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Boon for Business
What do Montana and North Carolina have in common? Maybe just enough, hopes Montana Technology Enterprise Center administrator Dick King.
MonTEC, housed in a former food warehouse opposite the UM campus on the north side of the Clark Fork River, is a business incubator, the $4.5 million culmination of a joint nonprofit venture between The University of Montana and the Missoula Area Economic Development Corp. (MAEDC). It’s designed to transfer the University’s intellectual property to the private sector.
Fourteen small businesses, many of which began life as UM research projects across the river on the main campus, currently are spread throughout the facility’s 32,000 square feet, where basic amenities range from fume hoods to Internet hookups, and the perks include river views and barbecues — all part of the basic rent.
One MonTEC company’s “product” is a computer system that monitors automatic securities trading; another manufactures a resin for selectively removing heavy metals from mining wastewater. Academic ties and entrepreneurial buzz create an environment that encourages kibbitzing and the sharing of ideas, and even spurs the occasional new partnership. MonTEC businesses, King affirms, are constantly getting peanut butter on each other’s chocolate.
There are encouraging precedents, he says, for the continued success of entrepreneurial hothouses like MonTEC. King cites North Carolina’s Research Triangle — the rough scalene formed by Duke University, the University of North Carolina-Chapel Hill and North Carolina State — as one successful model. Collaborative relationships among schools and economic developers have turned the Triangle into a nexus of business incubators and research labs where nearly half of the state’s high-tech industry is now concentrated.
“The Research Triangle of North Carolina is famous,” says King, who clearly sees analogous potential for Montana. “It took a rural, backward state and turned it around economically.”
Instead of a triangle, UM Associate Vice President for Research and Development Jon “Tony” Rudbach envisions several “technology corridors” that eventually will link Missoula to Helena, Butte and other business hubs around the state. Along with Missoula County, Ravalli, Lake and Flathead counties currently form the Northern Rockies Research Park and Technology Corridor, and plans are under way to create additional incubators in the latter three, preferably linked to institutions of higher learning.
The primary function of university-affiliated incubators, Rudbach says, is to exploit research performed at the parent institution in a way that benefits researchers, taxpayers, local business and the institutions themselves. In other words, the Montana economy. Rudbach, who came to his administrative position from a background in immunology and business administration, says his first and toughest order of business was just getting caught up.
“There was a backlog of discoveries laying fallow [at UM], and so one of my jobs was to ferret them out. I walked into labs all over campus and just asked, ‘What’s going on?’ And I found that many things had been discovered and developed up to a point, but they hadn’t been exploited.”
MonTEC administrator King, who first came to UM in 1965 as a chemistry student, adds that until roughly 15 years ago, there was little incentive to do so.
“When I went to the University — a long, long time ago — the only research that took place was some faculty member doing some obscure research that would get written up in some even more obscure scholarly journal, and that would get filed away and, there, we’re doing our stuff,” King says. “It was important to have those people because they brought students into the world of higher education and they had the respect of their peers. But UM never really did much in the way of funded research until the late ’80s.”
The key step in the transition, King explains, was the passage of a state bill in 1989 entitling universities to retain the so-called “indirect costs” that had previously been subtracted from research grants, with an equivalent loss in matching state funds. Funded research at UM before 1989, King says, was essentially a zero-sum gain, “with no real benefit to the University.”
Yet both King and Rudbach still perceived a gap between funded research at UM — worth some $70 million annually — and its commercial potential. Establishing a bridgehead in the local and global economies for UM intellectual properties seemed the logical step. Five years in the planning, MonTEC opened its doors to small business in 2002.
Half of MonTEC’s board of directors comes from UM and half from MAEDC. The UM contingent is Rudbach, President George Dennison and Vice President for Research and Development Dan Dwyer. Businessmen Bob Kelly, Kent Bray and Wes Spiker represent MAEDC.
There’s nothing new about business incubators, King admits. MonTEC is one of more than a thousand members of the National Business Incubation Association. At a recent international convention in Toronto, King even noticed differing attitudes toward incubator management in different countries. One administrator from Shanghai was astounded to learn that most of MonTEC’s companies employ fewer than 10 people. In China, the man explained, a business needs at least 50 employees to even qualify for an incubator berth.
“It’s just one of those cultural differences,” King says — a kind of entrepreneurial safety in numbers in a culture where business failure can result in loss of face. “But then, there are two sides to capitalism: creation and destruction. What you try to do with an incubator is help small companies have a better chance at success, knowing that many will fail despite your best efforts. I think our culture is a little more at ease with that.”
Eventually, MonTEC start-ups will undergo evaluations after three years to determine, as King puts it, “whether we have a business here, or a research professor and a couple of graduate students doing something cool that’s never going to be a product.” Extensions might be negotiated, King assures, but the idea of the business incubator is to prepare small companies to survive on their own.
Like Rudbach, King dislikes the thought of research fleeing the state in search of investors. As an example, he cites Montana State University research involving life in the hot pools in Yellowstone that later migrated to Stanford and the West Coast, spawning the recent biotech revolution.
“The challenge to Montana is: Can we build companies around that research that will do business here, or do we just let that research migrate to wherever there’s money and investors and have it create jobs somewhere else?”