April 2014

To Members, Friends, and Colleagues of the Michigan Business Incubator Association

From Larry Molnar, President of MBIA

The MBIA board members are taking a time-out period to assess the status of our organization and how we can best serve our members moving forward. We plan to soon distribute the next newsletter that will provide information about our deliberations. There will however be a brief hiatus from the regular newsletter schedule. If you have any suggestions about new initiatives, directions or how we can improve, please send us an email, michigan.incubator@gmail.com. We value your input.  

Thank you!

NBIA Conference

Michelle Armbruster

Registration is live – sign up now for NBIA's 28th International Conference on Business Incubation. This premier industry training event will take place May 18-21, in New Orleans. Incubation and entrepreneur support professionals from around the world will come together for a time of learning, networking and fun. This year's conference will feature focused networking opportunities and a programming track for our more experienced audience. The conference headquarters – the Sheraton New Orleans Hotel – is located just a block from the city's famed French Quarter, so you won't have to travel far to experience the local culture. Don't miss this opportunity to make valuable connections with colleagues and learn new tools and techniques. Register now or click here for more information about the event, www.nbia.org.

First NBIA Network Award Winner Keeps Cities and Counties Happy

Dennis Powell

University of Central Florida Business Incubation Program - Incubator Network of the Year

Statistics:
Year established: 1999, Number of incubators in the network: 10

Total size of incubators: 141,500 square feet, Total current incubator network clients: 128

Total incubator network clients since opening: 300, Total incubator network graduates: 85

Organizational structure: The UCF Business Incubation Program is a collaborative economic development effort between University of Central Florida, the Metro Orlando Economic Development Commission, the City of Apopka, Orange County, the City of Orlando, Seminole County, the City of Winter Springs, Lake County, the City of Leesburg, the City of Sanford, Osceola County, the City of St. Cloud, the City of Kissimmee, Volusia County and the Florida High Tech Corridor Council. It is a project of the UCF Research Foundation.

Mission statement: The UCFBIP is a university-driven community partnership providing early-stage companies with the enabling tools, training and infrastructure to create financially stable, high-growth enterprises leading to positive economic impact within local communities.

UCF Business Incubator network locations: Apopka, Daytona Beach, East Orlando (two incubators), Kissimmee, Leesburg, Orlando, Sanford, St. Cloud and Winter Springs, all in Florida.


NBIA’s Incubator Network of the Year award was new in 2013. With more and more incubation programs involved in multiple sites and no way of recognizing them without shortchanging those programs, single-incubator programs, or both, it became clear that a new category was necessary.

The inaugural honoree is the University of Central Florida Business Incubation Program, headquartered in Orlando, which is also the site of two of the network’s 10 incubators. The others are located in smaller cities in Central Florida and are operated in cooperation with those cities or their home counties. People familiar with municipal governments will quickly recognize that keeping eight discrete cities happy is not an easy task, yet the UCF program manages to do it. Part of the reason may be its success. A study commissioned by Florida High Tech Corridor (a 23-county consortium of economic development organizations, colleges and business organizations) revealed that from 2009 through mid-2011, the UCF program was instrumental in creating nearly 1,500 jobs with earnings in excess of $62 million. As a result, the return on investment to government was substantial, the report said. With an annual investment of $1.81 million, governments received a total of $9.1 million in tax revenues – in fact, the report said, the annual revenues returned 141 percent on the total 10-year investment of $6.5 million. And this was during a severe economic downturn.

Success breeds interest

The UCF program was founded by Dr. Tom O’Neal, executive director, with an eye toward commercializing technology developed at the University of Central Florida. When it demonstrated success, nearby cities started to show an interest, says Gordon Hogan, director of the UCF Business Incubation Program and the man responsible for setting up many of the network’s incubators. The overall program’s success has been remarkable: since its founding in 1999, client companies have created more than 3,300 jobs with an average salary of $67,000. Those companies have brought more than $620 million to the local economy.

“We’re fortunate in that we work with municipalities and counties that want us to succeed,” says Hogan. The program is additionally fortunate, he says, in that those governments are generally willing to embrace UCF’s way of running a business incubator.

“I’ve used the word ‘franchise’ in describing how it works,” says Hogan. That’s because, with one exception, the incubators in the UCF network are similar. (The exception is the UCF Center for Research and Education in Optics and Lasers Photonics Incubator on the UCF Campus in Orlando, which is an extremely specialized program dealing with lasers, optics and related technology; 75 percent of its clients are commercializing UCF research.) All are in the “Florida High Tech Corridor,” which extends from Daytona Beach at the east to Tampa on Florida’s west coast. Each site has a resident program manager who handles day-to-day operations, making the incubators in part freestanding. Scheduling of facilities, for example, is handled at that level. “Then we have a meeting every other week that runs about four hours, where we discuss best practices, new programs and how we’re doing,” Hogan says. “We all use the same general model.” Each site, though, has its own funding arrangements with its city or county. “We currently have 140 companies in the program,” Hogan notes. “The sites 5 or more years old are full.” The program has experienced substantial growth in the last four years, adding the Kissimmee and St. Cloud incubators in 2010, the one at Daytona Beach International Airport in 2011, and the facility at Apopka in 2012.

The networking offers programmatic economies of scale. “We have seminars at each location,” he adds. “Those [seminars] may move from one site to another from incubator to incubator.” Likewise, though there are mentors and advisors at each incubator, the entire network has available UCF’s resources and expertise. “All of the programs are required to take a course called Excellence in Entrepreneurship,” offered by UCFBIP, Hogan adds.

Full service and getting fuller still

Each of the incubators in the UCF network provides individual mentoring and consulting both by staff and outside professionals drawn from a wide range of almost 100 business partners in numerous fields. Typical best practices services and facilities are offered. But the program is not stopping there. 

“We have a soft landings program now, similar to the NBIA model,” Hogan says. “We’ve been working at it for two years, and there’s an increasing amount of interest in it.” International trade is a leading part of Florida’s economy, and international incubation and market expansion are fertile fields for the UCF network.

Indeed, it is at the urging of the UCF that the NBIA Board of Directors is considering a network category of NBIA Soft Landings designation, in the same way that the Incubator Network of the Year award was created. Soft Landings is an area especially suited to incubator networks, in that a network can centralize some Soft Landings services, thereby reducing the costs per incubator.

More recently, Hogan has undertaken a new program, initially at the UCF Orlando Research Park incubator, to serve military veterans. “I got interested in coming up with something to help vets interested in starting their own companies,” he says. Using a version of the Kauffman FastTrac program modified for use by veterans, he started a class of nine vets. “It’s an interactive class. There are probably three or four that will become incubator clients. Some of the others haven’t formed a company yet.” Of the group, one is a game developer, one is a nonprofit to aid veterans, two hope to become involved in military procurement and one seeks to create a company that will provide care to the elderly. “It’s a satisfying part of the program, and it’s needed,” Hogan says.

Reprinted with permission from the NBIA Newsletter, Jan/Feb 2014, pp.14 - 15.

Mount Pleasant Business Earns Recognition Statewide

Elissa Richmond

Prism Analytical Technologies, Inc. (PATI), will be recognized this spring by Gov. Snyder as one of the 2014 Michigan 50 Companies to Watch during the tenth annual Michigan Celebrates Small Business event, May 6 in East Lansing, Mich.

PATI specializes in identifying harmful contaminants in the air. Established in Mount Pleasant in 1992, the company started as a service based company. Early 2009, the company shifted direction to bring a new product line to consumers. This expanded the business leaving the company searching for a new location.

Les Keepper, PATI owner planned to relocate the business; fortunately assistance from Central Michigan University Research Corporation, Middle Michigan Development Corporation and the Small Business Development Center changed his mind.

“I could easily relocate our operation, but the connections that CMURC has specifically brought to the table and the support of all of the economic development organizations it makes more business sense to utilize these excellent resources to further advance the company,“  Keepper said.

Keepper moved the operations to the CMURC’s business incubator, providing labs, office space, and room to grow into the Mount Pleasant SmartZone Technology Park.

“Infrastructure and business accelerator programs were critical to Prism’s expansion as they required special air handling systems for the labs and specialized IT needs,” CMURC president and CEO Erin O’Brien said. “The region, by design, foster entrepreneurs like Les, and appreciate his leadership and dedication.”

Keepper was awarded the 2012 CMURC Entrepreneur of the Year Award, and has now led his company to be recognized as one of the Michigan Top 50 Company to Watch.

Plans to continue utilization of local resources in fueling future company growth are underway for PATI. CMURC will provide support in such areas as capital acquisition, intellectual property development, and the recruitment of high skilled professionals including chemists, marketing professionals, IT specialists and CMU students who require real world experience in commercial labs.

The SBDC will continue to play a complementary role as well, focused on helping Prism access capital critical to fueling future growth.

About Michigan Celebrates Small Business
Companies making it to the “Michigan 50 Companies to Watch” list are a remarkable group of second-stage companies. Defined as having 6 to 99 full-time-equivalent employees and generating $750,000 to $50 million in annual revenue or working capital from investors or grants, these companies form the backbone of Michigan’s economy. Representing all regions of the state and a diverse range of industries, companies like Prism Analytical Technologies, Inc. are known for their exceptional entrepreneurial leadership, creation of innovation or use of innovation in creative ways, and their sustainable competitive advantage.

Michigan 50 Companies to Watch is presented by Michigan Celebrates Small Business.
Founding underwriters are the Michigan Economic Development Corporation, PNC Bank, Accident Fund Insurance Company of America, and Dynamic Edge, Inc.

www.MichiganCelebrates.biz.

About Prism Analytical Technologies, Inc.
Prism Analytical Technologies, Inc. is a leading consultative air testing laboratory in the United States that is devoted to the chemical identification and analysis of contaminants in the air.  Since 1992, Prism has focused intently on providing its clients with the finest science based technology in air testing, coupled with extraordinary service.  They are a multi-faceted company, providing a wide range of air testing support, including on-site monitoring and emergency response support.  Some areas of the company's expertise include: Volatile Organic Compounds (VOCs), Semi-Volatile Organic Compounds (SVOCs), Mold VOC's given off by actively growing molds (MVOCs), Hazardous Air Pollutants (HAPs), Toxic Organic Compounds (TOC), plant emissions, process and industrial emissions, vent and stack emissions, and product off-gas.  Prism's deep knowledge in air scan technology has paved the way for the development of the first comprehensive home air test for consumers to test for total VOCs and total level of actively growing mold; Home Air Check™.  Many Fortune 100/500 companies, as well as hundreds of individual environmental consultants, home inspectors, and consumers have come to rely on their commitment to helping solve Indoor Air Quality, process control, industrial, and environmental challenges. (www.pati-air.comwww.homeaircheck.com)

About CMURC
CMURC is a nonprofit business incubator focused on advancing economic development in the community by leveraging the resources of Central Michigan University, the Mount Pleasant SmartZone and its local, regional and statewide partners to accelerate the success of entrepreneurs, growing businesses and jobs.  CMURC is a single source of contact providing physical space and essential business services that supports emerging businesses.

www.cmurc.com

For more information or to schedule an interview, contact Elissa Richmond, Marketing and Public Relations Director at 989-774-2720 or elissa.richmond@cmich.edu

The university-incubation connection: Turning research into cash

Dennis E. Powell

This article explores programs focused on the commercialization of research conducted at the schools. While this kind of incubator has been around for decades, it has constantly evolved and innovated to meet client and market needs – never more so than now. 

The ever-evolving face of university tech transfer

To the point: University incubation programs that specialize in technology transfer take many forms, with new ways of facilitating the transformation of research onto innovative businesses taking shape in new and existing programs all the time.

Featured sources:

Jamie Coughlin, new venture incubator programs director, Dartmouth College, Hanover, N.H.

John Hanak, entrepreneur in residence, Purdue Technology Centers, Indianapolis, Ind.

Greg Deason, executive director of Purdue Foundry, West Lafayette, Ind.

Carroll Turner, director, Manufacturing Development Center, Gainesville, Ga.

Keith McGreggor, director, VentureLab, Georgia Institute of Technology, Atlanta, Ga.

Jake Halliday, president and CEO, and Quinten Messbarger, vice president, Missouri Innovation 

Center, Columbia, Mo.

John D. Weete, executive director, Auburn Business Incubator, Auburn, Ala.

When the Bayh-Dole Act became law in December 1980, it opened the potential for a broad new revenue stream for U.S. research universities. That legislation ceded the intellectual property developed in federal-funded research to the institutions where the research took place, allowing small businesses or nonprofit organizations, including universities, to retain title to the inventions. Formulated to be an economic stimulant, the act, officially known as the Patent and Trademark Law Amendment Act, proved to be just that. In its first 30 years it resulted in the formation of more than 5,000 companies. Many or all of them licensed technology from the universities that now claimed rights to the newly developed technologies. Countless more existing companies also licensed the new technology to add to their existing product lines and methods or to form spinoffs to capitalize on the new research.

The new law spurred the creation of technology transfer offices. Very quickly, though, the researchers themselves – either faculty or research associates – sought to have a part in the commercialization of their work, and the potential for profit from it. Just as quickly, they discovered that the advantage they enjoyed in knowledge of the technology they had developed was surpassed by the disadvantage of not being experienced entrepreneurs. Fortunately, university-based business incubators also emerged in the 1980s, and they found a ready clientele in businesses arising from technology developed at their institutions. 
Initially, the chief philosophical concern for incubator managers was whether to try to teach scientists and engineers how to be entrepreneurs, or to match the researchers with the right people to handle the business side of a new company. More than 30 years later, incubator managers still differ in their approach to this matter.

Integration of functions is an important trend

Over time, technology transfer incubation has become a specialized field in the industry, growing and changing as rapidly as the discoveries commercialized there. The industry has developed a more seamless flow between technology transfer offices and business incubation programs. Dartmouth College in Hanover, N.H., recently located all the entrepreneur-focused programs – tech transfer, the Dartmouth Regional Technology Center incubator, student entrepreneurship groups, and others under one umbrella, the Office of Entrepreneurship and Technology Transfer.

“The big commitment is to no longer have intellectual property and licensing held separate from incubation,” said Jamie Coughlin, who last year left abi Innovation Hub in Manchester, N.H., to become new venture incubator programs director at Dartmouth. “The goal is to blend the two in a very official way. What a lot of colleges and universities are sometimes faced with is a fragmentation of activity across the board.” While the various functions – technology transfer, incubator and preincubation programs – are part of one structure, they retain their discrete functions in many respects. For instance, existing companies not otherwise involved in the school may continue to license Dartmouth research.

At the Life Sciences Business Incubator at Monsanto Place in Columbia, Mo., the integration of research and business creation takes a slightly different approach, according to Jake Halliday, president and CEO of Missouri Innovation Center, the nonprofit corporation that runs the University of Missouri incubator. 

The tech transfer office is located in the incubator, and its staff works closely with MIC staff and clients to develop start-up companies. “If the pathway is new venture creation, they’re directed right to us, Halliday said. “If it’s licensing, we’re not in the loop.” 

Licensing agreements are managed by the university’s Office of Technology Management and Industrial Relations, which has offices at each of the colleges on campus – law, business, engineering, veterinary medicine, college of agriculture, medical school – with its main office located at the incubator. Clients at the incubator do not have to be involved with the university, but university tech transfer enterprises are given preference when space becomes available there.

The integration of technology transfer with new business creation is enhanced at the Missouri program by the incorporation of students from the university’s business and law schools, noted Halliday. The incubator offers a six-class course on launching and financing high-growth ventures for graduate researchers interested in business, and the most promising students are offered additional mentoring from incubator staff. MBA candidates from the university’s business school work with prospective incubator clients, and its law school plans to make permanent this fall a program tried last year, a pro-bono legal clinic for entrepreneurs at the incubator.

“We’re not allowing the incubator to be perceived as something tangential to the university,” said Quinten Messbarger, vice president of Missouri Innovation Center, “but completely spliced in to the teaching mission.” At universities, those who discover it don’t necessarily own it. It comes as a surprise to some researchers, and is known already by the others, that absent specific policies to the contrary, intellectual property developed by university faculty belongs not to the researcher but to the university, and must be licensed – even by the researcher – if it is to be commercialized. This is an issue that comes up frequently at incubators specializing in technology transfer.

“We have an initial meeting with researchers wanting to start a company to determine where they’re at in disclosure to the office of technology transfer,” explained John Hanak, entrepreneur in residence, Purdue Technology Centers, Indianapolis, Ind., and venture funding relations officer at Purdue Foundry, an early-stage program at the university. “It’s important that they have an understanding of where they’re at with their IP.” At Purdue, as elsewhere, scientists are obligated to report breakthroughs that might be commercialized to the tech transfer office. In some but not all cases, the institution will file for patent protection of the discovery.

“The faculty member then decides what to do after they’ve made their disclosure and the university has made its decision whether or not to file for a patent,” added Greg Deason, Purdue Foundry’s executive director. Students, some of whom are Foundry clients “own their own intellectual property. And faculty IP is given back if the university doesn’t file for a patent in a six-month period. Otherwise, the Office of Technology Commercialization would license it back to the company that the faculty member is involved in.”

At the Manufacturing Development Center, affiliated with Lanier Technical College in Gainesville, Ga., but home to clients from other institutions, Director Carroll Turner takes a negotiated approach to university-owned IP.

“It’s been my experience that it depends on the product and the university whether the products are owned or partially owned by the university,” Turner said. “And they’re generally open for negotiation. The medical center we work with, Northeast Georgia Medical Center, very much encourages research and development among its physicians, and they’re just happy to facilitate an advancement.” Though a mixed-use program, Turner’s incubator specializes in companies developing and marketing medical equipment and devices. “I’ve found the schools we work with to be reasonable, and the direction seems toward less control of IP rather than more.”

At Purdue Foundry as well, licensing fees are often negotiated with the school, but not always. “We’ve added an express license that would let faculty accept predesigned terms,” Deason said. “And the researcher gets a third of the royalties the school receives through licensing, but I’ve yet to meet the researcher motivated by that fact.”

“There are a lot of times we wish we had a standard license agreement and royalty,” said Missouri’s Messbarger. “Here, every deal is negotiated separately.” Incubator staff conducts the negotiations. “We’re an advocate for the entrepreneur. We’re always on the entrepreneur’s side.” Learning business fundamentals is difficult enough for someone who is fresh out of the laboratory; it would be a lot to ask the researcher to master the fine points of royalty negotiation, such as deferment until capital is obtained. And the university is pro-commercialization, too. “I can think of one recent case where the university gave terms more generous than we’d asked for.”

Who should run the resulting businesses?

There is no problem finding ideas at Georgia Institute of Technology’s VentureLab in Atlanta. “Everybody at Georgia Tech has invented something,” laughed Keith McGreggor, VentureLab’s director. “We see a new invention or idea about once a day.” Nor is there an issue of rights. “It’s almost always the property of Georgia Tech itself.”

VentureLab’s approach is fast-paced and intense, not unlike a typical accelerator in some respects. “Here, a necessary condition for business is one paying customer,” McGreggor said. “We want to systematically challenge our idea of how the world might be and see how the world really is. When considering business ideas, we form a temporary team of people including the person with the idea, a mentor or student – anyone who might turn over enough rocks to help get the business together, with this goal: discover the customer.”

Technology transfer incubators differ to some extent from mixed-use programs in ways other than their clients, and none more so than VentureLab. “We do not believe in business plans,” said McGreggor. 

“We believe in business planning instead of the document, which is just guesses.” Nor does the source of the idea always end up founding the company – even if a company results from the idea. “Successful companies generally don’t have professors at their helm. They’re good at coming up with ideas. And almost universally, the professors don’t want to go be at a start-up, and certainly not a CEO, because they’re tenured professors at Georgia Tech.” As a result, VentureLab helps fashion a company from IP, founding capital, a founding team and engineers. “Most young companies can’t do it all and must partner in some way. We want to see that the necessary partners are on board.

Then the companies are given a month to figure out “customer risk,” said McGreggor. “Once they’ve gone through that month, they’ve probably talked to 50 or 60 people out in the wild. They’re habituated to this ‘discover the customer’ mentality. If they have discovered a product-market fit, we begin only then to address the technology involved.” The process is fast, he said. “If it’s computer science, it can go very rapidly. A biomedical device will take years. On average, from the time they walk to the door to the time they have a company is 60 to 70 weeks.”

Manufacturing Development Center’s Turner, whose program deals largely with medical devices that by their nature involve years of development and testing before they can achieve regulatory approval, tends toward helping researchers become entrepreneurs. “You teach them basic business concepts that they can grasp right out of the box; then as you work with them over time, they understand more advanced concepts,” he explained. “We sit down and talk about whether there is truly a market. If it does what the inventor says it will do every time, then we ask them to find out how many procedures are done that would make use of the proposed product. Then we each do a little market survey, find out what a market could be and what is going to be the net cost to develop it. They can find out some things we can’t find, and we can help them find out some things they can’t get.”

Because his incubator is involved with several schools, there is help available. “We’re the lab for some of the MBA programs, so MBA candidates can do a capstone project to meet some of these needs of live companies in the incubator.”

Programs provide special services to clients 

Matchmaking among scientists and entrepreneurs is an approach taken, too, at Auburn Business Incubator in Auburn, Ala. As with the University of Missouri’s incubator, Auburn Business Incubator is operated by a separate nonprofit entity, the Auburn Research and Technology Foundation. The incubator is located in the foundation’s Auburn Research Park, on the Auburn University campus. 

While the university has a technology transfer office, it is only in recent years that it turned to the creation of businesses derived from research done at the school. “A gaping hole was that we didn’t have an incubator,” said John Weete, executive director. He is also assistant vice president for Tech Transfer and Commercialization at Auburn. “Our 44,400-square-foot incubator space is now open and full, and we have a couple of graduates already.” The foundation is raising money for a new building of between 40,000 and 50,000 square feet. Weete helps researchers who want to found a company find business people to handle that side of things.

Weete points to other support services. The local U.S. Small Business Development Center is located in Auburn’s incubator, and Auburn University has a close relationship with NASA’s Marshall Space Flight Center in Huntsville, Ala. There is a new medical school on campus that features one of the most advanced magnetic-resonance imaging centers in the country. The U.S. Department of Agriculture has a research office on the Auburn campus as well. The cross-pollination is considerable, he said.

The other programs whose executives were interviewed, too, have close ties with academic, government and private investment. Among Auburn’s first graduates is a nonprofit company coordinating angel investment networks throughout the state. The University of Missouri incubator has an angel group with an office onsite and working relationships with other angel groups. The incubator in Gainesville, Ga., is associated with Brenau University Department of Nursing, the University of Georgia Small Business Development Center and Georgia Tech Enterprise Innovation Institute, as well as its primary involvement with Lanier Technical College. All have networks enabling client companies to find the resources they need.

Clearly, there is no one path to effective technology incubation. But any scientist seeking to turn basic science into applied science is likely to find one that meets his or her needs – and the field is growing and changing so rapidly that if just the right program isn’t there today, it probably will be tomorrow.

Reprinted with permission from the NBIA Newsletter, Jan/Feb 2014, pp. 4-7.
MBIA Template 1 - April 2014