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Biz incubator out of room: IU Emerging Tech Center needs $20M or more for expansion

May 8, 2006

In its quest to develop high-tech startups, Indianapolis has established a healthy pipeline. But there's a bottleneck that's poised to become even more congested.

Located at the head of the Central Canal, Indiana University's Emerging Technologies Center is the city's primary business incubator, chock-full of labs and equipment.

Established in 2003, the 62,500-square-foot building is now crowded with 26 promising young firms. A handful have outgrown their space, and are on the cusp of "graduation." IUETC CEO Mark Long reports there's a waiting list of hopefuls to take over their spots inside.

But these fledgling companies aren't yet ready to survive on the open market. With their products still in development, it will be several years before they are positioned to generate profit or, in some cases, even sales.

The companies certainly don't have the resources to buy or build their own digs, and wet labs-facilities equipped with the plumbing, ventilation and equipment needed to allow hands-on scientific research-are in short supply in central Indiana.

"We have to provide the space for them, or they're going to look anywhere they can, which might not be here [in Indiana]," Long said. "That's a serious issue."

The cost of acquiring and retrofitting the existing incubator was $10 million. Long estimates building a 100,000-square-foot building on the north side of 10th Street to accommodate graduating companies would cost $20 million to $22 million.

Back when the original incubator formed, plans for that expansion were included in the land use study by New York-based Beyer Blinder Belle architects.

Development of other buildings in that study has rolled right along-recently, for instance, Clarian Health Partners greenlighted its $44 million training center.

But the graduate business incubator is still gathering dust on the drawing board.

"The question is, 'Where's the funding coming from?'" Long said. "This is a case where we need all the partners we can get."

That's how the original incubator was financed. A team including U.S. Sen. Evan Bayh, U.S. Rep. Julia Carson, Mayor Bart Peterson and IU cobbled together the money.

The university is clearly not going to foot the entire bill for the next phase, either.

"It is everyone's expectation at IU that there will come a time we will build a second building. But I don't think anyone knows when that will be," said IU spokesman Larry MacIntyre. "IU cannot carry that burden by itself. But I think it's long been understood here that we would be part of an expansion of that operation and would play as much of a role as we possibly can."

In interviews with IBJ, nearly every party with a stake in the incubator's success was generally supportive of an expansion, from Peterson to Clarian to the Indiana Economic Development Corp.

"We would certainly be supporters in any way that we can," said IEDC Executive Vice President Nathan Feltman.

But since it's not clear where the buck should stop, each party passes it. For now, the project has no champion.

"It's kind of a 'Who's on first?' situation," Long said.

In the meantime, the incubator's occupants are in limbo. Take Therametric Technologies Inc., which is attempting to commercialize dental innovations. One of its products is a specialized pet food that cleans dogs' and cats' teeth. It should hit the market next summer. Another is a medical device to detect early decay in human teeth.

Therametric has attracted $1.2 million from the National Institutes of Health, matching funds from the Indiana 21st Century Research and Technology Fund. It now has six employees.

Its founder, Dr. George Stookey, helped IU with the original development of Crest toothpaste and has been an innovator in the field since. Stookey said Therametric will soon outgrow the incubator, but he's not sure where to go next.

"We're kind of on the bubble here, where things are starting to happen. I suspect within the next year, we'll have to do something," he said. "You've got to have some wet lab facilities. They don't have to be extremely elaborate, but you have to have some."

Rick Ludwig, CEO of contract researcher Indiana Centers for Applied Protein Sciences, or INCAPS, has grown his business to 17 employees since moving into the incubator in January 2004.

Ludwig has begun to consider his need to find new space in the next 18 months or so. He didn't sound eager to leave behind the incubator's shelter, which offers a host of mentoring services in addition to equipment and space.

Ludwig said a graduate incubator would suit INCAPS perfectly. But he doesn't know whether it will be there when INCAPS needs it.

"We would love to be able to go to a facility managed by the same folks we're working with," he said. "If it's not available when we need to move, of course we have to look elsewhere."

Parking is another potential roadblock to a graduate incubator. Lots of development has occurred around the head of the canal, IU's MacIntyre noted, but no parking garage has been built to support it. And that could create pressure to build a garage on land slated for the graduate incubator.

"That's not a showstopper, but it is a problem," MacIntyre said. "We do recognize that Mark Long has been really successful. His record's very impressive, and that's been noted."
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