Incubator ‘graduates’ major tenant

Originally published in the Arizona Daily Sun Monday Jan. 4, 2010.
By JOE FERGUSON Sun Staff Reporter | Photo by Josh Biggs

The departure of Senestech late last year from the Northern Arizona Center for Emerging Technologies is both good and bad news for the fledgling small-business incubator.

The graduation of the biotech company to larger facilities near Flagstaff Pulliam Airport was always expected. But its departure has left the 10,000 square-foot, state-of-the art facility on McMillan Mesa only 35 percent full.

And in the short run, this means NACET will be unable to collect enough rent to make the full monthly payment of $7,500 to the city.

But officials with the city and NACET both play down the problem as only temporary and part of a natural cycle for any small-business incubator.

Russ Yelton, president and CEO of NACET, said he was fully aware that Senestech was close to graduating when he took the job last fall and he made financial decisions to deal with the issue.

Primarily, the incubator overpaid its rent to the city in the months prior to Senestech leaving the facility to give it a cushion while it looked to bring in new businesses.

“For an incubator this is typical, this is what you want,” Yelton said. “If you don’t have vacancies every so often then your businesses are not graduating. And you are not doing what you should.”

Yelton also sees the departure of Senestech, which occupied two-thirds of the incubator, as a chance for NACET to make some changes in its client base.

“The good opportunity for us now is it truly gives us an opportunity to truly diversify the clients we have in here,” Yelton said.

And that is a process can’t happen overnight, he said.

He explains that there is a virtual tightrope that a high-tech business incubator walks: While it focuses on “green” businesses that produce high-wage jobs, it also has few areas it tries to avoid.

They include: businesses with high water demands, start-ups that would likely relocate out of the area upon graduation, and those that need industry-specific skill sets not necessarily available in Flagstaff.

So, for Yelton, the need to pay the rent will not dictate which clients to take in.

He said he expects the number of clients to grow significantly in the next three to six months.

A thick stack of yellow file folders on his desk suggests that the empty lab space will not last long.

Two new businesses are already in the process of moving in: Protein Genomics and Sedona Energy Labs.

Yelton said that Protein Genomics is researching ways to grow human skin and blood vessels to be used in wound healing and tissue regeneration. He said the company has already received the first phase of federal funding for the research and will be applying for a second round of funding later this year.

Sedona Energy Labs is working on producing a tracking technology that would allow solar panels to re-orient themselves during the course of the day. He said the technology could improve existing panels efficiencies by 20 percent.

Deputy City Manager Ben Fisk confirmed the city is working closely with Yelton on possible modifications to the lease.

He said the city has complete faith in Yelton’s ability to find new clients for the incubator and the temporary vacancies do not pose any serious budget concerns.

The city and NAU, along with fees charged to tenants and affiliates, underwrite an annual operating budget of about $350,000 a year.

Joe Ferguson can be reached at jferguson@azdailysun.com or 556-2253.

Companies currently at NACET

– Ambature LLC, is developing a new class of materials that improve the efficiency of power distribution while reducing electricity consumption.

– Algae Biosciences Corporation discovers, develops, produces, manufactures, and markets products that originate from marine and fresh water organisms.

– Foresight Wind Energy develops wind energy sources throughout the West.

– Keya Earth focuses on sustainable development strategies for Native American communities.

– Quantance, a semiconductor startup, has developed and patented technology innovations in radio frequency transmission efficiency that significantly increases signal power while requiring less battery power.

– SunWind Solutions produces web-based software for designing renewable energy systems.