Business Incubator Series: Fred Hoch And Terry Howerton, TechNexus, Chicago, Illinois (Part 6)

By guest authors Irina Patterson and Candice Arnold

Terry: If a company is adding value to this ecosystem, we don’t have to charge them cash to be in this space. It’s not formulaic by any stretch of the imagination. It’s a lot more difficult to manage an incubator like this, but it’s a lot more valuable at the end of the day, to do it this way.

It also depends on the time and the availability. If it makes sense for us to bring somebody in and we’ve got some room and we can afford to take a little bit more risk … Again, our revenue model is not just about the real estate. We don’t have to charge for the real estate.

If we’ve got opportunity or upside in corporate development or equity, then we can afford to be a little more risk-taking on the real estate side of it.

Irina: Do you assist companies with funding?

Terry: We do not actively lead the fundraising efforts for the companies. That’s something we leave them to do. We’re a part of that. We help them. We prepare them. We introduce them to potential sources of capital.

But the fundraising piece of this is something that we leave the entrepreneurs to focus on. At the same time, we also know that by just being in a collaborative environment like this, they have a lot more credibility when they go out to do that fundraising than they would if they were just out on the street by themselves trying to raise the capital.

Fred: By being here, they get exposure to a lot of people who are potential investors that they wouldn’t get from just being on the street by themselves.

Terry: Investors are beginning to realize the value of TechNexus as a source of leads. We’re now seeing investors, not just from venture capital firms in Chicago, but from venture capital firms around the country and a lot of private investors, who are hanging out here a lot more frequently.

They realize that just by hanging out for an hour or two at TechNexus, there’s a very good chance that they’re going to stumble across some interesting companies that might otherwise be out sending business plans or doing fundraising, but they’re busy trying to build their companies here.

It’s become an important lead generator for investors who are trying to find companies that are not normally on the radar and to find opportunities at different stages.

We do not have formal demo days. We’ve got a number of events that we host here throughout the month that could be called demo days. They’re put on by [organizations] like the Illinois Technology Association or the Clean Energy Trust or others. TechNexus itself does not organize specific demo days.

Irina: How do you feel about bootstrapping?

Terry: That’s the most important aspect of building a business for a company that’s growing here. That’s why when we say things like “the companies that have grown here have raised $4.5 million,” that’s actually a very small number of companies.

Of the 102 that have launched here, the ones that have actually raised capital like that may be fewer than 20. The vast majority of the companies have bootstrapped, and they’re able to bootstrap by being a part of TechNexus.

That’s the most important aspect of this. We don’t put whole lot of value on companies raising capital. We put much more value on being able to help a company get to revenue, customers, and partners and get into the marketplace. That’s an area where we spend a lot more of our time.

Irina: What do you see as your key challenges?

Terry: I think one of the bottlenecks is that many of the incubation and collaboration efforts we’ve made to date are centered on the facility, what happens within the four walls.

The four walls just aren’t big enough. We’ve got a 22,000 square foot facility across the street from the Sears Tower in downtown Chicago that’s been bursting at the seams for a very long time. We need to expand those walls. We need more room.

Another bottleneck that we’ve seen in our daily efforts that we’re also working on is, How do we reproduce what we’ve done, the matchmaking and the collaborative environment? We are trying to answer this question.

This segment is part 6 in the series : Business Incubator Series: Fred Hoch And Terry Howerton, TechNexus, Chicago, Illinois
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