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ENTREPRENEURS-
May 2002 by Claude Hammond Sidebar-
But this early success by one of Kentucky’s most ambitious incubators for high-tech businesses began as the result of five friends going out for beers after taking part in an area leadership group. “This whole concept came from De Stewart,” said Joe Michels, treasurer of Madison E-Zone. “He perceived the need for a technology incubator accelerator in Northern Kentucky and assembled the five of us. We had never met one another before taking the Leadership Northern Kentucky class. We started meeting and working on the concept for this project and it snowballed into what it is today. ” According to Stewart, the acknowledged guru of the group and a well-known visionary and entrepreneur in the Northern Kentucky/Cincinnati area, the Gang of Five (as he calls them) gelled in both personality and vision. “Across the river in Cincinnati, they were starting Main Street Ventures, an ambitious technology incubator. For us, the question became, ‘Where is Northern Kentucky in all of this?’ Louisville and Lexington were doing things in this realm, as well. Perhaps, we thought, there was some reason why there wasn’t something like that here. We asked around and found no reason.” So Stewart, along with Joe Michels, Chad Bilz, Tom Prewitt and Mike Ziegler, committed themselves to making the incubator a reality. “We rolled up our sleeves and got underway,” Stewart said. “We met every Friday and made progress reports, then set and re-set assignments. And every week, it kept building. We got excited because we started seeing movement.” Already, Northern Kentucky has some distinct advantages for being the location of a technology incubator. ‘If you look at the area’s important cities, Dayton, Cincinnati, Louisville and Lexington, we’re right in the heart of it,” said Stewart. “With the hub at the Cincinnati-Northern Kentucky airport, we’re right at the center of it all. You can get from Point A to Point B a lot easier here than in Northern Virginia or even Silicon Valley. Some of the major amenities where Northern Kentucky has an advantage over those two areas are the cost of real estate, the cost of living, quality of life and inexpensive power.” “We had to touch base with Tri-Ed, which is the economic development authority for this region,” Michels said. “We had some fantastic help and cooperation from the Northern Kentucky Chamber of Commerce, the City of Covington, Broadwing and Cincinnati Bell. Broadwing and Cincinnati Bell own the fiber optic pipeline running right up Madison Avenue here in Covington.” “This fiber optic network is fantastic,” Stewart enthused. “It’s bigger and has a greater capacity than the fiber optic pipeline serving all of Silicon Valley in California. “We started off thinking we’d have a budget of $250,000 a year and take out one or two floors of the building,” said Casey Barach, executive director of Madison E-Zone. “But when (Kentucky Commissioner for the New Economy) Dr. Bill Brundage saw what we were doing, he encouraged us to get all six floors of the building. We have made the building’s fourth floor our showpiece. We want the Madison E-Zone to appear as professional as possible. We want everyone to know that we are serious about business and not a flash in the pan. Dr. Brundage and the Commission have given us the Innovation and Commercialization Center (ICC) classification, which is quite an honor and gives us a leg up on things.” For a technology startup company to get space and support from the Madison E-Zone, its managers must do their homework and demonstrate their commitment to their idea. Hotshots who are all talk and no work need not apply. However, the incubator is organized in such a way to help new companies get startup capital and to be successful both early and often. “We really work on the ICC process,” Barach said. “The startups may need some work before they ever get into the process of running their business. We require that they get an independent market intelligence report. We do ask for the money that pays for that report. This shows that they’re serious about what they want to do. Plus, investors know the importance of a verified status report and will want to see one. We change the pitch of the business plan from ‘hey ain’t we great’ to an angle more targeted to investors.” After landing its first few startups, the Madison E-Zone staff has made some important contacts. “The companies pay a program fee to be here,” Barach explained. “It takes money to form a business and we want them to be formed right and be successful. When we decide to bring in a new company, we first refer them to attorneys for those with legal and intellectual property issues. “Then we work on their business plans and pitches to investors. We actually bring in a guy who made a venture capital pitch for more than 70 companies last year who comes in and examines this. We have a member who’s a partner of a venture capital firm. As you can imagine, his input can be priceless. These guys will ask those questions that venture capital investors ask. It’s important for startups to remember that a business plan must be investor-friendly. “After we’ve worked on the business plan, we get a CFO or CPA-type person to do a business valuation model. Usually we have to teach the executives of startups about valuation. Some venture capitalists won’t talk to you unless you have a valuation of at least $4 million. “When they’re ready, their company is dropped into a database that is open to only to ‘angels’ and venture capitalists throughout the region,” he said. The startups attracted to Madison E-Zone show a lot more promise than the typical high-tech startup of five or six years ago. Solid business people give solid advice and require solid planning and progress of technology startups. The approach has attracted intelligent, even celebrity, attention. “One of our companies has offices in San Francisco, Tokyo and Covington,” Barach said. “That company is called Global Project Design. When Bryan Moser, their CEO, asked us about rent, we gave him a figure and he told us that it sounded fair. It turns out that we had given him an annual figure and he was thinking monthly. That demonstrates how affordable it is to do business. “Bryan is a local guy who graduated from Covington Catholic High School. He went on to MIT and got a degree in engineering, then he went to Japan to work. He came back to Kentucky a few years later and couldn’t find the intellectual and technical horsepower here for his business, so he went to San Francisco. Now he has confidence in this state and region and has made a serious commitment to grow his business here.” Probably the highest profile corporate presence at Madison E-Zone is Ignite Learning, a company founded by Neil Bush, who is the brother of President George W. Bush. “Neil Bush founded Ignite Learning, a company that produces an online learning software product,” Barach said. “Neil is dyslexic and had learning issues growing up. Later in life, he discovered that his son was dyslexic as well. He did a lot of research and found out that there are different styles of learning. With the Ingite Learning program, kids can choose their own mode of learning. They can use analogies, songs and a variety of other ways to teach. Ignite moved in to the Madison E-Zone in March, making it their Midwest Sales office. Already, Cincinnati and Covington Schools and local parochial schools are using their products. This company is not a typical incubator client, but we aren’t a typical incubator.” So far, Madison E-Zone has helped create 15 new companies doing business in Covington. Most are small, but they represent more than 50 new jobs for the area. “The difference is that these are great jobs,” Barach said. “These aren’t people flipping hamburgers. They’re the kind of jobs communities want. These are jobs in research, engineering, software authorship and administration. The really great thing is that we’re just beginning to scratch the surface. Our potential here is fantastic.”
Claude Hammond
is editorial director of The Lane Report. |
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Copyright 1996-2002, by Kentucky Business Online. All rights reserved. Editorial content
is copyright 2002, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
It’s
accurate to say that Northern Kentucky’s high-tech business incubator,
Madison E-Zone in Covington, is reaching for the stars. If the truth
be told, it appears that the E-zone has already snagged a stellar object.
Probably the most conspicuous business leader to locate his technology
startup in a Kentucky business incubator is Neil Bush, brother of President
George W. Bush.