Oklahoma State program helps establish new companies

The state’s Technology Business Finance Program would have been considered a success if even one of every four of its sponsored startup companies had survived, Randy Goldsmith said.

By:
Brian Brus
Oklahoman

But that goal was too conservative. About 85 percent of the companies funded are paying back the program’s award money, said Goldsmith, executive director of the Oklahoma Technology Commercialization Center, which manages the program. And that success has drawn the attention of at least 16 states that want to copy the program, he said.

"If not the best, it’s one of the best state programs ever. We’ve been able to leverage state money significantly," he said. "It clearly reflects on Oklahoma’s interest and support in growing an advanced technology sector and recognition of its importance to the state."

The initiative was passed by the state Legislature four years ago. The Legislature gives about $1 million a year to the program, which in turn has awarded more than $3 million to 31 Oklahoma startup companies. Surviving companies have been able to secure additional money totaling about $237 million, Goldsmith said.

Over the last three months alone, six companies have finished repaying their awards under the terms of the program: If the company fails, the money is written off without expectation of repayment; if the company survives for at least two years, it will begin to pay back the award at twice the original amount.

Repayments are funneled back into the program to finance more companies.

"The money repaid easily exceeds our expectations by a factor of 10. … We were hoping that 10 percent of the companies would be able to resecure full payment," Goldsmith said.

Intelis is a good example of a company that got off the ground with help from the program. President and Chief Executive Richard Harrison said the value of the company’s $100,000 award was nearly eclipsed by the marketing help his company received from the program.

"They perform an outside evaluation of your business plan, and give you a detailed scoring of your plan and tell you what people think about your business model and where they think you might have problems. … It’s a lot of work to be approved for the program, but the advice you get along the way has proven to be incredibly helpful," Harrison said.

Intelis is an interactive marketing support company that provides online sales opportunities for such manufacturers as Ralston Purina Co. and Unilever Bestfoods. For example, a visitor to Ralston Purina’s Web site wouldn’t normally be able to buy product directly from the manufacturer, but Intelis software links the consumer to an appropriate reseller.

"I don’t want to sound like I’m discounting the money, because it’s very important to us," Harrison said. "But our concept is a little difficult to explain and it can be a hard sell to investors. So the process we went through was really invaluable and I’m not sure we could have gotten to where we are without that process."

Goldsmith agreed that the application and qualification process is "rigorous." Only 50 percent of applicants who make the final cut are awarded money. Only Oklahoma startups are eligible for the awards. Companies usually are in their development, proof-of-concept and prototype stages.

Jim Clifton, executive director of Kentucky Science & Technology Corp.’s innovation group, said one of the most attractive aspects of the Oklahoma model is its simplicity and position as an unbiased, disinterested third- party.

Kentucky is one of the several states that has expressed interest in Oklahoma’s technology enterprise model. Arkansas, for example, has adopted some elements into its state technology commercialization program, and officials from Wyoming are discussing a licensing agreement for the Oklahoma model. Officials from states including Texas and New Jersey have spoken with Goldsmith about the program.

Clifton’s agency was set up by the state’s Legislature more than a year ago, and started accepting applications for its own startup business awards in January. Kentucky licensed the Oklahoma model; the program blueprint was given freely, and Kentucky will give credit to Oklahoma for designing it, Clifton said.

"It was clean and simple to understand with very definable value that a company could see immediately," Clifton said. "We were also very interested in helping good ideas find good investors."

The risk of unrecoverable money from failed business startups is reduced to a point agreeable to legislators, he said. "And there’s a general understanding that these dollars being spent are a longer- term investment for Kentucky, if not nationally.

"It’s nothing particularly flashy; it’s just Business 101," he said.

Goldsmith agreed: "I think one of the aspects of why we’re getting attention is that we’re using a commercialization model that’s very practical. … It provides a strategic plan for day-to-day operations. It’s very focused and very client-directed," he said.

Goldsmith said that when he steps back to look at the program’s productivity, he feels a "tremendous swell of gratification with respect to the fact that it wasn’t an accident. It came about because of good planning, good decisions and a good model. … The recipe is working."