Arizona Business Magazine Jul/Aug 2010
Business Incubator AZ TechCelerator Works To Create Viable Companies In The West Valley
In an effort to boost its economy and shake its reputation as a bedroom community, the city of Surprise has launched AZ TechCelerator, a business incubator for budding entrepreneurs. The incubator offers well-below market rent, administrative support and access to experts who can help the entreprenuers “graduate” in three to five years, and thus bring their products and services to the marketplace.
The incubator comes in handy, especially in dire economic times. There are always entrepreneurs hoping to develop products or services. But in a slow economy, when people have been laid off and are unable to find gainful employment, Az TechCelerator gives those people an opportunity to test their ideas and innovations.
Of course, Surprise officials hope these startups will set up shop in their city once they emerge from AZ TechCelerator. A rule of thumb among business incubators is that 60 percent to 75 percent of these entrepreneurs do graduate, and about 75 percent of those will indeed remain in Surprise.
Jack Lunsford, president and CEO of WESTMARC, applauds Surprise’s effort.
“It’s an approach that our communities need to take as they seek and advance a knowledge-based economy,” he says. “I commend them for their innovation. We need more of these incubators. The high-paying jobs that come from spin-offs of these entrepreneurships is great.”
Mike Hoover, economic development coordinator for Surprise, gives the initial group of businesses high marks.
“They are exceeding our own expectations on quality and the amount of business going on in there, especially the anticipated growth and success of some of the businesses,” he says.
The AZ TechCelerator is located at 12425 W. Bell Road, in a four-building complex that formerly served as the Surprise City Hall. It totals nearly 60,000 square feet, which is four times the size of a typical incubator. Hoover says it can accommodate up to 15 businesses, depending on their size.
Three types of businesses are considered likely participants — those that deal in sustainability, such as solar technologies; life sciences and/or health care; and information technology.
One of the businesses in the incubator is MD 24, a medical service company that developed advanced software for home health care. It enables doctors to receive lab results, for example, while seeing patients in facilities that provide care for the elderly. Another company, Solar Jump AC, is developing more efficient cooling systems using solar thermal heat; and Athena Wireless Communications offers software for banking, telemedicine and other industries.
“These businesses are not yet commercially viable, needing assistance through a collegial supportive atmosphere that the city provides,” Hoover says.
In addition to offering space at a below-market rental rate, the city also provides an array of support services, including mail, copying and other administrative functions that each business needs.
The city’s most important service, Hoover says, is being able to link incubator businesses with various associations and support groups that can provide assistance with their specific needs.
“Whether they need help on putting together a marketing brochure, protecting intellectual property, or understanding how to put together a business plan for the company covering the next three to five years, they are able to get help,” Hoover says. “Anything that is identified inside of a strong and stable business, the city helps these businesses reach out to groups that can help them.”
Another way the city prepares businesses for graduation is by ratcheting up the low rents the longer the company remains in the incubator.
“It prepares them for the commercial world,” Hoover says. “There’s no sticker shock. At the end of their stay here, they are closer to commercial viability because they are paying closer to a commercial rent.”
Surprise started preparation work for the incubator in June 2009, began marketing it in September, and accepted its first tenants around the start of November.
One of the side benefits of the AZ TechCelerator is that it occupies the former City Hall complex that otherwise might have remained vacant. When the city moved to its new municipal facility at 8401 W. Monroe St., several hundred people left the old site on Bell Road.
“Restaurants and other businesses in the area were suffering,” Hoover says. “The choices were to leave that space dormant, or reprogram it into an economic engine. We turned a nonperforming asset into an economic starter.”
Surprise hopes to keep the expense of running the incubator as close to break-even as possible, supported by rent and common area fees, Hoover says.
“Our purpose is for business and job creation,” he says. “There are no retail projects inside. They are all some type of service or product development. They’re not competing with retail outlets on the outside.”