Can schools help keep startups from leaving?

UP CLOSE: Prototype material for electronic dice is displayed in a lab at the University of Massachusetts Dartmouth Center for Innovation & Entrepreneurship in Fall River. The dice have digital displays on all sides for use in games ranging from Dungeons and Dragons to War Hammer and Monopoly. / PBN PHOTO/MICHAEL SALERNO
UP CLOSE: Prototype material for electronic dice is displayed in a lab at the University of Massachusetts Dartmouth Center for Innovation & Entrepreneurship in Fall River. The dice have digital displays on all sides for use in games ranging from Dungeons and Dragons to War Hammer and Monopoly. / PBN PHOTO/MICHAEL SALERNO

Five years ago, Durval Tavares, president and CEO of Aquabotix Technology Corp., moved his company into an incubator run by the University of Massachusetts Dartmouth for a seven-month stay.

In October, following steady growth at other locations, the firm relocated into the Clover Leaf Office Park in Fall River, where it continues to develop underwater remote-operated vehicles and video systems.

“When I founded the company, we moved in right away,” Tavares said, referring to the incubator then known as the Advanced Technology Manufacturing Center. He had sought and found a place to launch and grow, a resource for the contacts needed to develop his business plan, and a place outfitted with prototyping labs he could use.

“It provided basic infrastructure for a startup,” Tavares said, “a physical place to be [and] access to academia and talent. Patent attorneys we ended up using had been speakers at some of the events [hosted by the ATMC].”

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While UMass Dartmouth has been looking to give the local economy a shot in the arm for more than a decade, it is not the only regional school looking for ways to accelerate economic development in its own backyard. Both Brown University and the University of Rhode Island are engaged in similar efforts, though so far largely tied to faculty-generated research projects. URI is interested in developing an incubator, connecting to a growing national trend among research universities.

And other local schools, including Rhode Island College, are looking to expand connections with the business community. RIC’s 1½-year-old James R. Langevin Center for Design, Innovation and Advanced Manufacturing offers training space for Rhode Island manufacturing businesses.

RIC President Nancy Carriuolo says a center director will be hired in January.

The center is “starting to take off,” she said. “We’re one to watch develop.”

But UMass Dartmouth is the only university in the area with experience operating an incubator. This fall, the university moved to expand its business reach, relaunching the 15-year-old ATMC as the Center for Innovation and Entrepreneurship.

Having graduated 40 companies in the marine and “clean” technology and biomedical engineering sectors, it now has a revamped mission – to not only incubate companies but accelerate their launching, and also offer more incentives to faculty and student entrepreneurs.

“We were a university incubator that looked off campus, to the region, for entrepreneurs,” CIE Director Toby Stapleton said in October, “but now an equal emphasis will be put on fostering the entrepreneurial ecosystem on campus.”

OUT OF THE ASHES

The ATMC at 151 Martine St. in Fall River was formed in 2001, about 14 years after a fire destroyed the Kerr Mill complex. In 2001, there was one major tenant, Avant Pharma, now owned by Celldex Therapeutics. Today, Celldex still leases space there, along with 18 tenant startups.

Fees are charged for use of biomanufacturing and mechanical prototyping labs, oversight of the production of prototypes, and use of a conference facility on site.

An $11.5 million state grant enabled UMass Dartmouth to purchase the 60,000-square-foot incubator facility in October, giving the university more control over the space. Covenants with the prior owner, the state’s development authority, restricted use of some of the leased space for startups, Stapleton said.

None of the ATMC’s 40 graduates came from faculty or student initiatives. But with the CIE now being owned by the university, added emphasis will be placed on transforming intellectual research into business opportunities, Stapleton said.

“We’re closely looking at opportunities to connect the CIE with the business community and serve as the conduit back to campus: to provide economic-development benefits to the region by connecting university resources to solve business problems,” he said of the incubator’s longstanding efforts.

“That will continue to be part of the mission, but leveraging resources back on campus, including students and faculty, will be key to helping create more faculty and student startups,” he added.

The CIE’s rates for resident startup office space range from $15 to $35 per square foot annually.

“The advantage for us versus other office space is, we do flexible [leasing] terms for as little as six months,” he said.

As the rebranded CIE, the incubator will foster startup development, with an ultimate goal of introducing an accelerator program in which fledgling companies’ progress will be closely and regularly monitored so that most graduate within a fixed time frame of 18 months or less, Stapleton said.

Plus, the focus on student and faculty entrepreneurship is intended to lead to a more dynamic connection with the university itself, he said.

Faculty and students had the access before, but they would have had to pay for it. Now, students get six months’ leased space for free to build a prototype or a team. Faculty can get lab and office space for free for a year, Stapleton said.

While UMass Dartmouth does not take any equity stake in the CIE companies, if faculty researchers were to form startups that developed commercially viable products, the university could derive revenue from that, said John Hoey, a UMass Dartmouth spokesman.

“That’s part of the reason the CIE has been developed,” he said.

The incubator’s success to date gives university leaders reason to believe in its growth potential.

Since 2001, the ATMC has created 600 paid internships in the region and helped create more than 250 new jobs. The combined revenue generated by the 40 firms launched or currently operating at the incubator since 2001 totals $200 million.

Over the next three years, the CIE plans to incubate 25 companies on-site and another 30 off-site, in part by utilizing virtual incubator tools, Stapleton said. The incubator has a target over that three-year period to graduate 10 companies, create 150 “high-wage” jobs and generate $24 million in economic activity for the region, he said.

GROWTH POTENTIAL

Although the CIE is unique in the region, it’s fairly common for research universities to set up a vehicle dedicated to driving economic development, as they try and keep new companies from leaving their local areas, says George Smith, vice president of U3 Advisors.

Based in New York City and Philadelphia, Smith’s company advises universities and cities on how to leverage higher education to drive economic development.

“There’s clearly a focus on trying to translate research and discovery on campuses so it can land in the communities around the campuses and it doesn’t get lost in Silicon Valley or New York City,” Smith said.

Across the country, the potential for growth with incubators is significant, said Smith, whose firm helped reposition the research park TechTown as an incubator at Wayne State University in Detroit between 2010 and 2013. From 2007 to 2014, TechTown served 1,026 companies, which raised more than $107.26 million in startup capital and contributed 1,190 jobs to the local economy, Smith said.

“Oftentimes, these incubators and accelerators can be used to establish a much stronger sense of place, energizing the edge of campus and having it be more accessible to the surrounding community and adding life to your commercial corridors,” he said.

URI is in the early stages of determining if an incubator on or near the South Kingstown campus would make sense, said President David M. Dooley. That is occurring in tandem with the expected co-location of URI and Brown University offices in the proposed life sciences project on the former Interstate 195 land in Providence. Dooley says that project might include an incubator of its own.

An envisioned biomedical research and innovation hub on the former I-195 land is one in which all the parties could benefit from an incubator, Dooley says.

Both Dooley and UMass Dartmouth Chancellor Divina Grossman say that transforming university intellectual property into commercialized products and companies is part of their mission. It attracts companies to research campuses, Grossman said, invoking the notable Research Triangle Park in North Carolina.

Grossman estimated UMass Dartmouth spends just under $1 million a year on its incubator, a fraction of the university’s $230 million annual operating budget. The investment helps fulfill the university’s reason for being, she says.

“When you look at our region,” Grossman said, “it’s clear the university is seen as a beacon that would help with a twofold mission – the need to increase educational attainment and promote economic development. They’re related. You can’t have economic development unless you have a high percentage of adults with college degrees.”

PILOT FIZZLES

Rhode Island once set up a pilot incubator, the Rhode Island Center for Innovation and Entrepreneurship, which launched at One Davol Square in 2009, said Brendan McNally, now associate director of Brown University’s C.V. Starr Program in Business, Entrepreneurship and Organizations.

A partnership chiefly between the state’s then-named R.I. Economic Development Corp. and Brown University, as well as the Slater Technology Fund and the Science and Technology Advisory Council, the incubator supplied expertise to the state’s college and university faculties, as well as to researchers and entrepreneurs looking to launch new companies, McNally said.

Stymied in 2012 by a lack of funding, but having supported about two dozen startups, the center evolved into the Founder’s League, an incubator co-located with Betaspring at 95 Chestnut St. in Providence, said McNally and Melissa Withers, Founder’s League co-founder. She is also managing director of Betaspring, an accelerator for early-stage ventures that has launched 90 companies.

While URI and Brown are supporters of the Founders League, getting companies to form, function and then stay local is a goal URI could meet with a dedicated incubator of its own, either on campus or nearby, according to Michael Katz, URI’s associate vice president for intellectual property and economic development.

“Ultimately, we would need space off campus here in South Kingstown,” said Katz. “[There is] very limited commercial space bordering the campus. Within the South County area, I’m actively looking for space that can be leased to our startup companies.”

URI’s objective is to help startups develop around technologies with real commercial potential so they can attract investment capital and move into the local economy, Katz and Dooley said. In 2008, economic development was added to the responsibilities of Katz’s position. He was hired this past summer.

“The ideal outcome is these businesses would remain in Rhode Island and grow and hire people who would live in the state,” Katz said.

In 2014 six companies emerged from URI, though none materialized in 2015, Katz said. Two more are evolving now, he added.

One of the six, CREmedical, could benefit from an incubator to provide low-cost housing. The firm is working to bring to market technology that cancels extraneous noise found to interfere with electroencephalography, better known as an EEG, a medical tool used to scan and monitor brain waves, says President and CEO Walt G. Besio.

An associate professor in URI’s department of electrical, computer and biomedical engineering, Besio founded CREmedical in 2011.

“We need an incubator,” Besio said. “Most of the intellectual property at URI is developed by the College of Engineering, so having an incubator on our new building would be very appropriate. If not, we might have to move to Providence when they put the new biotech complex in the I-195 corridor.”

Daniel P. Egan, president of the Association of Independent Colleges and Universities of Rhode Island, which has eight private schools as members, noted: “Not having a formal center of physical space doesn’t preclude the colleges and universities from engaging with spinoffs. What would be interesting to see is if a formal space does accelerate more growth or spinoffs. Emerging areas like the I-195 corridor provide perhaps the best opportunity for cross-institutional collaboration.”

Dooley emphasized that spinoffs and startups are only some of the ways URI drives economic development. He cited the Business Engagement Center, which helps students and businesses network and access expensive university equipment, the R.I. Small Business Development Center and Polaris MEP, a manufacturing extension partnership set up through the URI Research Foundation.

UMass Dartmouth highlights similar partnerships with the Massachusetts Small Business Development Center, Massachusetts Manufacturing Partnership, SouthCoast Development Partnership and venture-capital organizations.

Hugh C. Dunn, an attorney, is executive director of the SCDP, and executive director for economic development for UMass Dartmouth. Formed 14 years ago and relaunched this past April, SCDP is a collaboration between the business community, public school systems in Fall River, New Bedford and Dartmouth, economic-development partners and workforce-investment boards.

“Research universities spawn economic development,” Dunn said. “It’s an atmosphere of innovation. We’d like to have that here.”

But the economy in southeastern Massachusetts, like Rhode Island’s, has continued to struggle.

“The economic condition of the region we’re in is hindered by low educational achievement rates in K-12, with low graduation rates and fewer students making it into community colleges and four-year institutions,” Dunn explained. “So it makes it difficult for businesses to want to locate here.

“We’re trying to create a more college-going culture in the region, and that in turn leads to [an] attractive, skilled workforce. And jobs,” he said.

Brown University is not actively exploring developing an incubator, said Katie Gordon, managing director of its Technology Ventures Office. TVO helps put together strategic partnerships with companies and startups emerging from research at Brown. Her office has been involved with eight startups over the last five years, including two startups in recent months and two more expected in 2016.

“Our goal is to move products into the commercial sector, [and] really, to get these out into the public sector,” Gordon said.

Driving economic development locally is also a goal and byproduct of those efforts, she said.

“Rhode Island doesn’t have a highly developed ecosystem compared to Cambridge or New York, but this is something that, once it develops, it multiplies,” Gordon said. “Certain companies get formed, there might be success, and there’s a local serial entrepreneur looking for a new deal.”

HM Solution of Providence develops water-treatment systems to remove arsenic from water, using technology licensed from Brown professor Joseph Calo and his research team. Two patents are pending, and CEO Margaret Lengerich is taking the technology to market.

The company, founded in 2013, is refining the technology’s design and testing it at A.Z. Corp. in Providence, and working with different advisers as it seeks investors, she added.

“Katie Gordon and her team are helping us, and every time they get an investor interested in water technology, they connect us to them,” Lengerich said.

But staying in Providence depends on getting angel and venture-capital investments, which is a struggle locally and could ultimately take them outside of Rhode Island, Lengerich acknowledged.

In Fall River one CIE tenant, Infinity Cube, is developing a gaming device – dice with digital displays on all sides, to be used in games ranging from Dungeons and Dragons to War Hammer and Monopoly. CEO Daniel Bryand, who lives in Newport, started the company with two others. He is planning to launch a Kickstarter campaign with a more refined prototype next year.

“[The CIE] is giving us a lot of contacts and mentors to help us build the business and outside contacts to help us with the prototyping,” he said. “It gives you the tools to get started and gives you a really good place to put down roots and have a mailing address.”

Will that keep the company in southeastern Massachusetts? Probably, he says.

“When we do have employees, it will be a good place to set them up,” he said. •

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