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The birth of a notion

College incubator program aids tech business creation

College incubator program aids tech business creation

July 07, 2002|by JULIE E. GREENE

Starting a business can be hard enough. Imagine needing $250,000 worth of equipment.

Instead of immediately investing in such expensive equipment, the original partners of DVF Corp. found a better solution. They rented the equipment on an hourly basis.

The savings that resulted was able to accumulate was the biggest advantage of starting the contract engineering and manufacturing firm at Hagerstown Community College's Technical Innovation Center, DVF President Jay Wolfe said.

DVF Corp. is just one of the success stories to emerge from the center, an incubator program the college established in 1994 to try to develop the homegrown technology businesses, Technical Innovation Center Manager Chris Marschner said.

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A startup business in the incubator program can get below-market value rent that includes all utilities except the phone bill, assistance with marketing and business plans and access to equipment that costs $80,000 to $100,000 for $32 an hour, Marschner said.

HCC started the incubator program, with the assistance of federal money, to help improve the wage base in Washington County as part of its economic development mission, Marschner said. The theory was that once the companies were on solid footing they would move out of the center and into the community, growing and offering technology jobs that tend to have higher pay.

Ideally, the businesses that graduate from the center would be hiring skilled technical people for $35,000 to $40,000 a year. The 1999 per capita income in Washington County was $24,162, Marschner said.

However, many of the companies that grew strong enough to leave the incubator program have moved to larger markets such as New York or the Washington area, Marschner said. They do so well they capture the attention of larger companies that want to fold them in to get their revenue, he said.

Companies leave for other reasons. Technical Ceramic Products moved to Frederick, Md., to be closer to home, Marschner said.

Three companies that succeeded and stayed in Washington County were DVF, Tender Loving Home Care in Hancock and Leecom Inc., Marschner said.

Curtis Bachtell moved his Leecom Inc. custom database software firm into a Funkstown building last October after the firm spent two years at the center. Bachtell was at the center for five years with another company when he decided to resurrect Leecom.

"What the incubator did for me was I was able to get instant marketing on the state level and the national level," Bachtell said.

Bachtell still has a number of local customers, but his clientele extends to North Dakota, Tennessee and Arkansas. The larger contracts have given him greater exposure and a bigger market share.

The center enabled Bachtell to fine-tune his business as he used its business resources for marketing, which he considered his weakness.

Bachtell and Wolfe said they got assistance from Marschner or the in-house Small Business Development Center with business plans. The businesses at the center also helped each other with projects or steering leads to a center colleague, they said.

DVF took advantage of the large, expensive equipment the center provides for startup companies. By providing access to the equipment and managing the building, the incubator program is letting startup companies focus their energies on getting contracts and developing new products, Marschner said.

When DVF started in 1995 it had three employees and 15 or 16 projects or contracts its first year, Wolfe said.

By the time DVF moved to the Hagerstown Industrial Park in January, it had 11 full-time employees, four or five part-time employees and several contract employees, Wolfe said.

The company already has 27 projects this year, he said.

"I would recommend it to anyone who is doing a shoestring startup in a technology business," Wolfe said.

Without the incubator program, Wolfe said he believes DVF would still be a growing company, but would be far more strapped for resources.

Within six months of moving into the center, Machining Dynamics Inc. will be able to buy one of the large pieces of equipment it uses on an hourly basis at the center, Vice President David Koleber said.

Instead of spending more than $100,000 for the automated equipment right away, they were able to buy $20,000 worth of manual equipment and leased use of a $50,000 automated machine at the center, Koleber said.

The manufacturer of metal products for the microwave and telecommunications industry is ahead of its business plan that calls for it to move out of the center in three years, Koleber said.

Another way startup businesses in the incubator program can save money is on rent.

The center usually offers startup businesses rent at 80 percent of the prevailing market price for comparable space, Marschner said. Those rates are increased gradually to the market price as the company grows.

Companies spend an average of three years at the center before they are stable enough to move out and survive on their own, Marschner said. An Internet company doesn't need long to get on its feet, so typically it stays 18 months, whereas a biotechnology firm may stay seven years, he said.

To apply for the incubator program, entrepreneurs with technology businesses or manufacturing businesses with a strong technology element need to present a basic business plan, Marschner said.

They need to demonstrate they have enough startup capital to cover their costs and be willing to be coached, Marschner said.

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