Incubator programs may go virtual
(1/31/2011) (From Hartford Business Journal)
By Sujata Srinivasan
Connecticut’s business incubators are nearing capacity and the head of one program is considering a new approach — virtual space rather than brick-and-mortar buildings.
CTech, an initiative of the quasi-public Connecticut Innovations, still has room for another eight or so start-ups and is inviting applications for its three incubator sites at New Haven, Farmington and Bridgeport, which are run in collaboration with Yale University, the University of Connecticut and the University of Bridgeport respectively.
The popular program offers space at heavily discounted rates, networking opportunities and a string of pro bono services. But the key is CI’s ability to provide pre-seed funding to early-stage technology ventures.
The success of the program has Peter Longo, president and executive director of Rocky Hill-based CI, mulling the possibility of launching a new kind of incubator.
“Because of space issues we’re looking to go virtual,” said Longo.
“We have capital available and I encourage entrepreneurs to apply,” said Longo. “We consider tech-based start-ups with the potential of becoming big. We look for strong management teams who can provide us with solid exit plans.”
CTech invests a maximum of $150,000 per start-up in pre-seed funding, with the condition that 50 percent is matched by private capital. The seed fund is typically in the range of a half-million dollars. The funding comes from returns on CI’s investments and sponsorships from more than 20 local companies, not taxpayer dollars.
“Our goal is to ultimately break even on this program,” Longo said
Currently, the 15-acre New Haven facility has room for four more start-ups, while the 2,400 square-foot site in Bridgeport could include an additional two companies. Longo said CTech’s UConn facility at Farmington is close to capacity, but has room for a few start-ups.
Rita Zangari, director, Office of Technology Commercialization, UConn, said the university will create space for additional start-ups at its Avery Point campus and an older incubator site at Farmington. “We are open to working with CTech toward expanding our sites,” she said.
All of this is welcome news to beleaguered entrepreneurs trying to become the next Mark Zuckerberg during tough economic times.
“Incubator programs provide advantages by reducing some risks. For example, incubators provide flexible workspace so small businesses don’t have to sign long-term leases and can quickly expand into larger space if needed. Also, being located near one another allows small business leaders to build off of one another’s energy and enthusiasm. These are great ways to encourage small business growth while the economy still feels uncertain and entrepreneurs may be worried to take risks,” said Alissa K. DeJonge, director of research, Connecticut Economic Resource Center, Inc.
But will a virtual incubator be as successful as a physical one?
“Entrepreneurial companies need to be connected with mentors and VCs. If space is a constraint, then they could benefit from a virtual facility. It could work,” said Zangari.
For now, though, start-ups say they’re thriving best by interacting with each other in the real world.
What can $700 buy?
Ask Nick Jaensch, a hopeful 24-year-old who co-founded Shizzlr, Inc. with classmate Keith Bessette in 2009, when the duo was pursuing an MBA at the University of Connecticut.
A social networking application, Shizzlr helps users — mostly students — plan on where to hang out depending on where their friends are going. The app imports contacts from mobile phones, Facebook and its own website.
“Our iPhone app just got into stores and our Andriod and Blackberry apps are going to be out shortly,” said Jaensch.
On product differentiation, he said: “Foursquare’s ‘checking in’ tells your friends where you are right now. Shizzlr will tell them where you’re planning to go. Unlike Facebook events, we organize your plans and add a layer of conversation to it. Facebook is for all the people you’ve met. Shizzlr is for the 20 people you actually hang out with.”
The duo raised $200,000 last September in initial pre-seed funds from family and friends, and received $150,000 this month from CTech. Jaensch expects to breakeven in 2012.
“We’re using the Groupon model to build users. We want to turn Shizzlr into a planning platform and eventually offer restaurant reservations and group discounts,” he said. “Merchants can advertise specials a few days in advance and steer customers to their location. Bars and restaurants will pay a monthly fee ranging from $50 to $300.”
Plans are afoot to expand across New England this May and the rest of the country by year-end.
Jaensch and Bessette pay a monthly rent of $700 for a tiny office that fits three desks at CTech’s facility in Science Park, New Haven. That works out fine for now as Shizzlr has a total of three employees including the duo.
“We’d probably be working out of our basement without this,” Jaensch said.
The rent includes utilities, shared office equipment, a conference room, kitchen, and importantly, an array of pro bono services spanning legal, finance, accounting, marketing, and even management. Tenants get open access to CI’s venture fund team and face-time with sponsor companies such as Launch Capital LLC, a New Haven venture fund whose director, Konstantine Drakonakis, pops in two days a month to chat informally with CTech CEOs.
“I just walk into his office and bounce ideas off him. These informal interactions are very valuable,” said Eleanor Tandler, CEO, NovaTract Surgical LLC. The company has received $50,000 in pre-seed funding from Launch Capital and is expecting between $150,000 and $200,000 in a seed round.
NovaTract has an office in Milford for its engineering staff, and a small space at CTech, New Haven, for Tandler. The company was co-founded by Tandler and Dr. Kurt E. Roberts, a surgeon at Yale University School of Medicine in April of last year, to manufacture a device that enables single-port laparoscopy. The first device is on track to hit the shelves by year-end.
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