Business Incubator Series: An Interview With Skip Simms, President And CEO, Ann Arbor SPARK — Ann Arbor, Michigan (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: What are the main reasons that out of the 30 entrepreneurs who apply for your services every month, 25 get rejected?

Skip: The main reasons are one, they’re not in the city of Ann Arbor. Our primary stakeholder, which provides a lot of the services, has that requirement. The entrepreneurs have to be in the city.

Two, they’re not close enough to commercialization. They still have to develop their business model and product a bit more before they’re close enough to commercialization for us to consider them. As I said, we’re called an accelerator. The idea is to identify those technology-based companies that are within a year of commercialization. Our goal is to make sure they achieve commercialization within a year or sooner.

Irina: How do you usually accept and process those applications?

Skip: On our website, you can click a link that says, “Submit your business idea here.” Even those people who call us, we send to our website and make them fill out a basic form.

There are only eight questions. Seven are the traditional kinds of business questions you would have: Describe your business to us. Tell us a little bit about your management team. What do you think your financial prospects are? Tell us about your business model. What’s your marketing strategy? The eighth question we ask is, What would you like? What kind of help do you think you need? What would you like SPARK to do for you?

Our staff screens the form, does a preliminary assessment of whether they meet our core criteria. If they do, we usually have a face-to-face conversation with them to get to know them a bit better. That could or could not lead to another conversation that begins with due diligence on whether we’re going to be providing them with services.

Irina: How do you perform due diligence?

Skip: We get paperwork that they are in fact incorporated, that they are registered in the state with good standing, that they have company bylaws, are a real business, and that they are in business, if you will. That’s the core part of our due diligence.

The second is the team. We make sure we visit with the team one on one and make sure they’re engaged. We make sure they’ve got what we call “skin in the game,” which means they’ve already put some of their own money into this concept, that they’re just not asking for a handout, and that they are fully committed.

Sometimes we will take their executive summary and business idea and float it by one, two, or three people in the community who are familiar with that space and say, “What do you think? Does this have merit?” That’s most of the due diligence that we do initially.

Irina: How many people do you have on your staff?

Skip: Relative to the incubators, we’ve got seven.

Irina: So, once a company’s accepted, what do they do next?

Skip: If they’re accepted, if they’re an incubator tenant, we give them the cubicles and the space. If they’re virtual tenants, they sign an agreement that they’ll pay us every month for that address and for access to our conference rooms, and so on.

Then we’ll do an engagement letter with them if we’re providing them with consulting services. That letter basically says, Here’s a description of the company; here are the next milestones that need to be achieved. SPARK agrees to hire X consultant for X amount of money to achieve this milestone for you within a certain period – usually 90 days. You agree, entrepreneur, that you will not leave the community. You’re going to build your business here. That’s about it.

Irina: What are your metrics for success?

Skip: We measure the milestones achieved. Have they locked up their intellectual property? Do they have a customer yet? Have they graduated from the incubator? Have they hired anybody? Do they have a partnership agreement with someone? Did they receive a grant? Did they receive private equity? Have they received a loan? Those are all key signs that they are, in fact, growing. So, those are our metrics.

This segment is part 4 in the series : Business Incubator Series: An Interview With Skip Simms, President And CEO, Ann Arbor SPARK — Ann Arbor, Michigan
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