Business Incubator Series: An Interview With Skip Simms, President And CEO, Ann Arbor SPARK — Ann Arbor, Michigan (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Can you name some success stories?

Skip: Compendia Bioscience is one company that literally took full advantage every program that SPARK offers.

It’s a cancer diagnostic. It’s a software product that helps drug manufacturers and developers identify the best course of action in trying to cure cancer.

They attended Michigan Technological University. One of the co-founders left the university, became the CEO of the business, focused on it, and went to our bootcamp training. From there [he] started receiving business accelerator services from us, a couple of consulting engagements.

We helped them to find another CEO to replace the professor, to build the business. The professor’s still there. He’s back as CEO now. But that was a very valuable connection for all parties. Then we did another engagement with them. They then applied to our pre-seed fund, which is an investment fund. Companies anywhere in the state of Michigan can apply for [funding], which we match. They’ve already paid that investment back. They now have more than 20 employees. They’ve got customers from around the world and are doing quite well.

Irina: Your primary funding comes from grants, right?

Skip: A lot of grants. Because we’re public–private partnership, we do receive funding for the total organization, not just our incubators. We also receive funding from the government: City, county, and township governments donate to us every year to do economic development for the area. The universities make significant donations to us every year. Corporate donations are made by many corporate leaders in the community.

Irina: And you do have some revenue through the rent?

Skip: If you want to count that, yes, we do have revenues through rent. Then, our investment fund, when we get returns there. So, there’s a little bit of revenue, if you will, in that regard. We have a micro-loan program. We issue a lot of small loans to startups and early-stage companies. When they pay the loans back, we get interest on them. So, we do have revenue in that regard. We consider grants [as] revenue.

Irina: Would you tell us more about your funds and your micro-loan program?

Skip: There’re two funds. The Michigan Pre-Seed Fund is funded by the state. We administer it for all the technology communities around the state for their startup companies. It’s basically designed to provide a coinvestment for companies that are raising their first round of private equity. We’ll invest up to $250,000 one time only as a coinvestment.

The micro-loans, those are loans, straight, subordinated notes of up to $50,000 for companies in Ann Arbor.

There was a statewide micro-loan program that we had, but we went through all the money. We don’t have any money at the moment. That program will probably be reinstituted in 2011, but it doesn’t exist currently. If it does get re-funded, that’ll be a statewide program as well. So, entrepreneur, startup anywhere in the state can apply for that.

Irina: Who usually gets micro-loans?

Skip: Companies that are at that point where they need operating cash. They need to finish the development on their product or their service. They need to finish their website, for example. Or they need to get to that beta product so that they can get it into the marketplace.

It could be a company that is now actually in the market trying to sell. They’re going to trade shows. They’re going to meet with customers. They may be traveling to meet with investors. They may be traveling to meet with other partners. Those are just general operating costs.

There’s no program where you’re going to get a grant to cover those kinds of expenses. These micro-loans are to help companies with those kinds of costs and expenses. Of course, none of these companies are bankable. They don’t have revenue, yet, so they can’t get a traditional loan from a bank. We’re trying to fill that role in the early stages.

Irina: What’s the interest for the micro-loan?

Skip: Twelve percent. It’s a subordinated note. Any other loans that the company may have, now or in the future, get preference over our loan. There are no payments required. The loan is a two-year loan, and it balloons at the end of two years. You just pay us the loan back and the interest at the end of the term. You do not have to make any payments in between.

This segment is part 5 in the series : Business Incubator Series: An Interview With Skip Simms, President And CEO, Ann Arbor SPARK — Ann Arbor, Michigan
1 2 3 4 5 6