The Colorado Springs Technology Incubator is on a growth track

The Colorado Springs Technology Incubator has doubled the number of companies it hosts and expects to be at capacity by the end of next year, three years after moving to a building near the Colorado Springs Airport that boosted its space fivefold.

The home for startup businesses has made other progress, too. It recently launched a network of wealthy individuals who invest in local startups, started a program to help entrepreneurs evaluate ideas for products or businesses, and signed an agreement to help turn technology developed at the Air Force Academy into marketable products.

They are the first steps in a larger plan by the incubator to help locally based companies grow into major local employers.

"The incubator can be a rallying point for technology-based economic development. For the first time ever, we are growing our own world headquarters for companies we hope will employ 500 people and sell their products and services globally," said incubator President Duncan Stewart. "There hasn't been a startup home run in more than 20 years, since the semiconductor boom. I am bound and determined we will have some home runs, or at least triples."

Stewart has ambitious plans for the incubator that include putting together a $25 million venture capital fund to make early-stage investments in local technology startups and doubling its current size within three years in a new building in a proposed research park at the University of Colorado at Colorado Springs. The new building, he hopes, would include prototype manufacturing space and have enough space for professionals who provide services to startups.

Such plans would have been unthinkable two or three years ago for a nonprofit organization started just as the technology boom was ending and that has struggled to attract funding during much of its nine-year existence. But adding a focus on homeland security in 2005 and winning a $450,000 federal grant two years ago to buy its current 22,000-square-foot facility helped put the incubator on solid financial ground and launch new programs.

"The incubator had been stuck in neutral and has suffered from under-investment because it was started at the worst possible time, when the technology bubble burst. Helping high-tech startups was a difficult business to be in," Stewart said. "It was a real coup to be able to buy this building for one fourth of what it was worth because we now have more than $1 million in equity that we can use toward" the expanded facility in the UCCS research park.

Never able to house more than five businesses in donated space near UCCS, the incubator boosted its available space fivefold when it acquired a nearly vacant office building at 3595 E. Fountain Blvd. in late 2006 for $900,000. The incubator now houses nine companies, which Stewart expects will grow to about a dozen by year's end and reach the building's capacity of 14 or 15 by the end of next year.

Kevin Maher moved his Ultrathera Technologies Inc. to the incubator last year because he thought the services there would help him grow the company, which has developed a rotating chair for therapeutic and pilot-training uses. He said the low-cost office space, help writing his business plan, mentoring and networking services available at the incubator helped the company make its first sale to the Air Force Academy last month.

"I plan to stay here as long as I can to take advantage of services here. We may reach the point next year where the incubator can't meet our space needs, but we still want to continue using its services," said Maher, who is Ultrathera's president.

During the past four months, three new companies have either moved into the incubator or become nonresident clients, including SpiralFunds, which is developing fundraising software for nonprofit organizations; New Planet Technologies Inc., a year-old company housed off-site that is developing wireless technology to track food shipments; and Dr. Ed, which is developing an e-commerce portal for the veterinary industry.

"The kinds of clients we are attracting now are more viable than in the past," Stewart said. "Some of the early companies here were e-commerce businesses without a lot of patented technology. Now six of the nine clients are (making) patent plays."

Stewart said he also is promoting the incubator as a home for "novel ideas" developed at large corporations that could be spun off into startups rather than becoming a drain on corporate resources before they start generating revenue.

The incubator also has recently signed agreements to help turn technology developed at the academy into marketable products and to help the University of Colorado Technology Transfer Office evaluate homeland-security technology.

Al Steiner, co-founder and a director of the incubator, said the incubator's development is on schedule with the business plan developed nine years ago, although he added that the organization may soon need to "write another chapter in that plan." He said the incubator now has "the heft, the space and the mentors that we need to assist local entrepreneurs in starting businesses" that it has lacked in the past.

The incubator charges tenants and clients from $500 to $1,000 a month for furnished office space, access to conference rooms, consulting services on business planning, research and investor relations. The incubator also takes an ownership stake of 3 percent to 5 percent in tenant and client companies that it sells to support itself after the company has raised enough money or becomes successful enough to move into its own office space.

Only one former tenant, softwaremaker XAware Inc., has been successful enough to generate a profit when the incubator sold its stake e_SEmD $30,000 after the company moved into its own offices in 2002. XAware has since raised more than $25 million in venture capital funding and employs about 20 people, but doesn't disclose financial results.

Stewart said he expects at least one incubator tenant to "graduate" next year to its own offices.

Dave Csintyan, chief executive of the Colorado Springs Chamber of Commerce and a former incubator director, said he expects more incubator tenants and clients to become key players in the Springs-area economy.

"We have a good variety of incubator businesses that have a great potential for the future," Csintyan said. "I believe we will see more of our companies go off on their own and become significant contributors to the community."

Stewart has started a new program called "Launch Pad" that offers entrepreneurs a lower monthly fee to rent a desk and get support from UCCS interns from its master of business administration program so they can research a business idea for up to six months to determine its feasibility. He expects one-third of the participants to end up as full incubator tenants, another third to abandon their idea and one-third to start firms on their own.

To boost the chances that more tenants will graduate from the incubator, Stewart has helped organize High Altitude Investors, a network of about 50 wealthy "angel" investors willing to pump $25,000 to $50,000 each into startup companies. The group began meeting in June, and Stewart said its members have invested $400,000 in two of the three companies that presented their business plans at the first meeting.

Stewart also is trying to raise $1 million in donations for a revolving "proof of concept" fund that would lend Springs-area startups $40,000 to $50,000 to build prototypes to help attract customers and additional investment by demonstrating the feasibility of the company's product. The loans would carry below-market interest rates and be due in three years, but require no payments in the first year.

The incubator also is talking to local foundations and investors about starting a $25 million venture capital "seed" fund that would make early-stage investments in local technology, homeland-defense, biotechnology and alternative-energy firms. Stewart said the fund is needed because no venture capital funds are based or operate offices in the Springs; several have shut down or closed local offices in recent years.

Stewart's most ambitious plan calls for moving the incubator by 2011 to a new 40,000- to 50,000-square-foot building in the proposed research park on the eastern edge of the UCCS campus.

The incubator would have to raise up to $6 million for the new facility, which would include more than twice the space available in the current building as well as a prototype lab and space for other agencies that help startups.

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Contact the writer: 636-0234 or wayneh@gazette.com