Technology start-ups flock to Chandler Innovations incubator - East Valley Tribune: Chandler

Technology start-ups flock to Chandler Innovations incubator

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Posted: Friday, November 18, 2011 8:00 am | Updated: 9:34 am, Fri Nov 18, 2011.

Before the recession, Gregg Lahti wrote the business plan for his start-up on a napkin and got an investor to fork over $8 million.

When Lahti began another start-up after the recession, he found investment money so scarce that he and business partner Terry West were forced to tinker in a garage.

"You're trying to get a customer to buy a $400,000 product," West said, "and you can't do that in your garage."

Chandler knew that too, so it established a technology incubator to house fledgling companies that need a workspace - and the sense they're legitimate.

Chandler Innovations opened 17 months ago, and the demand has overwhelmed the city so much that it's started an expansion. Chandler figured it would take three years to fill the incubator.

An additional 24,000 square feet will boost Innovations to roughly 60,000 square feet of office, laboratory and meeting space. The rush for space shows Arizona needs more incubators, said Christine Mackay, Chandler's economic development director.

"We're going to be on the larger-size of incubators around the country," Mackay said. "There was such an incredible demand for space. We just don't have the incubators that some of the established regions have."

Chandler found more demand for office space and less interest in laboratories than anticipated, as many of the start-ups are focusing on software. One of those is the Serious Integrated Inc. Lahti and West began, which builds touch-screen devices like the iPhone that they'll program to operate products built by other companies. They expect touch-screen technology will eventually change the face of thermostats, appliance controls, and a wide range of consumer and technical products.

This is Lahti's fourth start-up. He's never seen such a rough climate to begin a business, he said.

"The flow of investment and (venture capital) money is gone and because of that, people have to figure out how to start up without a lot of cash," Lahti said.

Innovations helped that with access to labs, a conference room, a receptionist and below-market rent. Lahti, the chief technical officer, also values sharing ideas from people in the same stages of launching a business.

Serious has six employees, and the company could leave Innovations next year, Lahti said. He expects 20 employees in two years. West, the chief operating officer, said the incubator has been invaluable to the firm getting this far along.

"You've got to look like a company. You've got to act like a company. You've got to be a company," he said. "You can't be five guys in a garage."

Innovations has 19 tenants now, working on medical, defense and other technical products. About 75 people are there on a typical day. The enterprises range from two or three people to 25 at a University of Arizona facility.

No firms have left to begin their own business yet. Mackay expects most will need about three years before they can stand on their own. The city expects its $5.7 million investment in Innovations to pay off as businesses leave, grow and hire employees in high-wage professions. Chandler expects many will stay in Chandler rather than leave because their founders and employees will already have roots here.

Chandler has letters of intent for about 30-40 percent of the expansion and expects to fill it within two years, Mackay said. The city won't expand further.

"Then we start to cut the pie up smaller and we aren't able to provide the service," Mackay said. "If it's any bigger, it's just a real estate play. It's not an incubator."

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