Tech incubator cooking up new approach to business

The Tech Incubator’s Duncan Stewart.

Ready to make a “huge leap”: The Tech Incubator’s Duncan Stewart.

The Colorado Springs Technology Incubator has been helping start-ups hatch their business ideas for nearly a decade, but now believes it’s time to change the way it does business.

It’s planning to move to a new location and adopting a new payment model — all with the intention of serving a wider range of budding technology entrepreneurs.

The incubator is hoping to move its offices from 3595 E. Fountain Blvd., its home for six years, into the former Intel plant, now known as Corporate Ridge Office and Technology Center on Garden of the Gods Road.

Executive Director Duncan Stewart said the move will allow the incubator to provide space for manufacturing and research and development, rather than simply offering office space, which it now does.

“This will be a huge leap for us,” he said.

The costs of doing so also have come down considerably at the building, which before this year had sat vacant for years.

There is one stumbling block to moving, however.

The incubator purchased its current building with help from a U.S. Department of Commerce grant, which stipulates that if the property is sold before 15 years, a 25-percent equity payment is due to the Commerce Department.

As Duncan sees it, he has two options: re-purpose the building and run it as a for-profit substitute to generate cash for the incubator, or sell the building and take the hit.

“We need the operating capital,” he said. “So we have to find a way to keep as much money in-house as we can.”

In addition to the planned move, the incubator is changing the way it charges business for its services.

The incubator will continue to collect rent for space, but it will now collect royalty payments on products sold by its tenants instead of taking a 3- to 5-percent equity share in the companies, something that is legally complicated and a little daunting.

It’s a strategy that Stewart believes will be welcome by tenants.

“It’s just easier, better for both parties this way,” he said. “A high-tech company with a high margin, 1 or 2 percent in royalties won’t affect them.”

The new approach is expected to give companies more control at the front end, and the company decides when its relationship with the incubator should end. If a company leaves the incubator, royalty payments continue for one year. Equity shares were permanent.

“It gives us more cash flow, and gives (the tenants) more control,” he said.

There is one downside:

“If we have companies that are wildly successful down the road, we might regret not having that equity share,” he said.

What do companies get for their money? More than many incubators around the country, according to Duncan.

The Colorado Springs incubator provides more than just office space — new clients can receive patent advice, marketing help and access to a variety of experts.

“It’s not about the space really, that’s not what we focus on,” Stewart said. “These guys know they can come in any time, and receive advice and help. They can get market analysis, competition analysis — it’s all part of just being here.”

The incubator also negotiates special rates with vendors. For example, the incubator’s relationship with a patent attorney saves fledgling companies thousands of dollars in patent work.

For Tyson Hartshorn, owner of New Planet, the advice and help has been invaluable.

Hartshorn said he couldn’t have gotten his business concept off the ground without the incubator.

“They are doing the right things to foster development,” he said. “The entire community should be behind this effort.”

Who’s in the incubator?

The incubator is home to eight companies:

Blue Sun: Creates web-based products to help trauma patients recover

Combat Training Solutions: Creates non-pyrotechnic bomb simulators for military training.

New Planet: Designs and sells shipment and inventory tracking systems.

Pikes Peak SEO: Works to improve search engine visibility for small businesses.

Securics: Creats technology to enhance security and improve privacy, including biometrics, imaging technologies, embedded systems, networking and security.

Smart Tracks: Marking automation software that allows direct marketers to systematically categorize sales prospects.

Spiral Funds: Focuses on fund-raising for nonprofit organizations through online purchases.

Ultrathera Technologies: Uses technology to improve patient rehabilitation, therapy and neuromotor training.