By guest authors Irina Patterson and Candice Arnold
Ken: To me, the concept of saying we’re an incubator is somewhat arrogant. I’ve run two venture-backed companies that have IPO’ed. I’ve run a public company for years, after our IPO. I’ve been through those, and I found that there were lots of people who showed up after each successive event saying they were there and made it happen. We don’t spend much time doing that. We try to be a professional service provider.
Irina: What are the core benefits you provide for your clients?
Ken: Our story is very, very simple. Job growth and wealth creation comes from more cash flow in than out.
We have three legs of the stool. First is cash flow from customers: What can we do to help a company expand its sales and market reach?
Often, in the earliest stages, they get a lot of coaching on affiliate marketing of their investments, you know, family, friends, and fools. How do you find that first sale? It might be a family member, friend, or fool.
The second leg is sourcing capital. We do a lot of work on how to get growth capital. How do you get it out of your receivables? How do you get it out of the banks? How do you get it from angels? How do you get it from venture funds? It’s holistic. It’s not just angels. It’s not just suppliers. It’s what fits best with the organization.
So, one leg of the stool is, How do we grow your sales? Second, how do we get you growth capital? And the third is, How do we manage your operating expenses? In that, we have a program called “pennies on the dollar.”
Marc Andreessen, the founder of Netscape, said about a year ago that “a technology startup today can be done with a penny on the dollar.” That, literally, what cost $20 million to start up 20 years ago can be done for $200,000 today.
I think that’s true in San Jose. I think it’s true in New York. We don’t think it’s true in Michigan. So, we’re trying to change that. How do you get a lower operating cost? You have to be using 21st-century technology.
I expect every company to be hounded by people saying, “How are you going to use the mobile app and social media and Web technologies to expand your reach, to expand your services, to automate your back office? How does the cloud help?” If you don’t have that infrastructure in your community, your companies are at a disadvantage.
So, our third leg of the stool is operational efficiency. Again, three legs. Sales are what we call cash flow from customers. The second leg is growth capital. And the third is operational efficiencies.
We try to be specific about our deliverables. We have mentor relationships we establish with folks in the community. But we try to be precise about value-add to clients. We try to measure our success by job creation in specific companies that have engaged us and wealth creation in those companies.
The measure of success has to be whether we’re providing value to the entrepreneur.
Our outreach program is regional business incubator network. We try to provide support services across the region with people who have specialty services. There’s an import-export capability at some of the airports that have international trade zones in this state.
There’s an FDA-approved kitchen in Traverse City. For a small startup to explore a barbecue sauce, a salad dressing, a soup. We had a soup company, a wild game soup company, that was started in our region but had to go to Wisconsin to find somebody to do the production operations. They went to these support agencies, the university outreach, and extension services and were told a convoluted and complicated story about what it takes to create an FDA-approved kitchen.
We have FDA-approved kitchens that are more than willing to do private-label production. While they don’t want to call themselves a food incubator, they’re the perfect food incubator when they mix our services with their production capability.
Central Michigan University has completed some of the nicest advanced wet labs in Mid-Michigan. Very expensive facilities. When we have somebody with material science or chemistry projects who really needs sophisticated labs, that’s the place we send them. Our network tries to take advantage.
We believe that networks grow with the value of each node. Our network of incubators and entrepreneurship centers, we believe, grows as we tie this group together.