Mayor Khan Proposes Program to Accelerate Tech Growth

Mayor Farrah Khan is proposing that the City partner with venture capital firm Sunstone Management in the creation of a nonprofit entity to accelerate the growth of high-tech startups in Irvine. The proposal is Item 6.3 on the City Council agenda for Tuesday, September 12.

Khan’s memo to City Manager Oliver Chi states: “In concept, the Irvine Accelerator would be established as a non-profit organization dedicated to accelerating the growth of innovative, pre-seed and early-stage businesses into venture-ready companies.”  Khan continues: “In order to bring this program concept to reality, the City and Sunstone have developed a non-binding Letter of Intent (LOI) that I would like to introduce for City Council consideration (see attachment).” The LOI begins with a declaration that:

“The greater Irvine area has a burgeoning entrepreneurial ecosystem, fed by a growing cluster of technology, biotech, and medtech companies as well as a collection of world-class universities. Strengthening this ecosystem through education, mentorship, and access to capital supports the long-term economic development and quality of life for the area.”

“The Irvine Accelerator is envisioned to be an innovative public-private partnership between the City of Irvine and Sunstone Management developed to support and strengthen the entrepreneurial ecosystem in Irvine.”

The respective responsibilities of Sunstone and the City are listed as bullet points in the LOI. Among Sunstone’s responsibilities are:

  • Serve on the board to provide strategic direction for the Irvine Accelerator.
  • Support fundraising and provide funding for the initiation and ongoing operations of the Irvine Accelerator.
  • Raise a venture capital fund to invest in qualified startups accepted into the Irvine Accelerator.
  • Help develop and implement a strategy that attracts additional capital providers to the Irvine entrepreneurial ecosystem.

Among the City’s stated responsibilities are:

  • Provide access to City and other government resources such as small business and non-profit loans and grants.
  • Support fundraising for the operations of the Irvine Accelerator
  • Provide marketing support to increase awareness of the Irvine Accelerator programs and opportunities.
  • Develop and implement a strategy to attract private equity firms, venture capitalists, and the angel investor community to the Irvine Accelerator Fund.

The LOI culminates in an agreement that Sunstone and the City will “work toward a formal Memorandum of Understanding (MOU), but acknowledge and agree that this LOI is non-binding.”

Plan B for the Innovation Lab?

Khan had placed a proposal to lease space for an “Innovation Lab” on the agenda for the March 28, 2023 Council meeting.  In a memo to Chi, Khan explained the purpose of the Lab in language similar to that used in her Accelerator proposal: “[W]e’ve developed the idea of establishing the Irvine Innovation Lab, a space where entrepreneurs can find a world-class ecosystem of support that will help facilitate the accelerated development of their business through the incubation period, all aimed at growing and retaining successful Irvine-based companies.”

Prior to the March 28 meeting, Irvine Watchdog published a critical opinion piece arguing that tech development brings negative impacts on housing availability and affordability, traffic, and social stability. The article also revealed the involvement in the project of former Five Point CEO Emile Haddad.  In the wake of that article, and with Councilmember Mike Carroll absent, Khan pulled the proposal from the March 28 agenda and rescheduled it for April 25.

At the April 25 meeting, Sunstone founder John Shen spoke in support of the proposal. Following discussion, the Council unanimously passed the following motion by Khan, seconded by Carroll:  “Direct the City Manager and City staff to work with the Innovation Council to develop a work plan that outlines how the existing space at the Irvine Station … will be used, and also clarify who would be responsible for fulfilling the lease agreement as part of lease negotiations; and return to the City Council for consideration at a future date.” (Minutes.)

The Innovation Lab never appeared on a subsequent Council agenda and apparently has been superseded by the Accelerator proposal. There is no indication that Haddad is involved in the latter.

Who is Sunstone Management?

Sunstone, founded in 2015, has been described as “a diversified private capital firm that invests in early-stage technology entrepreneurs through partnerships with government, education, and non-profit organizations.” It was recently ranked as this country’s 18th most active venture capital firm, with 19 completed deals in the second quarter of this year. Sunstone’s offices are on Von Karman Avenue in Irvine.

Sunstone founding partner Shen received an undergraduate degree with a major in commercial law from Peking University in 1992, and an M.S. in Statistics and Decision Sciences from Duke University in 1996, according to his profile on the company website. The profile also notes that Shen previously served on the City of Long Beach Economic Development Commission, appointed by former mayor (and current Congressman) Robert Garcia, and that he currently serves on Khan’s Innovation Council. It adds that Shen’s projects “have collectively created approximately 10,000 full-time jobs throughout the U.S. and properly supported over 600 high net worth foreign families in their immigration petitions.”

John Keisler, Sunstone’s CEO and managing partner, has an extensive background in the public sector, most recently as Economic Development Director for the City of Long Beach, according to his company profile: “Under his leadership, the organization created an innovative Blueprint for Economic Development, and helped to facilitate an historic increase of private sector investment in the city.”

The Long Beach Connection

Sunstone has deep ties with the City of Long Beach. Not only were Keisler and Shen previously involved in that city’s economic development efforts, but other Sunstone executives were as well. Sunstone Director of Economic Development Eric Romero previously served as the Business Development Officer for Long Beach Economic Development; Economic Development Associate Jayro Sandoval served on the Economic Development Commission and the Long Beach Economic Partnership.

Indeed, Sunstone was instrumental in founding the Long Beach Accelerator in 2019. That organization describes itself as “a public-private partnership between the city of Long Beach, Sunstone Management, and CSULB,” with Keisler, Shen, and CSULB’s Wade Martin the three founding members of the board of directors. All three apparently continue to serve on that board.

Long Beach Accelerator touts downtown Long Beach as “a walker’s and bicyclist’s paradise,” with multiple transit options and substantially lower apartment and office rents than in several other California cities.

Sunstone’s Grand Ambition

While Irvine may not be able to offer low rents and abundant transit, by February 2022 Sunstone was already engaged in efforts to replicate the Long Beach Accelerator here—as part of a far grander ambition:

“As CEO, [Keisler] and Sunstone founding partner John Shen told Techwire, a major focus will be the establishment of public-private partnerships similar to LBA around the state — wherever there’s interest from a municipality and a university. Sunstone is working with the University of California, Irvine, to stand up a second such technology accelerator this year and onboard its first cohort of startups as soon as this summer.”

Keisler elaborated on the company’s broader plan to shape economic development for all of California:

“’We’ll be working to communicate with those key partners that helped us start the Long Beach Accelerator here in Long Beach, and identify the opportunities to build a network of nonprofit accelerators across the state of California, anywhere there’s a university and a city that’s a willing partner,’ Keisler said, noting that the Cal State and University of California systems between them are educating more than 700,000 students at 33 campuses. The CEOs and chief administrative officers at the state’s 482 cities and 58 counties, he added, ‘are all seeking a new vision for business development, business attraction and job growth. And Sunstone is going to be providing that vision. And the operational and capital behind it so that those 482 cities, those 58 counties will have an economic development strategy for the future.’”

Let the City Council Know What You Think

Irvine residents have several ways to comment on this and other items on the Council agenda, including e-comments and public comments in person or on Zoom. Instructions are here.