Local business incubator moves in with some of its clients, but its finances remain shaky

By BENNETT HALL
Gazette-Times business editor

At 15 months of age, grass seed broker Columbia Seeds didn't want to leave the nonprofit incubator that had nurtured its growth, but it had no choice. The Business Enterprise Center, one of the last such facilities in the state, was shutting down — at least temporarily.

The BEC had been losing tenants ever since losing its lease at 800 N.W. Starker Ave., its home since 1988. The center planned to reopen in new quarters in Philomath's Lakeside Industrial Park, but construction there has been delayed. It could no longer afford to stay open at the old site, and no suitable temp space had been located.

So Columbia founders Tom Pape and Scott Harer were thrilled when they secured offices at the Grant Avenue Professional Business Center at 895 N.W. Grant Ave. They persuaded four of their old BEC mates to join them at their new address: Pathworks Inc., Andrew Dwight Design, the Corvallis-Benton County Economic Development Partnership and the management of the BEC itself.

"We decided to come over as a loose consortium with shared services, continuing the BEC model," Pape said. "It's like the chick incubated the hen."

It's a far cry from the glory days, when the BEC housed as many as two dozen fledgling businesses ranging from tiny startups to emerging powerhouses such as Evergreen Technologies, Sanda Communications, ViewPlus Technologies and Green Pasture Software. And, despite some recent infusions of financial support, it's far from clear whether an incubator that has helped close to 100 businesses get off the ground will survive its own crash-landing.

The good news is the BEC has recently landed some new sources of support. Just this month, Hewlett-Packard Co. gave the center a $15,000 grant, which was matched by the same amount from Benton County, according to County Commissioner Linda Modrell.

Modrell, who sits on the BEC's board of directors, called the money "bridge funding" to help the incubator survive until its new building is finished. BEC-based companies have generated a lot of jobs over the years, and Modrell said the county wants to encourage more of the same.

"We think it's a good investment," she said. "It's not charity."

It's also not enough, by itself, to keep the BEC running for the coming year. Bill Ford, the incubator's transition manager, said his budget calculations include fees for shared services such as reception, mailing and use of office equipment from all the tenants at the new "mini-BEC." But one tenant that was supposed to be part of the consortium has decided to go it alone, Ford said, leaving him with a shortfall.

To fill the gap, Ford hopes to sell the BEC's sole tangible asset — the collection of now-empty modular buildings on the incubator's old site. He also plans to ask for some city funding.

Also this month, the BEC received a previously announced $600,000 federal grant to help finance the construction of its new home. Obviously, that's a big boon — but there are strings attached to the money.

For one thing, the grant contains language that suggests any money collected by the BEC — such as rent — would have to be passed on to the government. The county counsel is checking on that with the Oregon Economic and Community Development Department, which brokered the grant, and Modrell expects the matter to be cleared up shortly.

"It wouldn't make any sense," she said of the provision in question. "I'm thinking it's going to be fine."

But another proviso may prove more troublesome. The grant requires the BEC to have an ownership interest in the new building at Lakeside Industrial Park, and that presents some problems.

Lakeside developer Dan Desler plans to erect a 40,000-square-foot light industrial building at a cost of about $4 million. The BEC would occupy half the building and would be responsible for leasing out the remaining space to non-incubator tenants at market rates.

"Lakeside is a blessing and a curse," said Larry Plotkin, a Hewlett-Packard employee who sits on the BEC board.

"It's going to be a beautiful building that sends the right message," he said. "The downside is it's going to be an expensive space."

The plan would pencil out for the BEC only if the building is completely leased, Plotkin said. If some spaces go unfilled, the interest on the building mortgage would crush the BEC's fragile financial structure.

The solution, he said, is to raise enough money to buy the building outright. The board is casting about for additional funds to make that happen — not only from government agencies but also, perhaps, from some of the entrepreneurs who started out at the BEC and went on to considerable success.

Plotkin's hoping they'll remember how the BEC helped them stretch their wings — with shared services that helped them present a professional image while keeping their costs down, with savvy advice from veteran board members and, above all, with the almost-magical synergy that comes from cramming a bunch of budding capitalists together in the same building.

"You can't discount the value of having all these people in one place," he said last Monday, moving day for the BEC management and some of the incubator's last remaining tenants.

"Hallway alchemy is one of the major things we have here."

Plotkin figures the board has a year to raise enough money to buy the Lakeside building outright. If it can't be done, he says, the directors will find some other way to keep the incubator alive, "because the concept of the BEC is more important than the location."

In the meantime, though, the ongoing uncertainty continues to take a toll, both on the struggling startups that look to the BEC for support and on the people, like Ford, who struggle every day to support the BEC itself.

"The turmoil is just moving the goalposts every month," Ford said. "It's Chinese water torture for me."

Bennett Hall is the business editor for the Gazette-Times. He can be reached at 758-9529 or hallb@gtconnect.com.