Going small with startups

. May 18, 2012.

It may be hopelessly optimistic to believe that the Ann Arbor job market won’t suffer some by the collapse of Borders on top of Pfizer’s exodus three years ago, which erased 3,000 jobs from Ann Arbor.
But the area can best sustain such losses through an emphasis on creating opportunities for entrepreneurs, say small business advocates.

“It’s a huge loss when big players pull out whether its 400 jobs or 2300 jobs,” says James O’Connell, associate director of U-M Office of Technology Transfer. “It takes a long time for small companies to replace that, but the reality is that small companies are the backbone of new technology growth. They are the backbone of employment and also the backbone of long term success in the economy.”

Repenosed with Technology

The University of Michigan, which drew $1.14 billion in research dollars last year, could be viewed as a small business progenitor — whether churning out commercial applications from lab discoveries or providing mentoring and financial assistance to students with ideas for companies.

The university took over Pfizer’s 2 million square foot site on Plymouth Road two years ago and now nearly 700 people are occupying almost half of the space, in medical and scientific research and commercializing university technology, according to spokesperson Mary Masson.

The Pfizer opening also gave U-M an opportunity to beef up its 18-year-old Office of Technology Transfer by establishing the Venture Center and Accelerator incubator and adding staff. The incubator, which charges low rental fees in exchange for operating space and other resources, will house 13 startups this fall.

“There was a realization both from inside for faculty and outside for entrepreneurs and investors that they weren’t clear where to start,” says O’Connell. “Now you come to the Venture Center. We’re the people who put the deals together.”

Its first tenant, for example, is off and running. Life Magnetics, which speeds the testing of a person’s bacterial response to antibiotics, has secured more than $1 million in early stage venture funding from local investment firm Arboretum Ventures. And in April, the company landed CEO Jeff Williams, who recently shepherded the $480 million sale of Accuri Cytometers and HandyLabs – two Arboretum-funded startups he led – to the medical device giant Becton, Dickinson and Co.

“It highlights how we can move technology from someone with an idea inside the University of Michigan into a growing company,” says O’Connell.

There’s a push all around town for small business creation. The university’s other incubator, TechArb for U-M student entrepreneurs, has already outgrown its space in less than two years.

Entrepreneural Growth

“I think there’s been significant growth in the entrepreneurial community in Ann Arbor in the last five years,” says Doug Neal, executive director of the Center for Entrepreneurship at the U-M College of Engineering. “One of the things you notice is how much collaboration there is between community organizations like Spark and entrepreneurs, as well as the service providers and business and engineering schools all working together on helping entrepreneurs move forward. You definitely feel the culture of entrepreneurism throughout the community.”

Spark is the nonprofit business advocacy group founded in 2005 by now Gov. Rick Snyder. The organization’s budget is funded through business taxes and other public and university sources, which it leverages for other grants and federal dollars to support local businesses. Spark says its three incubators directly house 37 startups and provide virtual assistance to 23 others. 

The ultimate goal of these incubators is to get startups ready to move out into the community, like TechArb graduate Mobiata, which makes smart phone travel apps. Mobiata was purchased by Expedia in December and has since quadrupled its Ann Arbor office space in the Nickels Arcade expecting to boost its workforce to 30 employees in 2011.

TechArb graduate, Are You a Human (See August Current), is likewise moving out after landing $750,000 in a series An investment round from Detroit Venture Partners, a new fund investing in digital companies and moving them into downtown Detroit to foster a technology corridor.

“What you see is that the startups coming through the accelerator are coming in at a variety of stages,” said Neal. “The point is to embrace their stage and move them quickly into a milestone or identify a problem and allow them to pivot and restart.”
Time their word, accelerators speed the lifecycle of a small business. But for the economy at large, growing small companies organically is the key to building a
sustainable economy.

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