Academic 'incubator' concept helps hatch young entrepreneurs
Troy, N.Y. — Two years ago James Tousignant thought he could turn a classroom computer project into a financial honey pot. He and a fellow student had devised a special software program. At the time, plenty of other young entrepreneurs around the United States were starting companies and lining their pockets with silicon profits. Why, they reasoned, shouldn't they?
As it turns out, Mr. Tousignant didn't join the gentry overnight. But at 23, the briefcase-toting capitalist is doing all right: He's president of his own company, Mirror Images Software Inc.. It just opened a new downtown office in this aged industrial city and should do $2.5 million in sales next year.
What's unusual about his saga is not that it's another student start-up firm - they're becoming as ubiquitous as Pac-Men - but how he did it: by starting out in an academic ''incubator.''
His is one of 13 newly formed companies in a high-tech breeding program affiliated with the Rensselaer Polytechnic Institute (RPI) here, a top science and engineering school.
The incubator concept - in which a college or group of people pitch in to help entrepreneurs turn ideas into products - is spreading across more university campuses.
The idea isn't novel to the 1980s: Two plucky upstarts, William Hewlett and David Packard, received a helping hand from Stanford University when starting up a venture more than 30 years ago.
But in today's high-tech-era colleges, governments and industries are looking for ways to rekindle the country's entrepreneurial flame. Several dozen schools now give some form of aid to inventors and starting companies, besides the traditional courses in entrepreneurship (offered by more than 150 schools).
Approaches vary. Some schools give tinkerers hard-nosed evaluations of whether their better mousetrap is in fact better and whether it might bedazzle the buying public. These product evaluations may be done by university professors or local businessmen (Baylor University) or by students (University of Wisconsin).
The incubator concept goes further. It usually involves renting office space and technical and management assistance to businesses during their first critical year or so. A few programs are run directly by schools (University of New Mexico, for instance). Others are independent but tap some of the equipment and expertise of a local university (the ''Genesis'' program in Wichita, Kan., and Utah Innovation Center in Salt Lake City).
The big questions are: How well do these teething programs work and how widely can the concept be applied?
The RPI plan offers something of a looking glass. The three-year-old program was launched with several goals in mind:
* To help companies make it in the world of free enterprise without stubbing their toes. By now the survival rate of start-ups has become painfully familiar: Nine out of 10 don't make it.
* To give RPI students a ''living laboratory'' of how applied research and entrepreneurship work. Several incubator firms were founded by RPI students and faculty members. Other students do research and consulting work for the campus-based companies.
* To boost the economy in this upstate New York region by ''growing'' a new generation of businesses. Once companies leave the RPI nest - there's no specific limit on how long they can roost - they are encouraged to rent space in the school's ''Technology Park.'' This is an industrial-research site that sits on 1,200 rolling acres outside town. School officials hope the park will draw high-tech firms as well as incubator participants, and thus breathe new life into this once-bustling textile manufacturing center.
Not every idea that comes along ends up being accepted into the incubator program. A faculty-staff review board looks for only those that are high-tech, and then ones that fit the strengths of RPI. The theory is that the more the school's resources can be tapped, the better it will be for both the company and RPI students.
The school has no financial stake in the companies. It rents space in an ivy-cloaked brick building on the edge of campus, offers such things as accounting and legal advice, and helps round up financing from venture capitalists. Tenants also tap RPI's libraries and labs.
The incubator companies vary from solar firms to scientists trying to exploit new bacterial brews. None have failed yet. But it will take time before any turn a big profit. ''People come in with the idea they want to build a better mousetrap,'' says Jerry Mahone, program director. ''They think if they do, the world will beat a path to their door. It doesn't work that way. What we really try to do is focus them on developing a business organization.''
Is it working? Consider Mr. Tousignant. He is Karl Marx's worst nightmare - a budding young capitalist who talks profits and sales strategies like a man who has been working with corporate ledgers for 20 years. His company, cranking up to produce video games and educational software, now employs 28 part- and full-time workers.
''Without the incubator program we wouldn't have made it,'' he says. He attributes the firm's development to the ''lower-risk, high-quality environment'' of the program. The credibility of the school helped, too, when it came time to snare seed money.
Michael Hennessy is a blue-jeaned, tennis-shoe-shod researcher who works out of one of the basement offices of the incubator building. He and a team of 14 ( 10 part-time RPI students and 4 full-time scientists) are trying to develop new magnetic imaging devices for medical use. One reason for setting up shop here: access to RPI's chemistry lab.
Still, the success of the RPI program is no assurance that any school can help hatch a generation of entrepreneurs. There are valid reasons that some colleges have shied away from the incubator idea: the possibility of legal snarls surrounding the disclosure of product information or development of a defective widget, and ethical conflicts arising from professors becoming too involved with companies.
Yet as long as the program is kept at arm's length and adequate safeguards are built in (RPI, for instance, requires companies to carry product liability insurance), experts say the idea is good.
''It is a very viable concept,'' says Gerald Udell, director of the Innovation Institute, a private, Oregon-based consulting firm. ''Entrepreneurship is not something that fits neatly into a textbook. It's something you've got to experience. One way to create entrepreneurs is to introduce them to the process.''