Entrepreneurship 101

MTEC SmartZone helps tech business startups

By Deborah K. Frontiera

CEO Marilyn Clark stands in the MTEC SmartZone’s beautiful conference room in its main building on the Houghton waterfront.

This year, the Michigan Tech Enterprise Corporation, or MTEC SmartZone (affiliated with Michigan Technological University) celebrated its tenth anniversary. The actual date of its birth was somewhere in the summer of 2002, but it took a while to get operations going, so the celebrated anniversary was that of its formal operations.

It is one of fifteen, going on eighteen, SmartZones (or business incubators) in Michigan. Each is associated with a university, but these are fairly loose connections. MTEC SmartZone also is associated with the Keweenaw Economic Development Alliance (KEDA) and operates in conjunction with the cities of Houghton and Hancock as a nonprofit 501c3 organization.

A program held to celebrate MTEC SmartZone included many local, regional, state and national leaders: U.S. Senator Debbie Stabenow, Michigan Governor Rick Snyder, State Senator Tom Casperson, State Representative Scott Dianda, Houghton Mayor Robert Backon, Hancock Mayor William Laitila, MTU President Glenn Mroz and many other business and civic leaders in the Keweenaw area. Four people came from Marquette: mayor pro-tem Bob Niemi, city manager Bill Vadja and city commissioners Mike Coyne and Jason Schneider, all interested in information to begin their own SmartZone.

The fishbone chart used in MTEC SmartZone’s SmartStart program for entrepreneurs helps a person identify possible markets for an idea.

The fishbone chart used in MTEC SmartZone’s SmartStart program for entrepreneurs helps a person identify possible markets for an idea.

Many other local and regional business leaders filled the large meeting room to hear speakers and spend time chatting and networking. (This author sat in the back as a “mouse in the corner” soaking it all in and wanting to know a whole lot more about how SmartZones work.)

In his remarks, Governor Snyder mentioned that in the late 1990s, Michigan was booming, and voiced concern that there was no innovation in the boom times. He was appointed chair of MEDC (Michigan Economic Development Corporation) at that time, where they began to build “the seeds” for the idea of SmartZones.

“That’s why, personally, it’s really exciting to be here… to see an idea that I can say I had some part of helping create, to see it be a living thing. And not just a living thing. It’s got ten years of life; that’s made a tremendous difference in Michiganders’ lives,” he said.

Snyder also said people who start businesses are not fully sane, but they have to go forward if they have an idea.

SmartZones are the place to take an idea and marry it with talented people and infrastructure. In the past, things like the SmartZones were only located in large metropolitan areas. Today’s technology makes it possible to encourage innovation in places like Houghton and Hancock, where people can have a quality of life not offered in large urban areas.

A plaque presented to MTEC SmartZone CEO Marilyn Clark by Michigan Governor Rick Snyder.

A plaque presented to MTEC SmartZone CEO Marilyn Clark by Michigan Governor Rick Snyder.

All those who spoke during the anniversary celebration emphasized the importance of the MTEC SmartZone in bringing new businesses, and therefore, jobs, to the area to the extent that Houghton County was one of three counties in the state with an increase in population in the 2010 census.

During the week following the anniversary celebration, I spoke in depth with CEO Marilyn Clark about how the MTEC SmartZone operates. Clark is the third CEO at the MTEC SmartZone and has held that position for about a year and a half. She grew up in Chassell, attended MTU twice, and then left the area, working for GM and other companies.

In 2004, she was working for Cummins Engine in England, a company that makes diesel engines. She decided to move back to the U.P. and take a job with a company in the SmartZone as its director of sales and marketing. Then she moved into the position of CEO for the MTEC SmartZone.

The MTEC SmartZone offers business incubator services to high-tech start-ups, like office facilities and other resources to build these new businesses. The MTEC SmartZone does not assist retail type businesses. People with retail or service oriented businesses can find similar help through the Jutila Center for Global Design and Business in Hancock, which is associated with Finlandia University. There, thirty-three new businesses ranging from a café and catering service to health and wellness to counseling and an attorney have offices and receive the assistance they need in getting off the ground. But that would be a whole separate story.

3The MTEC SmartZone receives money from the MEDC mostly for high tech, advanced manufacturing, advanced automotive, energy, IT, biotech, and biomedical areas. They have branched out to others: two local community comprehensive lifestyle services––a hydrologist who works on sewer and water projects and outsources her services, and a person with a Ph.D. in biology who assists breweries with yeast and other biological areas of the microbrewing process.

Entrepreneurs usually begin by taking their idea to a five-week program called SmartStart. This is an organized process to evaluate a possible business idea. These workshops are open to the general public at a cost of $500.00 for five weeks. Participants are asked to draw their ideas “on a napkin” as visuals to explain their concepts “to their grandmothers.”

They then present their ideas or proposed products to the other participants who offer suggestions, ask questions for clarification, or brainstorm possible markets.

Clark said sometimes it’s better to fail early, before you invest thousands of dollars and years of work. For example, one participant discovered by the third week of SmartStart that his idea actually had no market and was not worth pursuing. Another participant had an idea to put an antibacterial agent into plastics to prevent people’s skin from picking up germs from plastic surfaces they touched. He thought he’d market his possible product to a soft drink company for its bottles. A more likely market (sit and think about it) would be to take the idea to manufacturers of toilet seats, door knobs, etc.

Participants must answer hard questions, such as: Who is my competitor? And: Is my market big enough? One might think that if there are no other companies offering your proposed product, there would be no competition. But the “status quo” may be the competition for such a product.

Clark said there are, metaphorically, two basic types of products: vitamins and aspirin. You take a vitamin that might make you feel better or that might prevent a problem. When you are in pain, you want an aspirin, and you want it now.

She said, generally speaking, aspirin is easier to sell because the problem and its solution are more immediate. When selling “vitamin ideas” people must be more convinced of the possible need.

Many business ideas are “solutions looking for a problem” and must be developed by creating a demand for the solution.

The MTEC SmartZone evaluates start-up business ideas along two main lines: Is there a viable market for the idea, and are the people with that idea open to being coached?

Most of the companies they have helped launch are high tech companies. This is because these types of businesses take more time to build and need a larger initial investment before they reach a point where they are making enough money to be sustainable, compared to most retail or service oriented businesses.

The payback is that they bring more money into a community since, generally speaking, they create more and better paying jobs in the community than a retail company. Also, this money usually is generated outside the area. A high tech company’s market is often regional and even global.

Businesses helped by the MTEC SmartZone receive thorough coaching in forming business plans, looking for and finding grants, and obtaining financial advice and physical facilities they would not otherwise be able to afford in the beginning.

Client start-ups have access to beautiful conference rooms with video conferencing capabilities. These can create that all-important “first impression” that makes them “look big” so they can attract clients that will allow them to become “big.”

Clark introduced me to Jacob Northey, part of what began as a father and son company whose offices currently are in the “acceleration wing” of the fourth floor of the Jutila Center for Global Design and Business. This building is a bold new use for the old St. Joseph’s/Portage hospital building in Hancock. The MTEC SmartZone owns the fourth floor.

It was with a smile that Clark told me the floor used to be the maternity wing–––an appropriate metaphor for birthing new businesses. One would never think of hospital rooms when looking at it now. Rooms of about 125 square feet have been renovated to become one- or two-person offices complete with storage areas, and windows that provide a spectacular view of Portage Lake with Houghton and Hancock on each side.

When a company outgrows these offices, they move into the “incubator suite” (which was the old baby nursery area and also would never be recognized as such now). This area has four connected office rooms that allow for business expansion. When a new business outgrows that area, it moves to the “acceleration wing,” with even larger office space.

Once a business reaches twelve to fifteen employees (or it grows about a million a year in revenue) it is ready to “leave the nest” and be a truly independent business. The rent these companies pay may be a bit higher than they could get immediately “on their own,” but the services they receive are more than worth it: a business coach and advisory board, help with human resources issues, client funding, help obtaining patents, marketing, finances, loans, planning, grants and finding equity.

The Northey business now has a dozen employees and is just about to move into its own location. As we stood there, Clark talked about upcoming press releases and meetings. Northey told me, “It’s been great. We’ve always had ‘just in time’ service with sales training, human resources and marketing. It’s business with an ‘easy’ button––not that any business is ever really easy; it’s always a lot of work.”

The SmartZone has two conference rooms available to client companies, one that seats six to eight, and another larger room, both with video conferencing capabilities; a kitchen space; phone service, copy and fax machines; even a shower in one of the restrooms for people who like to exercise on their lunch break and need to clean up for an afternoon meeting.

The MTEC SmartZone also recruits companies to open satellite offices in Houghton. These companies are interested in the abundance of engineering students at Michigan Technological University.

Such companies hire students as interns and often keep them on full-time upon graduation. The hope is that these companies will like the amenities available in the area and the high quality of life in a small town, so they will want to stay and expand further.

The MTEC SmartZone has space in three different buildings: the Powerhouse by Houghton/Hancock Lift Bridge, its main building on the Houghton waterfront, and the fourth floor at the Jutila Center. The main building was once the Cohodas-Paoli warehouse. Then it was renovated for use by UPPCO where some 300 people once worked.

Michigan Technological University bought the building from UPPCO and obtained an EDA grant of more than $1 million to remodel it. MTU has the top two floors and MTEC SmartZone leases the first floor.

Over its first decade of operations, the MTEC SmartZone has received, and used to help others, some $4 million in building grants, $3 million in program grants, and $500,000.00 in client funding. These funds have helped ten companies “incubate,” ten others “graduate,” sixteen preincorporated companies and eight people who went through the SmartStart program just this year (and some fifty last year).

Clark counted a total of ninety-four companies MTEC SmartZone has helped in its ten-year history. That’s a lot of new businesses and jobs.

But that’s not all. Clark said her vision for the MTEC SmartZone future is a goal to create 750 more jobs in the area. MTEC SmartZone has two volunteer boards to help accomplish that goal. One is the local development and financial authority, which has three members from the Houghton City Council, three from the Hancock City Council plus chair Dan Crane. The second board consists of nine people and works on strategies and operations.

Personally, Clark sees her job as CEO as her “swan song” and the job she’ll keep until she retires. She and her husband have three grown children––all working productively––and she has two sisters who live in the area. It’s fair to say that she would not want to do anything else or be anywhere else.

Clark’s leadership and the other talented professionals at the MTEC SmartZone will continue to help new businesses, innovate, and find creative new uses for old buildings for many decades to come.

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