows from his work with companies as a venture capitalist that things can get messy when it’s not clear from the beginning what each founder’s responsibilities are and how the company’s stock is allocated among them. This can be particularly tricky when the founders are friends, something Khanna knew from experience; he founded Saber Corp. with his brother and his best friend in 1997.
Almost exactly one year ago, Laika’s first feature film, Coraline, made its world-wide debut in downtown Portland. Now comes the news that this dark but endearing work of stop-action animation has been nominated for an Academy Award, launching a small, independent Oregon studio with a 36-year-old CEO into the big-leagues with Disney, Pixar and DreamWorks.
This is excellent news for Oregon’s film industry and a validation for the father-son tandem of Laika chairman Phil Knight and CEO Travis Knight. They took bold risks on Coraline, financially and artistically, and their risks are being rewarded. The film has already grossed more than $120 million (twice what it cost to make), and the publicity and gravitas of an Oscar nomination will boost sales as Coraline hits theaters in animation-crazy Japan and tackles the DVD and paid-television markets domestically.
“Five years ago when we were trying to find a partner for Coraline, nobody had heard of us,” CEO Travis Knight told me yesterday afternoon. “Obviously that changes with this nomination. This will make things easier for the business. But it also increases pressure on us creatively. We’ve set the bar high for what we’re capable of doing and we’ve got to live up to that now.”
It just wouldn’t be a legislative session without a water issue to whack around. This will sound familiar. David Nelson, the Republican state senator from Pendleton, has introduced a bill that seeks more water from the Columbia River for uses ranging from livestock, mining and irrigation to recreation, wildlife and fish.
“My wife called me crazy,” Nelson says. That would be Alice Nelson, who is also the senator’s legislative assistant. Crazy, perhaps, because Nelson and Eastern Oregon farmers, irrigators and others have tried unsuccessfully for years to get more water from the Columbia, which is tightly regulated by state and federal rules regarding endangered species, tribal rights, hydro flows and a myriad of other interests.
Nelson is eternally convinced that there’s plenty of extra water in the river, and it’s the way Oregon can climb out of its budget hole. He doesn’t seem to mind beating his head against the wall on this idea. He’s semi-famous for calling the Columbia’s water Oregon’s “oil,” and believes that Oregon could sell its water to parched states such as California for big bucks. “You want to raise some money for education and all the other things? We’re going to have to start looking at our natural resources,” Nelson says. “I’m not saying how or when we should use it.” Nelson says this bill simply restates reserving 30 million acre feet of water that was approved 20 years ago by the Oregon Water Resources Commission and later overruled by the state’s attorney general.
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