News

Tech entrepreneurs seek state support – Lack of funding and support can stall young companies with no assets

Building an entrepreneurial culture isn´t rocket science. It´s not nearly as straightforward.

Layne Simmons, who has a degree in aerospace engineering, has done work for NASA and is an Idaho entrepreneur, couldn´t agree more.

Julie Howard
The Idaho Statesman

http://www.idahostatesman.com/Business/IdahoTech/story.asp?ID=56588&S=0

“There is no algorithm,” said Simmons, a co-founder of new engineering firm TenXsys. “Part of you wishes that if you could do A and B and C, then D and E would work. But as an entrepreneur, you just have to hedge your bets and be prepared.”

Simmons is one of dozens of new technology entrepreneurs working their way through the puzzle of how to launch a new business. Making this process easier is part of the state´s science and technology strategy developed in 2001 and which has mostly fallen by the wayside in the wake of the recession.

The need for streamlining the process is simple. Most new jobs come from small business growth. Technology businesses have the potential to grow rapidly and tend to provide high-paying jobs. For the state, that translates into higher tax revenues that can be used to provide more services for all Idahoans.

In addition, Idaho´s economy has long focused on traditional no-growth industries such as agriculture, mining and lumber. The technology industry drove the state´s economy in the ´90s, dominating the state´s exports, adding to tax coffers and adding thousands of jobs.

Many believe technology is still the key to fueling Idaho´s future economy.

“There´s a lot of attention given to bringing in out-of-state companies that bring in 200 jobs, but economic development is also won by base hits and advancing the runner,” said Karl Tueller, deputy director of the Idaho Department of Commerce. “There´s going to be a lot more growth within the state borders and we need to recognize that and cultivate that.”

Incubator helps simplify a business

Brian Ernesto believes his new Web development and software business would look much different if it weren´t for Boise State University´s TECenter, a technology incubator that opened last summer in Nampa.

The 28-year-old entrepreneur acknowledges he lacks business savvy when it comes to handling federal taxes, dealing with accounting and even knowing where to go to incorporate.

“I haven´t built a company before, and I don´t know a whole lot of people who have,” said Ernesto. “It´s the expertise we get that is the most valuable thing.”

Ernesto´s company, Tiburon Corp., is in a 200-square-foot office in the TECenter and now has clients in Philadelphia, Texas and Washington as well as in the Treasure Valley. The business has been profitable from the start, he said, but the support of the TECenter has been critical in letting him focus on growing the business.

“I haven´t had time to build up the infrastructure and support in this business,” he said. “If business dropped off, things could go the other way for me as well.”

Idaho starts businesses, but survival rate is low

In fact, most new businesses don´t survive their first year and that seems to be case even more in Idaho.

While Idaho ranked seventh in the nation in 1999 for the number of new businesses started per capita, the statistics also show that many of those businesses fail.

John Glerum, director of the TECenter, said business failures accelerated in the recent recession and that support systems need to be in place to help new businesses grow.

“Just in Canyon County, in 1989 there were something like 280 startups and 100 failures,” Glerum said. “In 2001, there were 70 startups and 250 failures.”

In general, the state is seen as a reasonably easy place to start a business, said Glerum.

Incorporating is inexpensive and simple. Office space is relatively affordable compared to other technology centers. And because Idaho also has an affordable cost-of-living, companies can pay lower salaries for equal talent.

But staying in business and growing a business — that´s another story.

Why tech startups need special help

Why do technology companies need anything more or specifically geared to their industry?

There´s already the Small Business Development Center, SCORE, the Women´s Business Center and the Small Business Administration.

“A lot of technology firms don´t have storefronts,” said Brad Wiskirchen, an attorney at Holland & Hart in Boise who specializes in technology firms.

It can take a new technology company months or years to develop a product and start receiving revenues — quite a different model than, say, a dry cleaners or a bagel shop. In addition, said Wiskirchen, they need specialized professional services that range from patent attorneys to private investors.

Wanted: risk-takers with cash to invest

Funding also can be a challenge since startup tech companies typically have no sales and no assets, meaning commercial banks won´t offer them financing. Tech entrepreneurs typically either bankroll the startup with personal funds or seek private investors willing to take a risk on a new venture.

TenXsys´ Simmons said she´s found plenty of assistance in existing organizations, from the TECenter to the Small Business Development Center.

“There are a lot of programs out there that are really beneficial to a business like ours,” she said. “One of the things we´re so happy about is they´re constantly trying to find ways to make things better.”

Being located in Idaho isn´t always convenient because TenXsys does business with NASA and the federal government, said Simmons.

“When we went looking for help, we weren´t looking for advice, we looked at how to do work in Idaho,” she said. “I don´t want to travel all the time, and there´s a lot of work in Washington, D.C., that will never come to Idaho.”

On the flip side, she said living in a state that is sparsely populated gives her small startup firm access to state legislators — and that wouldn´t happen in larger states.

“In a more populated state, there are a gazillion companies like mine,” said Simmons. “Here, I was able to get in and talk with state legislators about federal projects that are out there, and I found them receptive to meeting with us. I don´t think I´d get that in other states.”

Having professionals that can offer a broader range of mentoring for technology companies — such as offered by the TECenter — would help, she said.

“With technology, there´s a certain amount of time needed to develop the product,” she said. “It´s not like you open the doors and sell the goods. The process is different, and it´s helpful to have access to those who are knowledgeable of that.”

Finding the ’magical mix’ of good tech support

Not having all the right services and support can stall young companies before they really get started, said Rick Ritter, technology services consultant for BSU´s Small Business Development Center. He points out that Idaho has a few giant technology firms, such as Micron Technology and Hewlett-Packard, as well as many small ones. What´s missing, said Ritter, is a larger group of mid-sized firms such as Extended Systems and MPC Computers that help create a critical mass of technology.

“If we just wait for the next HP or Micron to happen here, we´re going to be waiting a long time,” said Ritter.

What turns small companies into medium-sized companies is good support, say those in the technology industry. What “good support” means, however, isn´t that easy to define. Depending on who you talk to, that mix includes patent attorneys, venture capital firms, technology-oriented CPAs, incubators and trade associations.

“It´s a magical mix. There´s not just one recipe for this,” said Chris Volk, former owner and president of technology consulting firm CRI Advantage who now consults with startup companies. “That there´s a high rate of business failures among startups says that something is missing for them in our ecosystem.”

Figuring out that mix, and turning it into a cohesive support system, should be the duty of the state government, said an exasperated Wiskirchen.

“We need a tech czar in the state who´s going to be proactive about these things,” he said.

“There needs to be one centralized authority to push this forward. The rest of us don´t have time. I have a day job.”

The TECenter´s Glerum adds there is some urgency to act.

“If we don´t have the process to move things along, we´re going to rue the day,” he said. “We have a window of time to be competitive.”

To offer story ideas or comments, contact Julie Howard
[email protected] or 373-6618

Sorry, we couldn't find any posts. Please try a different search.

Leave a Comment

You must be logged in to post a comment.