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Grants for entrepreneur programs to end

Updated: November 9, 2012 - 3:57 pm

Posted: November 2, 2012

By Lydia Wheeler

lydia.wheeler@insidebiz.com

Federal funding that helped foster a regional entrepreneurial ecosystem is about to run out.

In 2011, the U.S. Economic Development Administration awarded the Hampton Roads Partnership half a million dollars. The cost-sharing grant, split into two $250,000 payments over two years, went to Innovate!HamptonRoads, a multi-faceted partnership initiative focused on growing businesses locally.

Innovate!HamptonRoads used the grant money to support five innovation centers, or incubators - the Hampton Technology Incubator, the Franklin Business Incubator, the Virginia Modeling Analysis and Simulation Center, the Old Dominion University Business Gateway, and the James City County Business and Technology Incubator, which is supported by the Technology and Business Center at the College of William and Mary.

Each incubator was given $25,000 a year for two years, which each matched by providing services to help startups open locally.

The grant also paid the salary of Rick Lally, executive director of Innovate!HamptonRoads.

Come April, however, Lally said the grant expires, leaving him and the program without funding.

"We've applied for a couple of grants through the SBA [U.S. Small Business Administration] and the EDA and have not been successful," he said. "There's no reason the U.S. government should be supporting this stuff long-term. This should be a public-private venture."

But some incubators, like the one in James City County, are reliant on grants.

"I need money like that to survive," said Bill Bean, who runs the county incubator as director of the Technology and Business Center at the College of William and Mary.

Without money, the future of the incubator network and other programs of Innovate!HamptonRoads are uncertain. Economic gardening is one.

The concept, which first sprouted in Littleton, Colo., nearly five years ago, focuses on using existing businesses to grow an economic base and create more jobs.

The idea is to help relatively small but steady companies expand within their market and to new markets rather than helping startup companies that easily fail or outside companies that can move operations elsewhere.

Innovate!HamptonRoads put five companies through a pilot of the privately funded program last fall.

After showing great success, Lally said another six companies were chosen for the first official round. They have either finished or are in the process of finishing now.

The group of six are AVID LLC of Yorktown, Command Post Technologies Inc. of Suffolk, Systems East Inc. of Hampton, Unitech LLC of Hampton, Universal Laboratories Inc. of Hampton, and xTuple LLC of Norfolk.

Since then, Lally said he's been trying to gather enough resources to send more businesses through the program.

Both Virginia Beach and Hampton have pledged $45,000, enough to send 10 businesses from each community through the program.

To be chosen, companies must have between six and 99 employees and generate at least $600,000 in revenue, depending on their location.

Companies must also show the potential for growth. As previously reported, studies have shown that companies fitting this criteria have the best chance to generate more jobs and higher sales than larger companies.

Innovate!HamptonRoads also assists in other initiatives. In the works now - a mentoring group of investors and an angel fund to help finance startup technology businesses.

Lally said effort is being made to bring back Tidewater Venture Mentors, a group that formed in the late '90s to prepare companies to seek seed capital, but failed within a few years.

The new initiative, Lally said, would be called the Hampton Roads Venture Mentors and the capital raised, the Angel Investment Fund.

Marty Kaszubowski, director of innovation strategies for Kaufman and Canoles Consulting, has been working on creating a fund to help with seed capital for local companies, Lally said. Bound by Securities and Exchange Commission regulations, Kaszubowski could not say whether such a group or fund is forming.

"It's been very difficult for forever for startup companies to find seed capital and I'm not talking about $50,000 or $5 million, but half a million," he said. "It's been that way since the dawn of time. There are several efforts under way to try and fix that."

The creation of First Landing Innovation Partners, a seed capital fund, is another project in the pipeline.

Lally said Innovate!Hampton-Roads is working with Thomas Flake, director of the Peninsula Technology Incubator, to gather investors, which could help the top 10 business prototypes discovered at Start Norfolk and Start Peninsula, happening later this month, get off the ground.

The plan, Lally said, is to give each entrepreneur $20,000 and send them through a three-month mentor-intensive, accelerator program.

"The $20,000 depends on sponsorship efforts," Flake said. "Right now it's about $10,000."

In the accelerator program, Flake said entrepreneurs will form business and marketing plans, create a prototype and gain a customer base. The goal, he said, is to make them more attractive to outside investors.

Lastly, Lally said Innovate!-HamptonRoads is working to create Business Connect. With the help of the Hampton Roads Partnership's 70 company members, Lally hopes to connect the businesses created through Flake's program to the proper markets.