City small business incubator threatened

Incubators for startups could face cooldown

The amount of space to assist promising startup companies in reduced-rent facilities in Augusta has shrunk and is in danger of shrinking even more.

Startup space at the city's incubator was cut in half two years ago.

Moreover, a downtown business accelerator for bioscience companies is in jeopardy of shutting down if state funding isn't restored to adequate levels.

All three of Augusta's business incubators have successes to tout: companies that are growing inside the facilities or have "hatched" and operate on their own.

The advent of the home-based Internet business has not dampened the need nationally for the small brick-and-mortar offices for startup companies, said Corrine Colbert, the director of publishing for the National Business Incubation Association.

"What we have been saying all along ... most economic growth comes from small businesses," Colbert said. "We see what happens when states and cities compete against each other to get big factories. What we think is the key for economic recovery is not smokestack chasing, but home-growth entrepreneurs."

Lester Lowry spent seven years in the Augusta-Richmond County Small Business Incubator near Augusta Technical College, which operates the facility for the city.

His company, Mustard Seed Video Productions, left the incubator three years ago in search of more space, which he found near the defunct Regency Mall.

Because of the economic downturn, his video production business has only one other employee, but he sees himself hiring more people later in the year. Lowry produces videos of church services, training videos for companies and TV commercials.

"I miss it because the overhead was very low," Lowry said.

Rent in the city incubator starts at $1 per square foot and increases annually.

It is more than the price that lingers with him today. Incubator programs provide more than cheap rent. Shared services, access to conference rooms and advice from mentors are part of the package.

"It pulled different people from different walks with good advice on how to survive," Lowry said.

That is part of the attraction for Eric Ray and Chris Thomas, who run Big River Networks from a windowless, 150-square-foot office with plain walls and a couple of desks in the city incubator.

The 2-year-old company started as a home-based business at Ray's house before moving into a building downtown. The overhead was killing them.

"We were essentially heating and cooling the entire floor," Ray said.

Big River Networks has one small business neighbor, eStrong Solutions LLC, which is also a customer of its voice-over-Internet phone service. The business partners are concentrating more on VoiP and less on other pieces of their fledgling tech business, such as video system installation.

They compete with other companies that offer business phone service, such as Knology and Comcast. They can put 20 phones on one high-speed Internet connection, Ray said, and don't require capital investments in a phone system, which is not financially feasible for the small businesses they target.

"We host the platform for a flat fee, and they don't have to invest any money," Ray said. "A small business owner like myself doesn't have five grand to plunk down on a phone system."

Big River Networks has a salesman on staff and might be in a position to hire more people in six months, Thomas said.

"As we have a growth spurt, we'll outsource," Thomas said. "The first year as a business, we were starving. The second year it got better.

"We have stable revenue to pay our bills and reinvest back into the business ... It depends on our growth pattern, but we might have to take over another office here as we grow."

The city's 18,000-square-foot building opened in 1998 and has office space for 19 clients. Augusta Technical College took over the facility in 2000 from a nonprofit entity that ran it for two years and struggled to recruit tenants.

TERRY ELAM, THE president of Augusta Tech, said the incubator became home to Georgia Quick Start for a time, which helped it break even. When the Quick Start program moved out because of state consolidation, the college moved in a law enforcement training program, which now occupies most of the building, Elam said.

Despite the reduction in incubator space, Elam said, the building will never stop being a place for startup companies.

"The way it is configured, it would take a massive amount of money to get in there and re-configure that building to make it do something else. It is set up in small modules," Elam said.

One of those modules is home to the Augusta chapter of SCORE -- Service Corps of Retired Executives -- which has 10 volunteers who assist people with business plans and other advice.

The idea behind such buildings is for new small companies to slowly gain clients in a low-cost environment with access to business mentors and equipment. After three to five years, the company is supposed to be successful enough to move out of the incubator and take on more overhead costs and personnel.

"What really helped -- beside having a place that had reasonable start-up rent -- was having a team of professionals from the area that would come in once a month to help coach us along the business side," said Bill Foster, the president of Impact Safety Systems in Evans, a graduate of the city incubator. "We've got some college behind us, but the practical experience of what they don't teach you in school is what helped."

Impact Safety Systems spent five years in the incubator. It primarily teaches Occupational Safety and Health Administration classes for construction companies.

THOUGH THE CITY incubator is 12 years old, the downtown biotech incubators, run by the Medical College of Georgia and Georgia Medical Center Authority, are not so old.

The Georgia Medical Center Authority opened the BioBusiness Center on Broad Street in 2007. It houses three biotech companies, Integrated Science Systems, REACH Call and ClariPath Laboratories.

For the second year, it faces financial problems stemming from a state in trouble and looking for something to cut from its budget.

Gov. Sonny Perdue in January recommended cutting $100,000 from appropriations for the authority for the current budget year and eliminating all $300,000 in state money next year.

Center Director Stan DeHoff said the three companies face the possibility of higher rent and having to purchase the lab equipment and furnishings they get free, part of the low-cost environment to get them off the ground.

"This will negatively impact their current plans for growth, jeopardize the addition of more jobs and make an exodus from Georgia more appealing," he said. Without the state funding, there would be no one to run the center either, he said.

Authority officials have testified to the state Legislature. The House restored $66,000 to the program, which hasn't been approved by the Senate.

"The current status of the financing is to be determined. It is working its way to the governor's office," DeHoff said.

Colbert, of the National Business Incubation Association, said she is saddened by the news that Augusta is in jeopardy of losing a biotech incubator.

"We warn our members and try to get across to stake holders that the goal is sustainability," she said. "It could take years for the incubator to get its facility full enough and programs in place, reach a point where it is generating income of its own."

She said technology-based incubators are the hot property, accounting for the largest increase in purpose for the facilities nationally. They are making a comeback from the dot-com bust in 2001, she said.

There are 1,500 incubators in North America, she said, and 900 are members of the Ohio-based organization.

Colbert said she expects to see an increase in the number of business incubators because there is a bill going through Congress that would support them.

"There is considerable political interest in incubation. Everybody wants economic development and they want high-growth companies," she said.

Do incubators work?

The U.S. Small Business Administration says only 44 percent of small businesses make it past four years.

The National Business Incubation Administration says 87 percent of the firms that "hatch" from incubators are still in business.

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