Austin incubator aims to grow, influence new technology

By Amy Deis Friday, 28 January 2011

http://impactnews.com

Focus shifts to growing clean energy, bioscience industries

NORTHWEST AUSTIN — After quitting their day jobs and borrowing money from friends, the founders of Calxeda entered the Austin Technology Incubator in Northwest Austin, hoping to garner enough seed money to develop a low-power chip for data centers.

Eighteen months later, Calxeda, a chip technology company, graduated from ATI with $48 million in investor funding and moved into a 14,108-square-foot office at MoPac and Far West Boulevard.

Larry Wikelius, Calxeda co-founder and vice president of software engineering, credits the company’s fast-paced success to ATI’s network of contacts and expertise, giving the company the runway it needed to survive, he said.

“It’s pretty rare where you can get that 360-view of what you need to do to build a company in one place,” he said. “They know when to help you and when to let you go on your own.”

Success stories such as Calxeda’s are proof to ATI director Isaac Barchas that the incubator has had a positive effect on the city’s economy and influenced technology in Northwest Austin, he said.

ATI, which operates out of a University of Texas building near MoPac and Braker Lane, has worked with more than 200 companies, which have raised about three-quarters of a billion dollars in investment capital.
How an incubator works

UT started the Austin Technology Incubator in 1989 to spur economic development through entrepreneurship and give students access to a real-world lab for technology entrepreneurship.

Each year, ATI staff meet with more than 100 companies about joining the incubator. A panel of student interns and ATI staff select prospective companies to bring in for a series of interviews.

The application process can take anywhere from three weeks to nine months. The final step is vetting the companies through the success committee comprising five to 10 community members who are either investors or experts in that technology and the customer market the company wants to break into.

ATI only selects about eight companies to join the incubator each year, Barchas said.

He said at any given time, ATI has between 20 and 27 member companies. Througah ATI’s relationships with venture capitalists and angel investors—individuals who provide capital to startup companies—ATI helps companies receive funding.

In 2010, companies in ATI generated $2 million to $3 million in tax revenue and had a $35 million economic impact on the local economy based on capital raised and company revenues, according to a report by AngelouEconomics presented to Austin City Council in December.
Success stories

Calxeda is just one of many companies that has emerged from ATI. Barchas said many are business-to-business companies and not in the consumer market. Other companies include ActaCell, Encore Orthopedics, Phurnace Software and Metrowerks.

At Calxeda, co-founder and CEO Barry Evans came up with the idea of using chip technology that runs cell phones and tablets for data centers that use servers to gather and store data.

The company entered ATI in February 2009 and graduated in September 2010 after receiving $48 million in funding from three venture capitalists, two strategic investors and an Abu Dahbi–backed investment company.

The company started with three employees and had 16 by the time it graduated. The founders want to grow the company to about 60 employees by the end of 2011 and begin production on its chip technology, Wikelius said.

“The skill set we need is based in Austin,” he said. “That’s the other advantage for being here and why we’ve been able to grow here the way we have.”

Calxeda was able to use UT graduate students to assist with market analysis and look at specific target segments for application of the product.

Wikelius said the next step is to build the company’s business side and customer network.
New initiatives for 2011

ATI has focused on information technology, clean energy, wireless telecommunications and bioscience. Clean energy was added in 2001 and bioscience in 2008, and Barchas said staff are trying to focus on those growing industries.

“In looking at the ways we’re having an influence on Northwest Austin, one of them is taking the foundational skill set that we have and allowing that to keep growing and grow into different areas,” Barchas said.

Barchas said ATI teamed up with the Greater Austin Chamber of Commerce on a feasibility study for a wet lab, which is a lab with access to sinks primarily used in bioscience.

He said the study should be finished by late spring and staff are looking at where to locate it and who would run it. Specialized labs often cost $600 to $800 per square foot to build, he said.
Economic impact

After companies graduate, ATI is not able to keep track of how alumni companies affect the economy. It is something that Barchas said he wants to change so ATI will have a better picture of its influence on the local economy.

In the past three years, ATI has helped raise $70 million in investor capital for its member companies. Alumni companies have had $300 million worth of successful exit events, meaning they were bought out.

Susan Davenport, senior vice president of global technology strategies at the chamber, said ATI has been significant in retaining and attracting businesses.

“They’re able to grow them organically and bring new money into the region,” she said.

Technology as a whole makes up 12 to 13 percent of the work force and 25 percent of the payroll in the five-county region. Davenport said ATI is able to lay tracks for job creation in that industry.

Barchas said a number of organizations, including the Austin Technology Council and Clean Tex Foundation, contribute to ensuring the environment for early-stage tech companies is robust.

“You don’t know which ones are going to be the next Google or Facebook,” Barchas said. “Austin would look a lot different if it didn’t have this support.”