Incubator

Cathy Swain: Executive Director, Hub of Human Innovation

    Posted in Inside the Hub, News, Spotlight    |    Comments Off

By Robert Gray\ El Paso Inc.

View original El Paso Inc. article

Born to a blue-collar family in an isolated town of 7,000 people in southern Illinois, Cathy Swain is a self-described Midwestern farm girl.

At first blush, Swain might seem an odd pick to lead a technology incubator that aims to turn baby startups into high-growth global companies.

In reality, though, she is probably the perfect pick.

After graduating college, Swain left small-town life for Silicon Valley. Her career has taken her from Wall Street, where she worked in investment banking, to Main Street in Vermont where she worked in economic development.

“I know exactly how it works, and I am not in it anymore,” Swain says of investment banking. “The foxes are all over the chicken coop; there are no chickens left in fact. There will never be the reform there needs to be in that industry.”

In 1999, she withdrew her registration as an investment manager and came to Texas where she watched over the University of Texas System’s endowment and general fund, which amounts to more than $20 billion.

Swain has a fiery personality and radiates optimism.

Since July 18 of last year, she has been imparting her knowledge to entrepreneurs in El Paso as executive director of the Hub of Human Innovation, which opened a year ago.

“I walked into a fire hose,” she says.

Swain started her job with only a business plan in hand and a location in the newly renovated Sotoa Office Lofts in Downtown. She quickly found funding, hired a small staff, obtained non-profit status and approved the Hub’s first clients.

Swain has a bachelor’s degree in economics and a master’s degree in finance from the University of Illinois at Urbana-Champaign. She completed post-graduate studies at the Stanford University Graduate School of Business and is a Chartered Financial Analyst.

She has served as director of portfolio advisory services for Boston Financial Group and chief executive of Northern Community Investment Corporation in Vermont.

Most recently, Swain served as assistant vice chancellor for commercial development and director of investment oversight for the University of Texas System.

Swain sat down with El Paso Inc. in her closet-sized office – there is just enough room for a glass-topped desk, computer and the black exercise ball she uses as a chair – and talked about the Hub’s first year, its future and flying saucers.

______

Q: What brought you to this city to take the executive director position at an upstart incubator?

It’s a clean sheet of paper. The energy, the collaboration here – you don’t see that very often. The people I work with here, we were completing each other’s sentences in a matter of days. The Hub is not associated with any one individual. One of the things that made me grin the most when I got here was there had to be at least half a dozen people say to me, “Well, you know? The Hub was my idea actually.” And I thought, “This is cool. There are a lot of people here that seem to have taken ownership of it.”

When something is a winner, everybody wants to talk about it and we are going to be. Another thing is Mexico and the Latin culture is a passion of mine. I minored in Spanish lit in college and spent some time in Veracruz.

Q: What has the Hub done in its first year?

We have done a lot. First was to secure the funding commitment from the city – that was life sustaining – and the funding from the Texas State Energy Conservation Office, or SECO, that funds the clean energy incubator program.

Q: How much?

A total of $1.3 million over four years from the city and, from SECO, $200,000 over 18 months that ends Aug. 31. This is a proposal to SECO (flips through a pile of paper on her desk) to continue that funding for the next two years, so pray for us.

Q: I imagine you’ve had some late nights putting that together.

Oh, you don’t want to know. I’ve probably got 250 hours in this thing. I’m not kidding.

Q: You got the initial funding. What next?

I finished staffing the Hub, adding three employees, and we started adding clients. We’ve also launched three key programs; I will save the best one for last. First, we have enlisted roughly a dozen partners who have said they will potentially test and become early adopters of technologies developed by startups here, helping to prove the products in the marketplace. That’s a component of the clean energy incubator program.

The second program is the manufacturing partners program. When I came here, one of the things on my agenda was capturing the manufacturing strength of the region. The Paso del Norte is the gateway from Nova Scotia to Cape Horn. I mean, we really have an opportunity to be a pathway to the Americas. We have a lot of manufacturers in the region and Fortune 1,000 companies.

The problem is that those big companies do their own thing and aren’t interested in developing a production model for startups and new products. But there are contract and shelter manufacturers that do target new products and will work with a startup.

So we have identified more than 20 manufacturers here with all sorts of different skills that will actually work with startups.

Q: All in Juárez?

No. There is a mix in Juárez and El Paso. One of the things that really inspired us to get some momentum going behind the manufacturing partners program was an experience that relates to the third, and my favorite, program. That’s the team mentor program.

Q: Based on a similar program at MIT.

Exactly. So what has that got to do with manufacturing? Five of us went to Cambridge for training. While we were there, we attended a team mentor meeting. We were introduced as guests and told the group a bit about El Paso.

Later, one of the trainers comes up to us and he just said, “Shame on you guys. Every one of our ventures, as soon as they’re ready to go to manufacture, they go straight to China. They don’t know your area exists.”

So we actually have an open door to go back to MIT and tell the region’s story, the goal being to launch some MIT companies from here. And we got the exact same response visiting Silicon Valley.

Q: Wow.

I’ve been beating on the doors of REDCo, the El Paso Regional Economic Development Corporation, the city, economic development, anybody really, saying let’s get together and tell El Paso’s story.

And with the manufacturing program, now we can say, “MIT, Stanford. We have more than 20 manufactures down here that could work with your ideas and get them to market.”

Q: What is the team mentor program?

It’s a game changer for us and for El Paso. I see the power of it already. The approach is team mentoring. Sounds obvious, boring, “OK, whatever.” But, suddenly, the startups here have a team to help them. The mentors are volunteers – entrepreneurs, intellectual property lawyers, a venture capitalist from Austin, the head of a hospital group here, some very high powered, very quality, successful people showing up just for them.

I watched two or three of our clients that I would describe as stuck, despite everything the staff might do for them here, and they walk in that room and they rise to a whole new level. The mentors have to sign a document that they will live by a list of principals.

There are strict confidentiality agreements and, if any conflict arises, they have to resign from that team.

Q: So they can’t be an investor in a startup and mentor that startup at the same time.

Correct; they can’t sell their services to it in any way shape or form.

Q: So why do they volunteer?

They want to give back and they actually get a lot out of it. For example, some of the mentors are angel investors and if they decide, “Wow, I think I want to invest in this,” they just have to withdraw from that team. So they get to see an opportunity from the inside they may not have seen before.

It’s social. It’s exciting. Mentors get to meet with their peers and share their knowledge.

Q: How many have volunteered as mentors?

We have 22 already.

Q: You mentioned grants, but how else is the Hub funded?

Fees from clients, which right now are somewhere around 8 percent of our budget. Ultimately, the monthly fees might get up to 10 or 15 percent.

Q: What are the fees?

It’s the cheapest thrill you’ll ever get in your life. We have two types of memberships – resident and affiliate. Affiliate members have access to all of our programs anytime we are open – without a key or dedicated space. Residents have dedicated space, 24/7 secure access and their own phone line.

Affiliate members pay $295 a month. Residents pay $640 a month for an office and $575 a month for a cubicle.

Q: El Paso is not really known as a place for high-growth startups, but is there a startup culture emerging here?

It is a cultural shift that is going to take a long time, but the seeds are there. There actually is an entrepreneurial spirit already here in El Paso, but you’ve got to get people to raise up their heads and look at what is possible. I see that as part of our mission – to wake up the culture to what’s possible in terms of global market opportunities.

The local businesses who want to just serve El Paso County have many, many, many resources. But that’s not what we are about. We are trying to focus our energy on what I call technology-enabled, scalable businesses.

Q: How many clients does the Hub have?

We have 11 right now.

Q: Is there funding available in El Paso for startups?

That’s my world, so I’m like, “Give me that problem, give me good deals and I will find the money.” We have quite a lot of access to capital, everything from angel investors to SBA loans. Two of our companies have partnered with each other and one has money and is helping to fund the other. Good management teams, good jockeys with good products find money.

Q: So far, El Paso’s first venture capital firm, Cottonwood Capital Partners, hasn’t invested in an El Paso startup. While it has invested in other startups in the Southwest, the partners say El Paso startups that have applied just aren’t quite ready. Is that going to change soon?

Yes. That’s part of what our work is – to get the financials ready, to get the pitch ready, to get the management team together. I am going to predict that two or three of our clients will be ready to look for funding over the next year, and we will find it.

Q: Say I’ve got an idea for a startup and want the Hub’s help. What do I do?

Step one, you would call us. Actually, most people come in and we talk, and I’m going to have a feeling right away if you’re a fit or not. Believe me, I’ve turned people away. There is an application process and background check.

Q: How many applications have you reviewed?

I know we’ve reviewed at least 25 companies for the clean energy program. It’s a two way street; some have said they aren’t really ready or aren’t interested. We are looking for companies or ideas that represent some sort of scalable opportunity and entrepreneurs who are really dedicated.

Q: I know it’s only been a year, but can you give me a couple examples of successful Hub startups? Any failures?

I don’t want to name them, but I did have to terminate one contract. It was a lot worse than this but I’ll summarize it this way. The partners were not really being honest with one another.

As for successes, we have a company here called El Paso Roof Care that is a gazelle company, increasing their revenue by at least 20 percent every year for four years.

Q: One doesn’t usually think of a roofing company as a high-growth startup.

Well, they are going to hate hearing you call them a roofing company. I like to say they actually save the lives of roofs. Instead of replacing roofs, they find ways to extend the life of roofs and they do that with green materials.

Another one of our companies is Team Technologies. They have some very interesting technologies that are ready to be commercialized basically in three categories: life science, clean energy and advanced manufacturing processes.

We’ve got LeFran. They are going to take off like a rocket after they get their first products on the shelf, and that is within sight.

We have a brand new client that is going to make flying saucers. They are going to be showing their prototype at Spaceport America, and that is one reason why they’re here with us. They are going to be fundraising over the next year as well.

Q: Wait. Flying saucers?

Jerome Smith, co-founder of MIT’s Venture Mentoring Service, gave a presentation here recently and he showed a video of a flying car as an example of why they don’t try to pick winners.

When the flying car came in the door there everyone went, “Oh boy, here we go,” and five years later the company has a five-year waiting list for the car. That’s a bit like how I view the flying saucer. It’s very futuristic, but I think it is going to go.

Q: Any new startups coming in?

We have one coming in August. It’s awesome. They make prosthetics. I’ll tell you more about them once they are here. They are a non-profit and they make prosthetics for Third World countries.

Q: What has been the greatest challenge for startups in El Paso?

Before Jerome left to go back to MIT, after leading three team meetings for us, he told me, “Cathy, those could be MIT companies. You are seeing the same kinds of things we are seeing every day.” The challenges here are the same as they are everywhere. What I see everyday are people who come with great ideas and no business skills.

Q: What’s your target for the number of successful Hub graduates, say, in five years?

We don’t have any sort of graduation. I’m less concerned about graduating people than I am about continuing to meet their needs while they scale – even when they do an IPO. There are people in this town who have been through an Initial Public Offering who could really help some of the companies here eventually.

Q: I imagine we are a long way from having a Hub startup that goes public.

I would say we are five years away from that.

Q: Really? Five years.

It could happen – five years.

 

Financial frontera

    Posted in Inside the Hub, News    |    Comments Off

Financial frontera: Juárez module creation gets a lift

by Michael Hissam / Special to the Times

View original El Paso Times Article

A binational effort led by the El Paso del Norte chapter of the Network of Mexican Talents Abroad aims to boost regional production of components to Juárez maquiladoras.

Alberto Correa, president of the chapter, as well as Quantum Research of the West Inc., said the El Paso chapter seeks to enable local suppliers to increase production of direct material components to the maquilardoras. This would be done through higher technology matched to component-product needs to warrant a larger share of that supply market.

Direct materials include components that become part of the final product shipped from Juárez to a global base of customers.

These materials represent the value added — what the customers want to pay for in products sold to them. In plain Spanglish: bigger bucks, más dinero, compañero.

“About 2.5 percent of direct materials used in Ciudad Juárez come from suppliers in Ciudad Juárez; El Paso represents about 2 percent. This is a very big problem for the maquiladoras. That means that 95 percent of the materials or components come from other parts of the world. That’s the money!” he declared.

Maquiladoras Juarenses use billions of components yearly. That’s billions with a “B,” mil millones en español. Correa and his group want to make sure more of them could be made here in Paso del Norte.

Correa and representatives of regional Mexican economic organizations last month signed at the Mexican Consulate in El Paso a collaboration agreement that will support the development and transfer of technology to maquiladora supplier development programs focused on Juárez: “We have contact with high-tech companies, with leading universities and leading laboratories, either directly or through third parties. In addition, we have negotiated with the Secretary of the Economy in Mexico for them to support this development. The technology is transferrable and the maquiladora suppliers do not have all the funding needed for this type of effort.”

The amount of funding from the Secretary of Economy has yet to be determined as each company must identify its needs then seek federal help with the funding: “The mechanisms are already set. The government will not supply the entire funding, but they will supply a very important percentage.”

In addition to Juárez, Correa pointed to other opportunities in the state of Chihuahua. He explained that once companies gain the technology to produce, they must accelerate their production activities to meet the needs of the maquiladoras or other customer entities. “In the state of Chihuahua there are several interesting clusters that have to be supported,” he said. “We are talking about the manufacturing cluster in Juárez, which is the main focus. We are also talking about the aeronautic cluster in Chihuahua City, as well as the agricultural cluster in Cuauhtemoc. All those need suppliers who have the right technology.

“We supply the technology so that the locals can manufacture the components.”

Alloys and composites used in the growing aeronautic industry in Chihuahua represent opportunities for the higher-tech, supply-side manufacturing needed for support.

Working from the Hub of Human Innovation incubator in downtown El Paso, Correa, representing Team Technologies of Albuquerque, offers engineering services, technology development, precision manufacturing, instrumentation and controls to companies in the El region. “We plan to become a source of reliable technology for local need,” he said. “We work for the potential integration of a binational facilities, and expect to contribute on a short- to medium-term basis to job-creation efforts pursued by regional policies.”

Concerning the agreement or convenio signed last month, Correa added, “The projects derived from it will constitute a substantial advance in the integration of industry in the region to the global economy through knowledge.”

Michael Hissam is president of Trans-National Executive Communications. He may be reached at michael.tnec@ymail.com

Incubator Help for Business Good

    Posted in Inside the Hub, News    |    Comments Off

Incubator: Help for business good for everyone 08/12/2011

El Paso Times Editorial Board

View original El Paso Times Article

Often, businesses need a little help to make a successful start. And help is available through a business incubator at the University of Texas at El Paso — the Hub of Human Innovation.

The El Paso City Council recently approved giving the hub $1.255 million over four years.

It’s a good way to spend the money, which comes from a new increase in the El Paso Electric Co. franchise fee. That fee is paid by EPEC customers in the city.

A lot of the money will go to help the Medical Center of the Americas, something that prompted city Rep. Eddie Holguin to wonder whether the funds would be “double dipping.” The MCA is supposed to support biomedical innovation, something the Hub also does.

But with El Paso’s emphasis on becoming a medical care and medical research center of international note, it seems logical to sink that money into biomedical research.

The MCA’s strategic location on the border makes it a natural focus of both national and international attention for treatment, research and associated businesses.

The Hub also concentrates on clean energy, biotechnology, defense, automotive and advanced manufacturing — all areas that hold great promise in 21st century business.

It provides office and lab space, business expertise — and how important is that! — and various other resources that can help businesses get going.

The point is to help and encourage business. Businesses employ people, pay taxes and generally play a huge role in local, state, national and international economies.

So the Hub — the incubator — can play a vital role

Why Workshops?

    Posted in News, Workshops    |    Comments Off

Entrepreneurship seminars and programs provide educational content and networking opportunities for clients as well as pre-incubation clients. These educational opportunities for potential and existing clients teach the practical skills needed for a start-up or early-stage business and include requirements for success, determining the market, writing a business plan, establishing an effective management team, identifying barriers to market entry, financing the business, and partnering with venture capitalists.

El Paso’s First Tech Incubator

    Posted in Inside the Hub, News    |    Comments Off

El Paso Inc.

El Paso’s first tech incubator
• Expected to open in Downtown by year end
• EP’s healthy business environment is a plus
• Can it become El Paso’s Silicon Valley?
By Robert Gray

A budding biomedical technology company located in Southern California is considering moving to El Paso. A company exec says the business environment is much healthier here.

“One of the really intriguing things to us is the strong healthcare infrastructure in El Paso,” the company’s vice president for business development told El Paso Inc. He is one of the founders of the company that produces diagnostic and therapeutic devices for critical care.

He contrasts El Paso with the Los Angeles area, where he says the infrastructure to grow a biotech company is seriously lacking.

The VP and the company are keeping their identities confidential at the request of REDCo, the El Paso Regional Economic Development Corporation, and Innovate El Paso. The two groups have been working to recruit the company to El Paso for more than a year.

It is one of 18 technology companies being considered as potential clients for what will be El Paso’s first technology incubator – the Paso del Norte Regional Technology Incubator.

The incubator’s developers say it is the inauguration of a larger vision that includes the development of a technology park in El Paso similar to Northern California’s Silicon Valley.

“What we are really talking about is a change of culture. And Silicon Valley represents that culture, which is innovation and entrepreneurship. It’s the creation of products that can be exported outside of the community,” says Paul Maxwell, executive director of the Bi-National Sustainability Laboratory, located in Santa Teresa, N.M.

The non-profit lab is taking the lead on the project, along with a whole host of partners. The core group includes the Paso del Norte Group, the Medical Center of the Americas Foundation, the University of Texas at El Paso, the U.S.-Mexico Foundation for Science, El Paso’s Economic Development office and Innovate El Paso, also known as the TransPecos/El Paso Regional Center for Innovation and Commercialization.

For the past nine months, Maxwell says, the partners have been working to launch the incubator. They hope to have it up and running by the end of November and are working to lease space in Downtown El Paso.

Headed to MCA
Eventually, they hope the incubator will become its own non-profit entity located on the Medical Center of the Americas campus in what will be the life-sciences research building.

“It will attract private research companies and, right now, most of the research is university based, but we want to be able to take that research and commercialize it,” says Emma Schwartz, president of the Medical Center of the Americas Foundation.

Founded in 2006, the foundation is guiding the development of a campus of medical facilities that includes University Medical Center and the Texas Tech Paul L. Foster School of Medicine.

Schwartz mentioned companies like Merck and Johnson & Johnson as the type they’d like to see at the MCA.

“If we could have a company like that here in El Paso, that means jobs. It could be a whole new industry for our community with jobs that are very high paying. Then, if we do well enough, eventually we could even manufacture in Juárez what we develop here,” she says.

As for the biotech VP in California, he says El Paso would present their small but advanced biotech company the opportunity to become nationally established. With the resources in El Paso, they would hope to grow to an operation with 50 to 100 employees in five years.

“The potential for customers, suppliers, academic research partners, access to banking and investor capital just make El Paso an ideal environment for a medical tech company to grow,” he says.

The MCA Foundation recently hired a team of consultants led by Hammes Company, headquartered in Wisconsin, to draw up a vision and business plan for the life-sciences research building. That’s where they hope to eventually locate the incubator.

With the plan in hand, the foundation can then go out and get financing, Schwartz says.

Three-legged stool
The group considered many different incubator models, says Gary Williams, who is director of the Center for Research Entrepreneurship and Innovative Enterprises at the University of Texas at El Paso. But they finally settled on an operation in Austin to emulate.

The Austin Technology Incubator was established in 1989 and has worked with 200 teams of entrepreneurs, who have raised more than $750 million in investor capital, according to a spokesperson.

The El Paso incubator would be designed to mentor and nurture companies by providing them with office space, business coaching, networking opportunities with potential employees, customers, suppliers and investors.

It would also help fledgling companies develop a business plan.

“We’re part of a three-legged stool if you will. Recruitment is REDCo’s piece of it, retention is the city Economic Development department’s piece of it, and the development of companies is the third leg of the stool and that is what we are about,” Maxwell says.

What is critical right now is attracting more funding. Williams says they would like to have enough capital to run the incubator for at least two years to ensure it doesn’t die on the vine.

“The last thing we want to do as an incubator is encourage these companies, and tell them all the wonderful things that are going to happen, then run out of money. It would not only be ironic, it would be a tremendous disappointment,” says Williams.

He added, “It is clear now, an incubator is not something that would just be nice to have. We have to have this if we are going to change the way we live and work in this community – raise the salaries and improve the quality of life.”

Right now, they have $300,000 from a U.S. Commerce Department grant, as well as $15,000 from UTEP and about $10,000 from Innovate El Paso. They need $1 million over the next five years, Williams says.

Eventually, they expect it will cost about $500,000 a year to run the incubator.

The support from UTEP and Innovate El Paso is important, Maxwell says, because it is not tied up with as many restrictions as the Commerce Department grant.

Five-year goals
According to Maxwell, the incubator will be developed in phases and will start with about 4,000-square-feet of space that will accommodate about six clients. The goal is to double and triple those numbers over the next five years.

The group has put together a business plan for the incubator and identified four key industries in El Paso where the development of technology is most promising: medical devices, clean tech, automotive and consumer products.

“The easiest technologies to develop are those that can be easily linked to university research. That to me is the benchmark or litmus test,” says Eli Velasquez, executive director of Innovate El Paso.

Williams with UTEP says the group chose to focus on technology companies because they found that technology-based startups have the greatest impact on job creation and economic development in the long term.

“We need to bring the average wage up in the city and you can’t do that with something that is not technology based. If you can, we don’t know what it is,” he says.

When the incubator’s first clients begin looking for venture capital, it will be out there says Emily Mendell, vice president of strategic affairs for the National Venture Capital Association, located in Arlington, Va.

“It is a trend that we have been seeing that there is venture capital available particularly at smaller initial rounds and seed stage deals,” she says.

According to Mendell, venture capitalists are putting smaller amounts of money, a couple hundred thousand dollars or so, into earlier stage companies, especially in the technology field.