The Health Sciences & Services Authority of Spokane County has broadened the scope of its mission to include funding to early-stage startups, a move that has resulted in the organization significantly increasing the number of grants it awards, says Dr. Francisco Velázquez, chairman of the HSSA board of trustees. 

Last year, HSSA distributed 19 matching grant awards for bioscience-based economic development totaling $5.69 million, up from seven grant matching awards totaling $1.87 million in 2023. This year, HSSA expects to make $4.63 million in matching grants. 

He adds that 2023 and 2024 activity accounts for nearly 40% of all grants awarded during the organization’s 15-year history.

Erin Williams Hueter, executive director of HSSA, says recipients include homegrown Spokane County bioscience entities, spinoff ventures from Washington State University Elson S. Floyd College of Medicine, as well as applicants who have moved part of their operations to Spokane County to benefit from HSSA, whose undiluted funding enables companies to operate and grow without giving up ownership of their company. 

“We want to see people succeed,” Hueter says. “But since we’re not asking for a return on our investment in cash, we are asking a return in the form of jobs and other economic drivers in the community.” 

Velázquez, whose primary job is as Spokane County health officer for the Spokane Regional Health District, says that about five years ago, he noticed a shift in the number of entrepreneurial companies in the region funded by angel investors and venture capitalist firms. HSSA’s mission at the time was narrowly focused on matching grants to life science-based entities that were awarded federal grants from agencies like the National Institute of Health and the National Science Foundation.

At the start of his three-year tenure as chairman of the board in 2023, Velázquez began to think about how the organization could support these ventures. 

“I remember asking the question, is there a reason we cannot fund investor-based companies?” Velázquez recalls. “I think we’re missing an opportunity because we see a lot of growth in that segment.”

A figurative lightbulb went on that set in motion the creation of a broadened charter with defined parameters and criteria that would allow the organization to legally grant funds to entrepreneurial startups, he says. The organization also expanded the definition of the entities it supports from life sciences to biosciences to include critical adjacent areas, such as tech, that are important to the life sciences. 

“Obviously, investors typically focus on the areas in which there’s critical mass and there’s momentum,” Velázquez says. “As we started to grow in the life sciences, that momentum started to increase.”  

The Health Sciences & Health Services Authority of Spokane County, located on the sixth floor of the Paulsen Center, at 421 W. Riverside in downtown Spokane, was established in 2009 to support economic development in the life sciences and better access to care for people who are uninsured and underinsured. The organization is funded through a small fraction of a percent of county-wide sales tax revenue. 

The organization dedicates 75% of its resources to funding life sciences, now broadened to biosciences, and 15% to organizations that provide better access to care. About 10% goes toward administrative expenses. Hueter, who took the helm as executive director in 2023, just as the board was making changes to its charter, is the organization’s sole full-time employee. Since then, the organization has added two part-time positions, a program assistant and a grants administrator. In addition to its staff, it has two contractors who provide legal and accounting services. 

With the expansion of its charter, the board also appointed five additional board members, growing the group to 14, says Hueter. 

“We chose to do that in part because it’s a lot of work for our trustees,” she says. “It’s a volunteer job … reviewing all of our grant applications, taking responsibility for voting on a million-dollar grant application is not for the faint of heart.”  

Velázquez has been a board member for 12 years and is part of the second wave of board members.

He says the establishment of HSSA coincided roughly with the founding of the University District. During that time, there was a lot of interest in investing in health and life sciences; Washington State University brought its health sciences hub, later followed by the Elson S. Floyd College of Medicine. In the beginning, HSSA was focused on helping develop the infrastructure of these projects, with many of its grants awarded to the academic institutions that were developing their faculty and recruiting researchers to relocate to the region and hire local people to help in their labs. 

“Now, initially, the discipline matching agency grants made perfect sense because we were trying to build the core of the life sciences,” he says. “And a lot of that core was coming out of the university … fast forward to the last few years, that pendulum started to shift more toward the privately funded companies.” 

Hueter says HSSA funds several WSU spinoff companies. One is Quadralynx Inc., a medical device company that works to address speech impairments for people with Parkinson’s Disease and other neurodegenerative disorders. HSSA awarded them a matching grant of $980,000. Managed Health Connections Inc., another WSU spinoff that provides training and support to clinicians, individuals, and caregivers impacted by substance abuse disorders, was awarded $500,000, she says. 

The first investor match that HSSA awarded was to Inherent Biosciences, Inc., a biotech company that combines epigenetics and artificial intelligence to provide support to health care providers. Inherent Biosciences was awarded $250,000 in its first round and will receive $1 million this year. Total awards to a company are capped at $1.25 million, she says.

While the company is based in Utah, its CEO grew up in Spokane and has started adding staff and investors here, Hueter says. 

“They’ve now moved all of their research and developments to Spokane County,” she says, adding that the CEO is also planning to relocate to the region. 

Hueter says that because HSSA requires companies to spend as much of their money in Spokane County, it attracts companies to the region or persuades some to hire locally instead of remotely from anywhere in the country. Lighthouse Health Inc., a Spokane-based startup that has developed an application that helps address the nursing shortage, is one example. 

“They could hire from anywhere,” she says. “And initially, that’s what they were thinking.“

However, HSSA’s cost reimbursement system is only eligible for Spokane County-based staff, she says. Hueter says it forced Litehouse Health to hire a local marketing firm to help them recruit nurses, and that the company’s CEO David Heath is quick to say the company has seen better results when they switched to a Spokane County-based firm. 

Velázquez adds that because the grant funding is non-diluted, it doubles the impact of the investment that the investor is making and protects the equity of the investor and the original founder.

“That has made it attractive for a number of companies to come here,” he says. “It has brought it to the point where we are actually awarding pretty much the total amount that we have budgeted for the year. I think as we go forward, we start to see we have more requests than we may have funding for.” 

He contends, however, that this is a good problem to have because it shows that their work is having an impact, the ecosystem is continuing to grow, and HSSA’s investments, coupled with those of private investors, are allowing companies to stay in the region.