Spectrum - Volume 17 Issue 22 March 2, 1995 - Developing businesses

A non-profit publication of the Office of the University Relations of Virginia Tech,
including The Conductor , a special section of the Spectrum printed 4 times a year

Developing businesses

By Sookhan Ho

Spectrum Volume 17 Issue 22 - March 2, 1995

Virginia Tech, the state's Center for Innovative Technology, and the towns of Blacksburg and Christiansburg have launched a $150,000 program to provide a new level of business assistance services to fledgling technology-based companies in Southwest Virginia.

The Business/Technology Center (BTC) is an expansion of a previous effort to promote economic development in Southwest Virginia through the transfer of technology from Virginia Tech. "The region lags behind other parts of the state in economic growth and is experiencing a decline in manufacturing jobs--in real terms and as a percentage of total employment," says Joe Meredith, president of the university's Corporate Research Center.

"What is needed is a robust technology transfer program that will ensure that the knowledge created by Virginia Tech can be translated into jobs in the region," says Meredith. "The BTC will ensure that emerging or early-stage companies in a high-tech field have every opportunity to succeed by providing high-quality business assistance." This success, he adds, would result in an increase in the area's growth rate, an increase in high quality jobs, and a demand for skilled workers and professionals.

The companies could also help expand university-based research, provide a return on the investment in university research, and provide revenues to technology licensed by Virginia Tech and/or the CIT.

The program has received a $50,000 grant from the CIT, contributions totalling $69,500 from three university units--the Corporate Research Center, Virginia Tech Intellectual Properties, and the Pamplin College of Business--and $9,000 from the two local governments. The remaining monies are expected to come from client fees during the center's first year of operation.

The center received one of four awards the CIT made at the beginning of the year for entrepreneurship assistance programs around the state. Says Catherine Renault, CIT managing director for technology services and support, "Virginia Tech's proposal was superior in its innovative use of existing Pamplin College of Business resources, the support of the local community, and the interaction with the Corporate Research Center. We are very enthusiastic about the potential to support the technical entrepreneurs in this community, especially those companies spinning out of Virginia Tech's research efforts that CIT has supported."

The CIT's Entrepreneurship Assistance Program seeks to help new, growing, or small technology-based firms in Virginia using the services of the program's staff, the faculty and students of local universities or community colleges, and the resources of local communities.

The center will offer assistance on issues ranging from planning, marketing, and financing to legal support, personnel management, and production planning. Though these are typical services provided by business "incubators," the BTC, its organizers point out, is not a typical incubator--it's more of a "virtual incubator."

"While conventional incubators offer clients cheap space and management services under one roof, the idea behind a virtual incubator is to bring the needed services to the company at its existing location," says Meredith. "Low rent is not the key ingredient here. It's the quality of services." Pointing out another difference, Meredith says that the organizations that operate conventional incubators often have equity in their client companies.

The BTC, however, will not be acquiring any stakes in its client companies--except in unusual cases where equity is offered as an alternative means of payment for services. The center, he says, will seek to be as self-supporting as possible by charging client companies service fees.

The center will be directed by Herb Cork, a former business executive who leads an undergraduate course on small business as a part-time faculty member of the Pamplin College. To reduce overhead costs, share resources, and facilitate communication, the center will be based in both the college and the Corporate Research Center, using existing offices at the two locations.

Pamplin College dean Richard E. Sorensen notes that though the college's faculty and students have provided a variety of management consultancy services to the region's businesses, the college has done relatively little work with business startups. "The new program will provide many opportunities for our faculty and students to help the university's scientists and engineers and local entrepreneurs develop viable high tech businesses," says Sorensen.

Cork says there are a number of early stage companies in the region that could benefit greatly from the services of the BTC. "These companies typically cannot afford private sector assistance, lack a full management team, or are not fully capitalized, but have the potential to make a measurable impact on the local and/or state economy."

So far, the center has identified some 18 potential local clients that have businesses based on ceramic materials, fiber optics, power electronics, and other advanced technologies. Incubators can choose to nurture specific industry groups, Meredith says. "We have selected high tech companies because we believe they provide the greatest economic development leverage to the local community. The nature of our land-grant university spawns high-tech endeavors."

To give clients the best support at the lowest cost, Cork says the center will maintain links with groups that offer similar services, such as the Small Business Institute, the Small Business Development Center, SCORE (Service Corps of Retired Executives), and the CIT's Technology Transfer Program. What distinguishes the BTC from these other programs, Cork says, is its ability to offer help for an extended period. "Moreover, none of these programs is directed specifically at serving emerging, high-tech companies."

Crediting local governments for their support of the original program, Meredith says, "their backing gave us valuable experience that put us in a position to submit a successful proposal to the CIT."

The center follows a similar but smaller program run by the Corporate Research Center that assisted in the start-up of 24 companies over the past three years. Seventeen of these firms sought to commercialize Virginia Tech research products. Meredith expects that the new center will provide a much higher level of service than its predecessor.

"Previously, you could turn someone in the right direction with a couple of contact hours, but you couldn't provide much follow up," he says. "The new center will have the resources to follow up."