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Hatching Ideas

Business incubators foster future economy

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Less than nine months ago, Jeff Russell donned cap and gown--literally--and stood before a smiling crowd as his company, Easy Office, graduated from the WaterCooler, a business accelerator in downtown Boise.

Easy Office, which helps nonprofits manage their finances, moved to Boise's Mallard Building, near the corner of River and 11th streets, in August 2009 with about three employees and a few dozen clients. Since then, it has grown to a staff of 25 serving 115 clients and is already looking to expand into a second office.

It's the kind of success story that has been increasingly rare in a recession-strangled economy, where startups have plenty of ideas but a dearth of ready cash. Russell, who serves as Easy Office's chief operating officer, said the company's business plan was solid to begin with, but the initial support it received at the WaterCooler was instrumental.

"The real value for me was that there were always investors and Kickstand members just milling around," Russell said. "If we'd been out in some lonely strip mall, we wouldn't have had that kind of exposure."

The result: "We went from some dudes in a garage to being a legitimate, established business with a recognized track record," Russell said.

In hard times like these, more and more companies like Easy Office are looking to accelerators like the WaterCooler, which provide existing small businesses with office space, advice and access to investors. Incubators, like the Boise State TECenter, are also seeing more interest in their services, which take a direct, hands-on approach to building startups from the ground up.

The Boise area is adding new business support centers at a decent clip: the Ground Floor, in Meridian, opened its doors in late January; the City of Boise is nearing completion on its Green House project in downtown Boise; and MarkMonitor founders Faisal Shah and James Hepworth have launched Nebula Shift--above the Main Street Bistro at Sixth and Main streets--as a tech-centered "sandbox" focused on software research and development.

Boise State's TECenter is the granddaddy of them all. In operation for more than six years, the center has given direct support to more than 150 companies, graduated 10 and currently serves more than 30 in various stages of incubation. All told, the TECenter's 23 clients represent 140 jobs and about $10 million a year in revenue. The incubator operates as an arm of Boise State, and so is supported by a combination of client rents and fees, university money and grants from the U.S. Economic Development Agency.

TECenter director John Glerum welcomes the surge in projects like the Ground Floor, Green House and Nebula Shift.

"The more the better," he said. "Most economic development is going to come from new business creation and business expansion. It's probably one of the best forms of economic development for our city, state, country ... I think you're going to see a lot more of it."

Rick Vycital, at the Small Business Development Center in Boise, agrees. He said the upswing in accelerators and incubators reflects a growing but still nascent understanding of the impact that homegrown companies have on economic development.

According to a study from the Economic Development Agency released late last year, business incubators were found to create between 46.3 and 69.4 local jobs per $10,000 of federal investment--more than the construction of commercial structures, road and transportation projects, industrial park and community infrastructure combined.

Heightened investment in Idaho's business incubators also underscores the state's changing economy.

"Idaho has gone from an agricultural, forestry, mining-based economy to one that's technology and innovation driven, and we need to support that," Vycital said.

The Ground Floor, run by the Meridian Development Corp., intends to take advantage of that trend but will be less an incubator and more of a downtown "hub for new business types," said Shaun Wardle, MDC administrator.

"One of the things that's been in our Urban Renewal Plan since its inception was job creation, with a specific emphasis on small businesses," Wardle said. "We hadn't seen as many as we'd like, and were hearing that there was a lack of identity--a place to identify with in downtown Meridian."

Located in a 100-year-old green-retrofitted building at 136 E. Idaho St. in Meridian, the Ground Floor will be supported by a combination of MDC funds and client rents and fees. Project manager Jill Truax said three tenants have taken up residence so far.

She said once the Ground Floor has 30 people--not companies--in the 3,000-square-foot space, the MDC will think about opening another location.

"The reason it was started was to have several different startup businesses come in and use it as a network-friendly environment and try to build up Meridian," she said. "Hopefully they'll stay in Meridian."

The City of Boise's Green House will be a little different. Cece Gassner, economic development adviser to Mayor Dave Bieter, said the project is focused on "the wrap around incubator experience."

Tenants at the Green House should already be established as businesses, but young enough that they need help with basics like human resources, e-commerce, legal and marketing.

"It's really more that they're at the life stage of the company where they're past being an idea but they really need help looking at all areas of the business," Gassner said.

The Green House will operate at a break-even level, with facilities maintained by EDA grants, rents and fees, city funds and financial support from an as-yet-unannounced private sector partner. The Capital City Development Corp. will also be using federal grant dollars to bring in speakers and host seminars.

"We have to take a much more active role to make sure we're supporting the entrepreneurs in our community," Gassner said. "It's no longer the public sector trying to do these things or one individual trying to do these things--it's communities coming together."

Nebula Shift is aiming to meet a long-unfilled need in the Treasure Valley's business community: software research and development.

"We've talked for a long time about the need for a sandbox--the idea being to give people the ability to go in, build code, test code and see how things work," said Rick Ritter, president and CEO of Idaho TechConnect. "That's what they've got going on over there and there isn't really anybody focused on that."

Shah said that unlike the Green House, WaterCooler and the Ground Floor, Nebula Shift will be focused on product development and funding, rather than business acceleration or incubation.

"Some of these incubators are more dedicated to helping companies with office space--we're more of a research lab," Shah said. "We're almost at the front-end of all of that. There's no competition with any other incubators. They're looking for already viable companies. We're looking to help them start up and get going."

Shah and Hepworth know something about growing a company. When the pair launched the software firm MarkMonitor 10 years ago, it was with two employees. It has since grown to more than 220 workers, does business with more than half the Fortune 100 and has offices in North America and Europe. In the meantime, the pair also founded First To File Technologies, which delivers patent documents on demand.

"We thought of going to Silicon Valley [with Nebula Shift], but the talent here was better. So why not actually develop everything here in Boise?" Shah said. "With our expertise, with funding, I think companies can make a good start here."

Hepworth said much of that talent has been spun off from tech giants like Micron and Hewlett-Packard. Many of those displaced workers have a high level of expertise and love the Boise area, but need somewhere to develop their ideas.

"If you're displaced and you're a software company and you need a place to be for three months, you can literally just come [to Nebula Shift] and do it," Hepworth said.

Nebula Shift is also unique in that it will offer up to $16,000 in startup capital to as many as five companies twice a year. In exchange for the investment, recipient businesses would kick back a percentage of their future earnings to keep the fund going.

The goal is to establish new software firms that will have a vested interest in staying in the valley.

"I can't think of what a drawback would be to starting a business in an incubator," said Shah, who added that MarkMonitor itself was launched in an incubator.

"It allows you resources, it allows you networks, it provides you with the education you need to succeed as a new company," he said.