he term “incubator” has lost favor in recent years, due in part to its association with the explosion and implosion of multitudinous Internet start-ups during the late 1990s and early 2000s.

Much of the reason for this fall from grace is a misperception about the proper function of incubators, says Dick Koehn, a pioneer of the model in New York state and Utah during the 1980s and 1990s. “People think of an incubator as a facility, a place where you can set up shop,” says Koehn, who founded the nation’s first life sciences incubator in 1985 at SUNY Stony Brook and helped develop the innovative Research Park at the University of Utah. “But really, it’s much more a program than a place. Young companies need all kinds of support—from facilities to advice and networking—and a good incubator can provide things you can’t find in a lot of other places.”

“It’s not a new idea, but in today’s economy the business incubation model has taken on new meaning,” says Eric Mott, VP of business development for Stellar Technologies, an Idaho-based technology-focused investment holding company founded in 1999. “It now offers management guidance, expert financial and legal and HR services and, in some cases, physical space—in our case, in exchange for an equity position in a growing young firm.”

The current incubator model can offer entrepreneurs a measure of financial savings and support during the crucial start-up stage in which they are most vulnerable.

The National Business Incubation Association (NBIA) reports that there are approximately 1,000 business incubator companies in North American today, up from only 12 in 1980. Thirty-seven percent of these companies, including Stellar, focus on technology businesses.

NBIA’s research indicates that since 1980, North American companies that have grown up through the incubation model have created more than 500,000 direct jobs. There is also an economic multiplier effect: for every 100 jobs created by an incubator’s company, approximately 50 more jobs are created in the community that company serves.

What’s in a Name? Incubators, Accelerators and Venture Centers

A number of Mountain West organizations that provide support to young companies prefer the name “accelerator” to “incubator,” both because they believe it is more descriptive of the services they perform and because of the baggage they perceive the incubator name carries.

“In many cases, incubators have come to be perceived as ‘EEPs’—Entrepreneurial Entitlement Programs,” says Brad Bertoch, founder and CEO of the Wayne Brown Institute (WBI), a Utah-based non-profit venture accelerator that helps prepare companies to obtain investment capital.

The problem with traditional incubators? According to Bertoch, “Too often, the focus has been on what entrepreneurs might want—coddling and adulation, free or heavily discounted space, office and administrative support—rather than what they need—a realistic knowledge of what it takes to build a solid company.”

WBI provides entrepreneurial assessments and mentoring services through its network of investors and other professionals throughout the U.S. The organization also holds a series of annual venture conferences in Utah, New York, Alabama and Hawaii in which entrepreneurs present their business plans to venture capitalists and angel investors. Since WBI was founded in 1983, its alumni companies have raised in excess of $1.1 billion and been involved in numerous IPOs and acquisitions.

Another Utah-based technology accelerator, Technology to Market (T2M), focuses on providing educational and networking opportunities for companies ranging from start-ups to established public companies. “We have found that there is a powerful educational component for companies and entrepreneurs to take the next step in their evolution,” says Dick Clayton, T2M’s founder and a partner at Holland & Hart. “Wherever they are in their development—whether they are developing a fledging idea or a mature company—they want to learn about best practices, and to network with experts and peers about trends in the marketplace, regulatory developments and other issues.”

In addition to occasional deal-flow presentations and personalized mentoring for companies and entrepreneurs, T2M holds three annual conferences: BaseCamp, designed to help start-ups and young companies in establishing their companies in the marketplace; Horizons, which explores leading market and technology trends; and Summit, which focuses on the concerns of public companies and large private companies.

“We have found that there are other resources that entrepreneurs and start-ups need a lot more than they do cheap office space,” says Randy Wilson, senior director of business operations for Technology Ventures Corporation (TVC), a New Mexico-based 501c3 corporation founded in 1993 by Lockheed Martin to commercialize technology innovations coming out of Los Alamos and Sandia National Labs and the state’s universities.

What, then, are the primary needs of these budding young companies? In the case of TVC, what their clients need is access to business knowledge and expertise. “In large part, we get entrepreneurs who are brilliant technically but have little or no business experience,” says Wilson. “They need advice and mentoring about how to wrap a viable business plan around their technology, and how to run a business.”

TVC seeks to help entrepreneurial scientists capture and commercialize the $6 billion in annual R&D budgeting is performed annually at New Mexico national labs. Through its on-staff project managers, the organization provides services for technology innovators in a number of essential functional areas: market research to help identify opportunities; management recruitment and training; marketing, finance and accounting functions; HR development, practices and policies.

In addition to its on-staff project managers, TVC has developed a network of business infrastructure professionals in New Mexico who provide advice and mentoring in accounting, insurance, banking, law and other areas free of charge to start-up companies. TVC also provides advice about funding issues and introductions to investors.

Wilson believes TVC plays an integral ongoing role in New Mexico’s technology-related economic development. Since TVC was established, the number of venture firms with a presence in New Mexico has increased from zero to 18. “We can’t take credit for all of that, but we believe we play a key role in helping create opportunities and capture value from this rich R&D environment,” says Wilson. He also credits the State of New Mexico for helping foster a fertile commercialization environment through legislation that encourages co-investment in New Mexico companies. In addition to New Mexico, TVC has a presence in California and Nevada.

“There are different models that work in different ways under different circumstances,” says Lu Cordova, CEO of CTEK, a Colorado-based “catalyst” dedicated to helping develop technology-related companies and business leaders.

CTEK is developing a network of regional “Venture Centers” located throughout the state, coordinated from a central Denver office. In addition to its Denver headquarters, the organization currently has offices in Boulder and Longmont, and is considering additional locations. Started in 1989, the organization is designed to assist as many Colorado companies as possible, at all stages of development.

“The core value is bringing a vast network of volunteer expertise and investment capital to bear on innovative companies, no matter what stage of growth,” says CEO Lu Cordova. For example, she says, CTEK is currently planning to establish a “mid-market” Venture Center to help established companies increase their profitability. CTEK has assembled a group of more than 600 volunteer advisors and mentors, in addition to its full-time staff. “Partnering with volunteers, communities and existing incubators throughout the state reduces costs and increases the impact we can have.”

A classic incubator model is limited in the impact it can have, says Lu Cordova. In contrast, “Instead of helping five or ten companies, the Venture Center model will allow us to help hundreds of companies every year to become more profitable and sustainable.” The organization offers services such as business plan review and development, investor pitch reviews, networking opportunities and introductions to potential investors, customers and strategic partners.

The CTEK Angels are the largest group of individuals in the Rocky Mountain region. “Because of the interplay between the CTEK mentoring side and the CTEK capital side, our angels fund at over three times the national average, so the synergy has great effect,” says Cordova.

According to Cordova, the greatest challenge to CTEK’s growth is convincing communities to balance their “go-it-alone pioneer spirit” with the mutual gain that can occur through collaboration. “Some communities have operated so long on their own that they feel threatened and are fearful, and so retreat to isolationism, while others are leading out in partnering. Education and communication process will be key to bringing other communities involved and increasing their vitality.”

Another Mountain West organization with ambitious plans is Montana-based TechRanch. “We are in part an incubator, but we’re a lot more,” says TechRanch executive director John O’Donnell. “We believe Montana—Bozeman in particular—is on the cusp of becoming the next hotbed of innovation and entrepreneurship in the region, and feel honored to be in the center of this development.”

O’Donnell points to a number of factors that are driving the growth of Montana as a technology industry growth area: high quality of life, including scenery and recreation; a major research university, Montana State University, “waking up to the power of technology transfer and commercialization”; convenient air transportation to other major cities in the Mountain West; and improving technology-related business infrastructure.

“TechRanch is working to bring private equity and business development expertise to the table here,” says O’Donnell. “We are a group of experienced business development people who have run start-up companies.”

The organization also launched an angel network in 2002, which now has more than 100 potential investors in its database and has invested more than $3 million since its inception. Prospective Montana start-ups also benefit from TechRanch’s network of retired executives and other professionals who provide pro bono advice.

Since it was founded in 2001, TechRanch has served at least 27 client companies that together have created more than 140 jobs, primarily technology-related. ““Our value proposition is that we’re helping launch companies that will be attractive to sophisticated early stage venture investors,” says O’Donnell. “We have a promising group of venture-backed companies here, one of which had an IPO and was one of the top-performing IPOs in the U.S. in 2004.”

There is no guarantee that the nomenclature debate will find imminent closure, but whatever they are called—incubators, accelerators, business catalysts or Venture Centers or other names—organizations such as those discussed in this article are likely to play a vital and increasing role in technology-related economic development in the Mountain West for the foreseeable future.

Contacts
CTEK: www.ctek.biz
Stellar Technologies LLC: www.stellartllc.com
Technology to Market: www.t2m.com
Technology Ventures Corporation: www.techventures.org.
TechRanch: www.techranch.org
Wayne Brown Institute: www.venturecapital.org.

Kimball Thompson is founder and senior editor of Wasatch Digital IQ, the leading technology business journal in Utah. Kimball is a frequent contributor to Digital IQ, Utah Business Magazine, and other publications on topics of venture capital, emerging businesses and technology. The online version of Digital IQ can be read at www.wasatchdigitaliq.com.