The Dayton region’s technology business incubator was awarded $450,000 in state funds for 2014, but an independent evaluation found weaknesses in The Entrepreneurs Center’s operations that must be addressed before the next funding round, state officials said.
The Entrepreneurs Center at 714 E. Monument Ave. in Dayton provides business coaching and facilities for early stage technology startups. Launched in 2000, the center’s total economic impact over the past five years has been $48 million in revenue and 170 jobs with an average salary close to $65,000, according to Ohio Third Frontier documents obtained by the Dayton Daily News.
The Third Frontier, a $2.3 billion initiative that oversees much of Ohio’s technology-based economic development efforts, took over the state’s Edison Technology Incubator Program in 2013. The shift includes new performance goals and funding metrics geared toward graduating more startups from the incubators, officials said.
Barbara Hayde, president of the Entrepreneurs Center, said she has “no argument” with the evaluation or the new direction of the state’s incubator program. “We will certainly adjust in any way that we have to in order to comply with the new rules and regulations that went into effect on Jan. 1,” she said.
The Third Frontier Incubation Program is intended to develop Ohio technology startups into self-sustaining, job-creating members of state business communities. The program is funded to award up to $8 million in grants to eight to 14 applicants. For 2014, 11 incubators were selected from 15 applicants for state funding totaling $4.9 million.
The Entrepreneurs Center was awarded $250,000 in operating funds and $200,000 in technology tenant awards. The center’s total annual program budget is $700,000, according to state documents.
“Our commitment to providing them dollars in this next round is an affirmation that we believe they are meeting the needs of the community,” said Norm Chagnon, deputy chief of the Office of Technology Investments at the Ohio Development Services Agency. “Certainly, they can improve on the ability to do that, but they are doing what is needed to address what they need to do in terms of the region and the Dayton community.”
The Entrepreneurs Center is in a 35,000-square-foot facility at Dayton’s Tech Town business park, and has three full-time staff members. Currently, the facility is 98 percent occupied, with 17 tenants, Hayde said.
An independent evaluation by Urban Venture Group, a Columbus-based consulting firm, praised the Entrepreneurs Center’s track record with early stage businesses. The report also lauded the center’s Advance to Profit tool, which monitors startup companies’ progress and closely aligns with the Third Frontier’s technology commercialization framework.
However, the report said the center “lacks deep technical expertise or facilities” for highly technical startups or later-stage incubator tenants. In addition, the center received a “poor” rating for its technology tenant pipeline because of long tenant incubation times, and a lack of clarity and direction in its pipeline plan.
“Average length of incubation is long, almost 60 months, partially the result of the lack of intense technology-focused coaching and support,” the report said.
Hayde said incubation is a “long-term process,” and many of the center’s most successful companies didn’t reach a point of success until after five or more years.
Center graduates include Peerless Technologies, which now has more than 300 employees and its own facility in Fairborn; Gracar Corp., which grew to 75 employees and $11 million in annual revenue before being sold in 2006 to MacAulay-Brown; and iNET Interactive, which now has about 50 employees and its own facility in West Chester.
Chagnon said long tenant incubation time is a “general concern across all of the incubators” that state officials wanted to address as a system. The Third Frontier wants to see the companies progress and move as quickly as possible from their ideas to the marketplace, he said.
“We will definitely have a plan to move people through the system quicker,” Hayde said.
Despite its lack of in-house technical experts, the center draws on a number of regional technology-based resources, including the University of Dayton Research Institute, Wright State University and Sinclair Community College’s Advanced Integrated Manufacturing Center, Chagnon said.
Hayde said many of the center’s entrepreneurs are scientists and engineers who have strong technology backgrounds. What they lack is the business training and experience to turn their ideas into a viable, sustainable company, she said.
“They are smart enough to know that in order for (their idea) to have value it has to be in the hands of someone who can commercialize it for them,” Hayde said.
The Entrepreneur Center’s tenant pipeline is the most critical issue to address before evaluations for funding in 2015 and beyond, Chagnon said.
In response, the center will host a free public event on Feb. 22 for people who are thinking about starting a business. The 2014 Entrepreneurs Open will offer guidance, consultation, information and expert-led presentations. The event also will feature a “Shark Tank”-like competition called “Fund My Idea,” in which selected companies will pitch their concept to investors.
More information is available online at theentrepreneursopen.org.
“The whole idea here is to fill everybody’s pipeline,” Hayde said.
The Entrepreneurs Center by the numbers
$48M - Economic impact over past five years
$700,000 - Annual budget
$250,000 - 2014 state funding for operating expenses
$200,000 - 2014 state funding for technology tenant awards
Source: Ohio Third Frontier
Dayton Daily News reporter Dave Larsen reviewed state documents, and interviewed state and local officials, to investigate Ohio taxpayer funding of the state’s technology business incubators.