IN GOOD COMPANY

10 years after relaunch, Youngstown Business Incubator looks back, forward

By ADAM PLANTY

TheNewsOutlet.org

YOUNGSTOWN

The arrival of California’s Revere Data to the Youngstown Business Incubator makes Jim Cossler, the YBI’s chief executive and self-proclaimed “chief evangelist,” thankful in many ways, but one especially.

He now has a company besides Turning Technologies to brag about.

Revere Data’s 2009 decision to come to Youngstown has many looking at the incubator as a national contender. YBI turns 10 years old this year — well, 10 in terms of its current definition.

It actually started five years before in what Cossler calls “a dirty little secret.”

“We were an urban- renewal project disguised as an incubator,” he said.

It relaunched itself in 2000, and in 2001 helped launch Turning Technologies, which produces audience-response software.

More than $12 million in government funds later, that single launch in 10 years is what one national incubator group cites as a knock against YBI.

But those inside and outside YBI say the second decade is set to start in a dynamic way.

Zethus Software and BizVeo are two YBI companies that can be bigger than Turning, Cossler said.

“When we started the incubator, we didn’t have all the resources set in place for these companies to succeed, and Turning Technologies still did well,” Cossler said. “Now those resources are in place and these other companies can benefit from that fact.”

A new definition

It wasn’t until Cossler joined the YBI in 1998 that significant redefining of the incubator began.

The incubator was established in 1995 after the nearly century-old main building donated for the business had been renovated via $1.3 million in federal, state and local government grants.

The YBI moved away from the traditional approach of housing various kinds of companies and announced in January 2000 its decision to focus only on companies that develop software for other businesses.

Ten years since choosing its new direction, the incubator now claims a portfolio of 18 companies, led by Turning Technologies. Turning first joined the incubator in 2001. It was ranked by Inc. Magazine in 2007 as the country’s fastest-growing software company and posted sales of $34 million in 2009.

Betty Jo Licata, dean of the Williamson College of Business Administration at Youngstown State University and YBI board member since 1995, is happy with the incubator’s accomplishments.

“The YBI has served as a catalyst for developing Youngstown’s reputation as one of the top 10 cities in the country to start a business, according to Entrepreneur magazine,” she said.

YBI helps startup businesses by providing them free utilities and office space while companies focus on developing products and services. Once the companies have remained profitable for an extended period of time, they are expected to pay rent for their office space, albeit at a hefty discount.

Space-time-money

The YBI has received more than $12 million in various grants for construction and operational costs over the 15-year span. It operates on a yearly budget of $700,000. Half a million dollars of that comes from the government in the form of grants, while the rest is a mix of private donations and rental income.

The average salary of the roughly 230 jobs at the incubator is $57,000, including Turning Technologies, which now resides in the $6 million Taft Center downtown and pays rent to the incubator.

The Taft Center connects the original YBI building with its other property, the Semple Building.

The three buildings establish a significant presence on West Federal Street, placing the expanding tech campus directly in the shadow of one of the oldest buildings in Youngstown, the Home Savings and Loan building.

The Semple Building was renovated using $1.8 million in federal funds and houses the Youngstown office of San Francisco-based business Revere Data.

While 10 employees are in the offices now, Revere CEO Kevin O’Brien said as many as 100 could be working there in two years. The building is about 40 percent leased, but the incubator hopes to have it filled within a year.

“The YBI, because of its size, can afford to take the time to allow businesses to mature, which is fortunate for them,” said Dinah Adkins, former president of National Business Incubator Association.

“The issue is that once a company grows, it needs the space to do so. Youngstown is ensuring that space is not a problem,” said Adkins.

The NBIA, based in Athens, Ohio, estimates that in 2005, business incubators supported more than 27,000 startup companies providing full-time employment to more than 100,000 workers, generating more than $17 billion in annual revenue.

The NBIA also points to research showing that every dollar of federal funds devoted to an incubator generates about $30 in local tax revenue.

Linda Knopp, the NBIA director of news and information, said that the YBI is below average for the number of companies it’s created.

“But it’s doing well in total sales,” she said. “The average combined client revenue for all the incubators in the United States in 2006 was $16.1 million.”

Turning posted sales of $20.6 million in 2006, single-handedly putting the YBI ahead of other incubators throughout the country.

The tech community

YBI companies are expected to help one another with no expectation of payment beyond having the favor returned when they need a helping hand.

“It’s one of those open-door things, where we’re in a planning meeting and something comes up. We can walk out the door, head upstairs and knock on Zethus’ door and say, ‘Hey come on in, what can we help you with?’” said Alex Milne, BizVeo co-founder and senior vice president of sales and marketing.

“You can’t put a dollar value on that.”

Tony DeAscentis was one of the first employees hired at Turning. He stayed with the company until there were more than 100 employees. Now he’s serving as the CEO of BizVeo and looking to recreate the successful environment he spent years working in.

“We hope that Tony does for BizVeo what he did for Turning,” Cossler said. BizVeo develops specialized streaming video to share information.

DeAscentis is aware of the expectations for him, but said that the downtown area lends itself well to maintaining a good atmosphere for the company.

“Turning, BizVeo, the incubator itself — people like having access to all the stuff downtown,” he said. DeAscentis occasionally meets his son, a junior at Kent State University, for lunch at local establishments such as the Lemon Grove Caf .

The collaboration extends beyond West Federal, too.

BizVeo has been testing its product with St. Elizabeth Health Care Center. It’s worked out well for both organizations, but it’s been extremely beneficial for BizVeo.

“The Humility of Mary Health Partners has signed an annual contract to use our technology,” Milne said. “It’s our first contract, and we’re very excited to have acquired them as clients.”

Selling Youngstown, Warren

The Lemon Grove opened in August of last year and is one of the businesses taking advantage of being so close in downtown Youngstown.

Owner Jacob Harver said the cafe gets enough business from larger companies such as Turning Technologies that it’s worth his time to try and entice them to his establishment on a regular basis.

“I’m thinking of starting ‘Turning Tuesdays’ or something like that where we would offer Turning employees a discount for eating here that day,” he said.

The YBI is doing much to benefit the city’s image, said Mayor Jay Williams.

“The YBI has emerged and continues to be an integral part of the renaissance of the economy of Youngstown,” he said.

The YBI has done well enough that the city of Warren has begun the process of establishing its own incubator targeted at alternative-energy technologies. U.S. Rep. Tim Ryan of Niles, D-17th, said last year that he believes the incubator will be a great establishment in Warren, and points to the YBI as proof that the Warren Energy Incubator can succeed.

“Statistics show that 87 percent of companies that started out in an incubator are still in operation four years later, compared to 44 percent that start outside of an incubator,” Ryan said in announcing the Warren project.

What’s Next?

After roughly $12 million in renovations and expansions, there is still plenty of room for growth.

“Youngstown is fortunate because not all incubators have space available around their area for expansion,” the NBIA’s Knopp said.

In the 2011 transportation appropriations bill working its way through the U.S. House of Representatives, $700,000 has been targeted for YBI to help it expand to a vacant building on Boardman Street. That is where BizVeo would relocate.

Ultimately, growing companies is the primary purpose of the incubator.

In choosing which ideas to bring into the building, Cossler believes it’s important for people to be willing to relinquish a measure of their vision.

“We want people to love their ideas, just don’t marry them,” he said.

The NewsOutlet is a joint media venture by student and professional journalists and is a collaboration of Youngstown State University, WYSU Radio and The Vindicator.