Before Apple and Google became iconic American businesses, their founders developed the start-ups in the humble garage.
The East Valley’s cities want to boost their economies with high-tech businesses like that — and they’re willing to provide the garage.
On Monday, Chandler will open the most aggressive city-led business incubator in the East Valley, with a focus on biotechnology. The city spent $5.7 million to open Chandler Innovations, where start-ups have access to shared business services, office space and expensive lab equipment that they couldn’t afford on their own.
The city is leasing space to the fledgling firms at a reduced rate, betting their concepts will turn into self-supporting businesses that will pay high-wage jobs. For new businesses, the most important role an incubator plays is bringing people together who have different backgrounds and skills, said Darren Cummings, who is moving his small business to the facility.
“A good business plan is absolutely requisite and that is not something that you learn in engineering school,” Cummings said. “A lot of people are sitting at home with good ideas and they’re broke.”
He started Cummings Engineering Consultants after being laid off from Motorola. His 15 employees sell encrypting technology for military and commercial communications devices.
The idea for Chandler’s incubator started when three start-up biotech companies approached the city for lab space, but were told there wasn’t any. Chandler decided the city needed an incubator after research showed 76 percent of start-ups stay in the area where they were founded, said Christine Mackay, the city’s economic development director.
The city screens tenants to look for companies with the strongest odds of becoming profitable businesses, she said.
“They’re a little more sophisticated than, ‘Oh, I’ve got a great idea,’” Mackay said.
The 38,000 square foot facility has numerous labs that can be leased by a single operation or by an individual on an hourly rate. It’s in a former Intel building at 145 S. 79th St. The University of Arizona is a key anchor, and Arizona State University is considering a role there.
Mesa is working with ASU Polytechnic to open a business accelerator at the Phoenix-Mesa Gateway Airport. It would focus on aerospace, but could include work in the areas of defense, solar and alternate fuels, said Mesa City Councilman Scott Somers, a key proponent of the concept. The incubator has a huge potential, he said, because of access to ASU, military contractors, the airport and it being in a foreign trade zone with substantial tax incentives.
“All of that comes together in creating a unique opportunity to focus on high-wage, high-tech jobs,” Somers said.
Mesa is still studying the concept but is aiming to open an incubator next year in an Air Force research lab that’s slated to close. The city hasn’t determined a cost or who would fund it.
Arizona does little to encourage start-ups outside the efforts spearheaded by East Valley cities, said Francine Hardaway, a consultant to start-ups. Her Stealthmode Partners runs incubators programs for Gilbert, where the focus is making small businesses larger. She also works with Tempe, which promotes technology start-ups. She’s involved with a west Mesa incubator emphasizing service-oriented businesses.
Additionally, the privately-run Gangplank in Chandler focuses on technology.
The new businesses that emerge from incubators have potential to move Arizona away from its real estate-heavy economy, Hardaway said. She’s affiliated with the Kauffman Foundation, whose research shows start-ups are important job creators.
“It turns out that most jobs are generated by new companies, not by big businesses or small businesses, but by businesses under 5 years old,” Hardaway said. “At some point, a company hires all the people it needs and stabilizes.”
Hardaway criticized Arizona’s business approach, saying the state should encourage more small businesses without spending much money on buildings to house incubators. She advises clients instead to crash on a friend’s couch, work from a garage or take food stamps while funneling money to the start-up. Hardaway said her experience is start-up founders do best when they can work with others in the same situation and learn from each other.
“They develop a trusted network,” she said “They trust each other and they buy from each other and they use each others’ services and it creates a network and it isn’t like being out there all by yourself.”