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25 Years of Ideas, Growth

Sunday, May 04, 2008

Akron Global Business Accelerator, a national role model and a key to driving local development, is 1 of 2 finalists for innovation award

Provided by Akron Beacon Journal
Written by Paula Schleis

The recession of the early 1980s gave us double-digit inflation, 22 percent interest rates, and plant closings that foreshadowed the end of Akron's reign as the Rubber Capital of the World.

But it also spawned a resource that — 25 years later — is a key driver of Akron's economic development.

The Akron Global Business Accelerator, celebrating its silver anniversary this month, is a national role model.

It is one of two finalists for the National Business Incubation Association's 2008 Incubator Innovation Award, the winner of which will be announced at a conference on Tuesday.

''It has grown to be something really special in Akron,'' said Mike LeHere, who has been under contract to manage the incubator since Day 1.

James Phelps, who retired after 17 years as Akron's deputy mayor for economic development, said the incubator is fulfilling its promise of creating businesses and quality jobs.

The companies inside range from those serving niche markets to innovative enterprises that are helping to grow the advanced energy and biomedical industries in Northeast Ohio.

''It's a big economic development tool because this is where it all starts,'' Phelps said. ''Just look at the results we've had. Everyone in the state looks to Akron and says, 'Wow, we wish we had that.' ''

First in Ohio

''That'' began as the Akron-Summit Industrial Incubator in May 1983, an inexpensive and nurturing environment for entrepreneurs to work on their ideas for products and services that could create jobs.

It was the first in Ohio and among a handful in the country to grow out of a national recession that had development officials scrambling for ways to offset plant closings and layoffs.

State and federal grants, as well as city and county tax revenue, supported the project. And the University of Akron gave the incubator its first home, a former steel warehouse at 100 Lincoln St.

Rent at the incubator averaged a buck a square foot, and tenants had access to a city revolving loan fund, and accounting, legal and managerial resources for up to three years. Then they were expected to ''graduate'' and find their own quarters to make room for others.

''They got a sheltered environment where they could acquire the skills they needed to run a business,'' LeHere said.

For many years, LeHere was a one-man show, changing light bulbs and restocking the toilet paper between helping fledgling companies write business plans.

Three years after opening, the 40,000-square-foot building was at capacity with 14 tenants.

As Akron continued to bleed rubber factory jobs, the incubator was ''this one little glimmer of hope,'' said Terry Martell, who was the incubator's first tenant when he moved his Airborne Industries electronics company out of his home.

Today, Martell is back at the incubator, this time as its director of business development and LeHere's right arm.

The incubator's early focus was manufacturers, because those were the kinds of companies leaving town.

But the Lincoln Street facility had limitations. Wood floors and beams couldn't handle heavy manufacturing equipment, so the city set its sights on the abandoned B.F. Goodrich tire factory complex off South Main Street.

In 1995, state grants helped Akron transform one of the old red-brick buildings into a permanent home.

The 320,000-square-foot, nine-story structure was rechristened the Akron Global Business Accelerator in 2006.

Over the past 25 years, 65 companies have graduated from the incubator, with a total of 755 employees when they left the nest.

Today, 152 people work at 38 companies there.

Networking for success

More than a dozen of those workers clock in at Vacuum Electric Switch Co.

In a cavernous space that accommodates the bulky equipment, owner Cecil Wristen and his employees remanufacture broken switches that are used to turn electric arc furnaces on and off.

The switches are re-engineered to give them a longer life than the original, at 70 percent of the cost, Wristen said.

He used to make the switches in the basement of his Hudson home. He began renting a truck dock at the incubator in 1998, and in 2003 he hired his first employee.

The incubator today is much more flexible on the time a company can stay there. Wristen expects to leave the incubator when his lease is up in 2010. For now, he and his 17 employees serve a growing market that includes North America, Europe and Africa. Many of his customers are small mills that recycle scrap steel.

In addition to the cheap rent that has enabled the company to grow, Wristen said, he benefits from networking with other incubator tenants. He's used one company to make his moldings, and another to maintain his computers.

On the third floor, Spine-Matrix Inc. has begun manufacturing its invention: a system for detecting the source of back pain.

In a clean, white room, employees apply conductive gels and liners to an array of electrodes that are applied to a patient's back.

Because the incubator gave them room to expand, the company decided to assemble the machines that run the equipment on-site rather than outsource that work, said Director of Operations Whit Miller.

There are other, more intangible benefits, he said. They include the way Martell was able to connect Miller with people who could share tips beforeSpineMatrix underwent review by the Food and Drug Administration.

And of course, the low rent is a huge attraction, Miller said, especially for a startup waiting for its first sales.

Tenants on the manufacturing floors pay about $4.50 a square foot, utilities included. Upper floors — climate-controlled offices for more high-tech enterprises — run $7 to $9 a square foot.

LeHere said similar space in a private facility would cost 30 percent more to twice as much.

''We want to allow these companies to take every dollar they raise and channel it toward revenue-producing activities instead of overhead,'' he said.

On the eighth floor, half a dozen employees of reXorce Thermionics Inc. are preparing to demonstrate a prototype of an advanced energy system.

The ''Thermafficient'' thermal engine converts heat from just about any source into usable electricity for cooling and heating, said company co-founder Philip Brennan.

Brennan said the company based itself in Ohio because of an investment by the Northeast Ohio venture development group JumpStart, and settled in Akron because of the incubator.

''We felt there was local support in Akron so we could operate at lower cost, and we felt there would be some commitment at the state level through the Third Frontier program and other things,'' Brennan said.

The diverse space in the incubator serves the company's many needs, from office space, to a lab, to a manufacturing room where it doesn't have to worry about things getting dirty, Brennan said.

While JumpStart assigned an entrepreneur-in-residence to reXorce to serve as a business coach, Brennan said there still are plenty of times he consults with incubator staff.

''You can save yourself four phone calls to figure out who you really need to talk to,'' he said, ''and all the little things you would consider soft items but ultimately help you capitalize on the most scarce resource, which is time.''

New generation

The incubator is close to being self-sustaining, LeHere said.

It collects about $400,000 a year in rent, and another $350,000 a year from the state's Thomas Edison Program.

It costs anywhere from $775,000 to $825,000 a year to run the facility, so the city supplements the shortage. But LeHere said the city and state get a lot of their money back from the jobs and tax revenue created by the new companies.

Renovating the building has been a decadelong process, and this year, the final 37,000 square feet of the sixth floor will be completed and opened for business.

The city also has announced its desire to open a second incubator, focused on biomedical companies and within the designated ''Akron Biomedical Corridor'' that seeks to unify the city's health-care assets.

''We fully hope that we're the ones to deliver the management oversight and consulting services with the experience we have,'' said LeHere, who is not a city employee but an independent consultant paid by the city to manage the incubator.

If it makes sense to move the medical startups from his incubator to the new one, LeHere said, they wouldn't be missed for long. He predicts the space would fill instantly with a new generation of startups and even young foreign companies that the city has been courting to establish a North American presence.

''With the international activity that's going on now,'' LeHere said, ''we're only going to see more new technology opportunities.''