TECHNOCATION - Incubators: A fundamental foundation for start-ups

February 20, 2002
By ELLEN WIGGINS,
Special to the Daily Record

A 17-year-old high school junior, Akron, Ohio's LeBron James, recently made the cover of Sports Illustrated. The young basketball phenom is being trumpeted as a potential NBA draft pick by scouts and coaches, with some even decrying the league's requirement that athletes must graduate from high school before declaring for the draft.

But, in sports and business, potential is short-lived without solid fundamentals. If anyone needs a reminder of that, just pay a quick visit to The Museum of e-Failure (http://www.disobey.com/ghostsites), an online archive of defunct dot-coms. I also recommend renting the excellent documentary film “Startup.com” that chronicles the fast rise and dizzying fall of two childhood friends and their fledgling Internet company.

In sports, the pitfalls of raw potential are personified by last year's over-hyped, high-school-to-NBA bust, Kwame Brown. Brown is currently riding the pine at a Washington Wizards' game near you and averaging an underwhelming three points per game.

Meanwhile, two rookies who built solid fundamentals by staying in excellent college programs for four years, Shane Battier and Brendan Haywood, were recently NBA rookies of the month for their respective conferences, despite being drafted below Brown. The post dot-com economy and the NBA are both harsh, unforgiving environments that offer a rude awakening to inexperienced youngsters lacking the fundamentals of their profession.

Despite a slow economy, business incubators continue to see a flow of excited new entrepreneurs wanting to turn their ideas into companies. Although technology has not been the be-all-end-all it was prophesied as in the giddy, go-go ‘90s, the desire and opportunities for entrepreneurship are still strong in the Baltimore-Washington business and academic communities. But in today's economic reality, only firms with the right combination of innovative technology and excellent business fundamentals have a chance to succeed.

The UMBC Technology Center and other regional tech incubator programs are not searching for the next LeBron James of the business world. Instead, incubators are seeking firms that combine potential with a strong work ethic that can be streamlined into a stable, growing and promising business.

The process is a lot like building a good college basketball team, and incubator staffers are like coaches. They scout their region to identify and recruit raw potential. Once they find a young firm that could be a diamond in the rough, they work with the company to refine its technology into a marketable product. They then help entrepreneurs with the most important step, developing fundamentals.

At the UMBC Technology Center, we are fortunate to have a great business advisory team — Patty Rippin and Dan Roche. Rippin, director of business advisory services at the Center, draws on her 15 years of experience in commercial banking with organizations such as the Treasury Management Association and the Maryland Department of Business and Economic Development. She also identifies well with entrepreneurs, having run her own business, Proactive Results, for the past two years. Roche, the Venable Entrepreneur in Residence at UMBC, is a startup and venture capital guru who is now working on starting his fourth successful firm.

Both Roche and Rippin bring a priceless added value to their incubator and emerging tech companies — the voice of experience. I'm happy to announce that Dan and Patty will be regularly joining us at Technocation to bring their expert advice to a wider audience of current and future entrepreneurs. Think of them as skilled assistant coaches helping to teach our region's business rookies how to improve their game.

Introducing Patty Rippin

Most new business ventures that I work with are byproducts of the Internet era, wireless communications and promising biotechnology research and development. Typically, these entrepreneurs are equipped with a proprietary technology but have very limited resources to launch their product or service. They often launch a company with few employees and without a ready-made product or service.

However, they have vision, passion, and the belief that they can be successful by acquiring the necessary resources to commercialize their technology, capture significant market share, and establish their company as an innovator and contender in their field.

Given these limited resources, entrepreneurs are wise to seek an incubator to help them launch their business. A good incubator serves as a sounding board to the start-up to ensure that they stay focused on R&D and understand the value proposition of their business model.

Today's entrepreneurs, typically former scientists or computer engineers, value the fact that a well-established incubator program offers a flexible leasing arrangement, collaboration with university faculty, and invaluable business resources that would not be available to them otherwise. Entrepreneurs view an incubator as a nourishing environment to cultivate their core competencies and garner the support from the management team and business advisors from various professions.

Incubators are also similar to sports in that it's important to hold start-up companies accountable. Young firms must prove that they are developing a sound road map to manage the development and growth of their business.

A big part of my job is to challenge companies, although in a non-threatening manner, to present the tough questions venture capitalists, law firms, and other vendors are bound to present in the future. In fact, two UMBC firms, Accelics and Epitaxial Technologies, recently made the cut to present at the DC Early Stage Capital Forum, a highly competitive opportunity for local startups to pitch their companies to area VC firms.

These tests are like drills in a basketball practice. They force entrepreneurs to focus on fundamental business skills such as accounting, finance, marketing research/strategy, distribution, and human resources. Incubator management team and business advisors work with entrepreneurs to evaluate a firm's strengths and weaknesses.

Incubators aren't for all entrepreneurs. Firms with strong management teams and adequate resources already in place won't benefit as much as traditional startups. Likewise, an incubator may not be the right place for entrepreneurs who aren't comfortable openly discussing their progress with the incubator team.

Other companies find incubators intimidating when they cannot demonstrate adequate capital or a sound business plan. Before committing to an incubator program, entrepreneurs should know that they will be held accountable to meet their milestones or be asked to leave the program.

In the next several articles, the UMBC Technology Center is proud to highlight some specific incubator companies that have faced a particular challenge and resolved it successfully. These real-life, entrepreneurial case studies will offer advice and encouragement for anyone interested in the realities of starting a company, raising capital, marketing, human resources, and other key areas of growing a business.