A different growth model

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In Henrietta, Innovative Solutions has a 19,000-square-foot facility that features a tech launchpad and innovation lab, where community members can collaborate and exchange ideas.

In downtown Rochester, Envative is setting up common work space and business support for local technologists and startups.

Like others who operate business incubators here, Innovative Solutions CEO Justin Copie and Envative partner Craig Lamb share a strong desire to keep talent in the Rochester area by nurturing startups. Yet while other local incubators are nonprofits, Innovative Solutions, which provides technology services, and Envative, a web and mobile developer, are not.

And there’s another difference: Both technology company leaders steer clear of the term incubator.

“I think people have a (traditional) definition about what incubator means. We’re not following that by any stretch of the imagination,” says Lamb, who has mulled the name “cooperative.”

Innovative Solutions’ CEO Copie tells people his information technology company is an “excubator,” or a space that accepts companies after their time at an incubator, if that’s the case, and before they enter the real world and build sustainable culture.

What’s in a name?

Broadly speaking, a business incubator is a space that assists the growth of startups and other young companies by offering services such as connections to customers, capital, training and offices.

Whatever the nomenclature, from incubators to accelerators and coworking spaces, Rochester has no shortage of initiatives to foster entrepreneurial ventures. The incubator map here includes NextCorps (formerly High Tech Rochester), RIT Venture Creations, UR Ventures, the Entrepreneurs Network, the Center for Urban Entrepreneurship and the Commissary: the Downtown Kitchen Incubator. The recently opened Magic Spell Studios at Rochester Institute of Technology also announced its intent to grow fledgling firms.

The step taken by Innovative Solutions and Envative stands out in Rochester, but elsewhere incubators created and run by for-profit businesses have proven successful.

“In general, competition is a good thing,” says Scott Catlin, associate vice president of technology ventures at the University of Rochester. “If they can do it better than other folks, if they are providing something that doesn’t exist in a tailored or focused way, then I can’t think of a downside to it.”

Says Copie: “At the end of the day it’s not about who’s taking startups from where. We’ve got to keep startups here in Rochester. … I am so frustrated with watching startups leave the area.”

Riverwood campus

Innovative Solutions recently completed its expansion in Henrietta. The more than $2.1 million project, announced in April, involved the repurposing of a former Kodak campus on East River Road.

Innovative Solutions recently completed its expansion in Henrietta.

“My whole vision with the innovation lab is that anybody, even our competitors, can come in and experiment with technology, real time, face to face,” says Copie. The intent of the lab is similar to those found in tech hubs like Silicon Valley. “It will feel like you’re in a Microsoft or Apple store on steroids.”

Its tech startup launchpad is designed to support up to a dozen startups with a focus on market acceleration.

“They see it as an opportunity to pick their product or service, do things what they wouldn’t normally do, potentially within our client base that’s looking for technology solutions,” Copie notes. “We’re there to help bridge and integrate whatever solution there maybe to a client’s needs, so it’s a really symbiotic relationship.”

So far, Innovative Solutions has not conducted any marketing or outreach for its launchpad. Copie says he waits for companies to contact him. When vetting startups, Copie says his first question is: “When is your date?”

“‘I don’t care what you do, I don’t care who you serve; what is the date that you are going all in your business?’ It’s the very first question I ask all. And believe it or not, it’s a huge, huge qualifier,” he observes. “What I find is (many) entrepreneurs who are running startups, they are not all in their business yet. We know that if we’re going to work with somebody, they’ve got to be all in and they’ve got to be ready to grow.”

It’s only after that question is answered that Copie explores the product and strategy of the business.

“We look for anybody in tech who has an interesting piece of (intellectual property) that they’re trying to monetize … and we honestly just look to see if they’re good people,” he says. “If they’re a good person and they want to go kill it and they’ve got really high ambitions and they are willing to work hard at their business, I invite them in.”

So far, Innovative Solutions has four startups on board:

  • Arkatecht, a maker of digital tools to assist women and men with integrative planning for family and careers to more effectively plan their lives;
  • Quantum Loop Solutions, which builds winery intelligence by automating winery commerce;
  • Voice+Code, which optimizes the customer digital experience; and
  • Boonle, whose website links U.S. college students with design projects.

The startups will be housed free at Innovative Solutions for 12 to 18 months.

“If there’s an opportunity for us to leverage their IP to help one of our customers get to market quicker, that’s a win-win-win all the way around and it creates opportunities for them they wouldn’t normally have,” Copie says. “And that’s where the magic comes into play.”

He adds: “I wanted to create something where we were completely agnostic. … I didn’t want the startups to be a piece of us, I didn’t want control over them. I want them to live.”

In its new space, Innovative Solutions can accommodate new ventures with up to six employees, though businesses with three people would be optimal, he says.

Downtown attraction

At Envative, development of the startup space is in the early stages. Lamb has a couple of businesses in mind.

“They’re either struggling with networking or they don’t have a large client base, but they have some really good ideas,” he says. “We might ask about a couple of their previous projects or what their aspirations are.

“You never know when that next opportunity is going to show; there could be another D4 or Pictometry or whatever. We want to make sure we can support that.”

The Envative Bot

Lamb and Envative partner David Mastrella decided to support young businesses after successful experiences contracting out some work. Though Envative has a strong team, the company’s work on web and mobile development sometimes requires a combination of expertise in disciplines like user interface and experience. So, the company relies on external help from time to time.

“There’s a lot of talented people we’ve met along the way,” Lamb says.

Mastrella and Lamb figured if they could help remove obstacles like business development, project management and market analysis, it could give young businesses a clearer path to success.

“There’s really smart people in Rochester,” Lamb says, “and what’ll happen is that invariably they’ll have a great idea that might be a little bit early for the Rochester market, and they don’t have any way (to) explore how they can implement their new idea or technology or whatever it might be. We just thought it would be a good idea to create that kind of space (where they can).”

Envative announced its planned move to an undisclosed building on Main Street downtown in July. The deal, which is taking longer than expected to finalize, is likely to close next month.

By offering inexpensive common work space and technical support, Envative hopes to use a portion of the 13,000-square-foot office to encourage cooperative enterprise among local technologists and startups. It’s also Envative’s way of supporting downtown Rochester.

“We’re talking about limiting terms to a year … to make sure that we’re working together as a vibe, that it’s not complacency, that we’re working together on growth,” Lamb says. “Ultimately, it’s to give those people an opportunity (and then) to make room for the next guy.”

Both Innovative Solutions and Envative received state and local tax credits to facilitate their expansions. New and young companies are the primary source of job creation in the American economy. Not only that, these firms also contribute to economic dynamism by injecting competition into markets and spurring innovation, Ewing Marion Kauffman Foundation research shows.

Source: Kauffman Foundation

“If we really want to grow our economy, all the other ways to attract new companies are great, but the (biggest boost) comes from starting or growing more of our own,” says James Senall, president of NextCorps. “So as a community, we should be saying that’s a proven method to get the most jobs long term (and) all of us should be focused on how we do that better.”

The private model

A growing number of private companies like Envative and Innovative Solutions want to incubate startups in their facilities, Senall notes. He thinks various factors are fueling the trend including surplus space, a desire to give back and get a chance to get a sneak peek at new technologies.

“But in these situations, the private company is typically not providing a suite of services—coaching/mentoring from a broad network of mentors, the rigor or regular check-in meetings, access to things like Amazon web credits or other benefits that incubators have access to,” Senall says. “That said, if the resources provided can help a startup, the more the merrier as far as growing our startup sector.

“The only caveat is that we do want to (build) critical mass; small, fragmented efforts can detract from this.”

Some large companies have explored this model. One with a local connection is Johnson & Johnson, which houses Clerio Vision at its JLabs location in Toronto.

Spun off from UR, Clerio has developed laser-induced refractive index correction technology. LIRIC aims to improve vision correction, overcoming safety and performance issues with existing offerings such as contact lenses and refractive surgery.

“From our perspective being in the ophthalmology field, we thought it to be a good match to join JLabs,” says Mikael Totterman, CEO of Clerio.

Beyond the company’s value proposition and links to ophthalmology, the short drive to Toronto made it a sweeter deal.

Started five years ago and now with 13 locations worldwide, JLabs positions itself as a life sciences incubator. It has more than 450 companies in its ecosystem, up 44 percent from last year, that have secured $11 billion-plus in financing. Two-thirds of the firms operate in the pharmaceutical industry.

Getting into JLabs isn’t an easy process, Totterman says. But it was worth the effort: Clerio now has access to the J&J corporate organization for input on clinical and regulatory issues, among other benefits.

He says Clerio gets the best of Johnson & Johnson for help in these areas. JLabs also runs events, offering its companies access to venture capitalists and experts from tech hubs.

Totterman thinks Envative and Innovative Solutions are on the right track.

“It is definitely something that requires research and focus,” he says. “There is a lot of value for companies trying it out.”

Setting standards

Incubators nationwide tout the number of companies they’ve helped. But do incubated firms outperform other startups? The Kauffman Foundation says there isn’t enough data to know for sure.

NextCorps is likely Rochester’s most significant effort in growing companies. It has worked with more than 700 startups since 2010 via its incubator, accelerator, and other mentoring and training programs in Upstate New York. It does survey incubator graduates, but it’s not always easy, Senall says, especially if management changes occur.

Currently, NextCorps has 43 members, of which 25 are residents. The second Luminate NY cohort will join the group in January, boosting that number to 53. NextCorps recently persuaded a Silicon Valley startup to relocate here. The organization charges a membership fee for access to programs and services, and rent for space. It doesn’t invest in its clients, but some of accelerator programs provide cash in exchange for equity, Senall says.

The companies go through an annual review, he says, and if their idea isn’t gaining traction NextCorps works on counseling them out of the incubator in a “friendly way.”

UR’s Catlin believes tracking success and setting standards are essential to cultivating businesses.

“I’m not necessarily one who believes that we should have a whole bunch of startups whether they’re good, bad or indifferent and just keep them all in the garden, as opposed to a healthy garden (where) you pull the weeds,” he says.

He cautions against using numbers alone and suggests a focus on quality with an eye for spotting the right types of companies.

“However you do it, try to bring the right people to the right companies to do the right things,” Catlin says. “You have to set a standard. I wouldn’t take everybody who walks through the door unless you think (all) who walk through the door are rock stars. If that’s the case, then you’re really lucky.”

Innovative Solutions and Envative say Rochester’s young business owners yearn for real-world experience where they can rub elbows with employees of growing firms. In turn, these staffers hope to be energized by startup fervor.

“We’re talking about real stuff,” Lamb says. “We’ll be talking about a real project (or) helping with a real connection or helping with real networking or show them how our sales cycle goes, or how we do some of our proposals for different types of things. All this stuff that people are not going to know until someone shows them.”

Says Copie: “It’s about all of us thinking bigger and raising the bar. It’s not about any one entity; it’s about us all coming together.”

 

 

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