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New Fayetteville Incubator Forming
March 13, 2004
By Michael Clinebell, Staff writer, Fayetteville (NC) Observer
The nation’s only business incubator for homeland security companies, located in Annapolis, Md., is the inspiration behind a similar idea for Fayetteville. Should the incubator – which would provide space and support for fledgling companies – be set up, Annapolis organizers said Fayetteville would probably need the participation of the military and a supply of technology workers.
Officials with Raleigh-based computing center MCNC asked a legislative committee last week to recommend that the state give $200,000 to develop a plan for assisting emerging technology companies. MCNC, formerly known as the Microelectronics Center of North Carolina, was founded in 1980 by the General Assembly to bring more technology jobs to North Carolina. It was supported by the state until the late 1990s. Under the proposed plan, it would develop the North Carolina Innovation Institute, with a primary location in Research Triangle Park for general technology and a homeland security location in Fayetteville. The program would provide free lab space, administrative support and access to community colleges and universities. MCNC said it can develop a plan in about six months. After that, the state would need to give about $15 million for startup and another $15 million a year for 10 years, about $164 million total, until the project became self-sustaining.
The Fayetteville incubator is anticipated to be the smaller of the two, costing about $2 million compared with the $12.5 million for the RTP center. David Rizzo, MCNC’s chief executive officer and president, said the group’s incubator concept is better than other models because occupants will not pay rent for space. In exchange for free space and services such as accounting and marketing, a company will give the institute part ownership. The idea, said Rizzo, is that with no incentive to collect rent, the institute can be aggressive about pushing out companies that are not meeting success benchmarks. When companies become successful and leave the incubator, the institute can sell the stock, split the money with the state, and put its share in an endowment to fund incubator operations after state support expires. Rizzo said Fort Bragg is the “real life test environment” for homeland security products, which would be high-tech based. “These companies would have to come to the military base to prove the technology,” he said.
The idea for a homeland security incubator came from Joan Myers, president of North Carolina Electronics, Information and Technology Association. She learned about the Annapolis incubator, called the Chesapeake Innovation Center, at a technology conference. Myers said her association was already involved in encouraging homeland security protection technology. Myers spoke with Rizzo about the Annapolis project and Rizzo included it in his developing incubator proposal for the state. The Chesapeake Innovation Center in Annapolis, Md., opened in October. Bill Badger is president and CEO of the Anne Arundel County Economic Development Corporation that oversees the Chesapeake Center.
Selling a county
Badger said marketing Anne Arundel’s first incubator to homeland security businesses was a way to sell county’s strengths. Annapolis is a 30-minute drive from Washington. The National Security Agency is Anne Arundel County’s largest employer. ”Its just because we had some natural assets we felt were competitive and gave us a legitimate branding opportunity to say: ’You are kind of close to everything that counts,’” Badger said. The incubator was marketed to information technology and telecommunication businesses as well, but the eight slots filled with homeland security companies. Companies generally focus on providing cybersecurity and combating biological terrorism.
Multiple companies
PharmAthene, for example, develops human vaccines for infectious diseases. The incubator is expanding to add 10 more slots. The NSA is a partner in the incubator. It cannot provide funding, but gives advice and lets organizers know about promising technology. “We took a clean sheet of paper and said what makes sense for us,” Badger said. He said Fayetteville would need to do the same thing. “It’s important for you all to figure out what you have in place so you can use that to your advantage.”
James Robbins is a partner in Business Cluster Development in Menlo Park, Calif., a consulting firm that helps clients start business incubators. Robbins, who helped develop the incubator in Annapolis, said the factors in Fayetteville's incubator would be technology personnel and military interest. With a technology focus, he said, technologically-trained people would obviously be needed for the start-up companies. A study would need to determine the skills of labor.
Also, Robbins said, the same interest expressed by the NSA in the Chesapeake Center would most likely need to be expressed by the military for the Fayetteville center. “You’d want reasons to believe that the military would support this, because that is part of the logic for it.” MCNC officials said they have not gauged the military interest yet. Officials at Fort Bragg and Department of Homeland Defense did not respond to interview requests. But a public affairs officer with the Office for the Assistant Secretary of Defense said the incubator idea is too speculative for comment. Mark Sauter, chief operating officer of the Chesapeake Center, agreed with Robbins that the military would need to be interested as the reference, or test customer for products. And he had a recent example.
Real User Corp., a company in the Chesapeake center, has contracted with the United States Senate as the first customer for its technology to replace computer passwords. Paul Barrett, CEO of Real User, said the environment the center brings is helping launch the company’s technology, which they have been promoting in the United States since 2000. “It’s this incredible network,” Barrett said. “But they also have the resources in Maryland to bring to bear this huge network of potential partners and customers.”
Credibility needed
Barrett said Real User was selected for the Chesapeake Center from more than a hundred applicants, and the NSA was among the agencies that reviewed the company's application. “The most important thing from out perspective is that it gives us a level of credibility,” Barrett said. He said the Chesapeake Center is providing a new focus for the interaction of private business and the government in homeland security. “I think it is going to cause quite a change in how things are done,” Barrett said.
Staff writer Michael Clinebell can be reached at clinebellm@fayettevillenc.com or 486-3523.
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