Small Business Incubator Support

A lot of factors contribute to a vibrant tech economy. Startups have so many disparate and unique needs and, as a result, a broad range of support is required to nurture and grow the earliest stage businesses.

For example, the support for startups in the Ann Arbor-area is second to none. Not only does the region offer a deep talent pool, startups benefit from a range of programs, including non-traditional funding sources like angel funding, grants, microloans, and other business-related services (conference rooms, meeting space, et. al.) at business incubators and accelerators like Ann Arbor SPARK’s Central Innovation Center. Additionally, offering talent assistance designed to help startups find talented employees has positioned Ann Arbor as a destination for innovative people and companies.

And in Ann Arbor, this investment in supporting startups yields big economic results. In the last year alone, the 162 startups that have worked with SPARK have raised $141.6 million and created 150 new jobs. Thirty-seven new high tech startups were created in 2015, and data show that those companies have an opportunity at thriving. For example, since 2006, Ann Arbor SPARK-supported companies have achieved a 72% survival rate compared to 50% and 33% for five and ten years, respectively.

Two companies from distinct industries, SpellBound and SkySpecs, illustrate how being part of a solid entrepreneurial ecosystem can provide significant benefit and how that support helps to attract jobs and investment.

SpellBound, founded by Christina York, is building mobile technology tools, an app used by pediatric therapists, that improve patient satisfaction, reduce procedural costs, and create moments of joy and escape for pediatric patients and their families.  This app provides an augmented reality (AR) that transforms children’s books, cards, and other print materials, into digital, 3D experiences through a smartphone camera. Pediatric therapists use this app to distract kids during painful procedures, help improve their motor skills in a fun way, and provide an escape from an unfamiliar place.

SkySpecs, started by Danny Ellis, is an automated inspection company that develops software to enable drones to conduct visual inspections of industrial structures with its primary focus on wind turbine blades and is compatible and developed for any large structure.  The software enables any technician to conduct an inspection in a fraction of the time compared to other methods with the single push of a button.

Michigan Angel Fund’s investment SkySpecs pushed the company to a nearly $4 million raise, led by Venture Investors and Huron River Ventures. SkySpecs’ drone technology is focused on wind turbine inspection with plans to expand to other inspection applications, like cell towers, power transmission, and civil structures.  SkySpecs also won the Accelerate Michigan Innovation Competition in 2014.

I recently talked to both York and Ellis regarding their respective businesses and how going through an incubator program, such as Ann Arbor SPARK, benefited to their business and start-up success.

Lee:  Talk about the support you received through SPARK, MEDC, others.

York:  Ann Arbor SPARK and MEDC have provided us with so many opportunities for mentorship, funding, finding talent, and gaining greater exposure to the Southeast Michigan community and entrepreneurial ecosystem. SPARK has provided us space, funding, connections to supporting organizations, helped us recruit talent, and given us a safe environment to grow and learn. We wouldn’t have a viable company or business model if it wasn’t for the coaching we received at SPARK’s Boot Camp. SPARK is also where we were connected to our key adviser, Ted Dacko.  MEDC has also been critical in our go-to-market strategy, providing press opportunities and connections we couldn’t otherwise make ourselves.

Ellis:  SkySpecs has received funding from a variety of Michigan sources including business competition wins (Accelerate Michigan 2014, Michigan Clean Energy Venture Challenge), matching funds for grants (NSF SBIR, DOE SBV program), investment through the Detroit First Step Fund, and grants to provide funding for services (First Customer Program, market analysis funding). I am probably leaving out some funding that we have received, but overall SPARK, MEDC, and the rest of the Michigan ecosystem have been an enormous and crucial help to the growth of SkySpecs.

Lee:  You were able to tap into talent resources to support your business. Please describe.

York:  Our company has employed and been fueled by several highly-skilled student interns and contractors, who we found through SPARK programs, events, or connections. Also, as a result of Tech Trek, we were able to connect with four modelers and animators, a skill difficult for us to find in this area. We ended up hiring one of them.

Ellis:  When we were starting the business, all types of funding were attractive to us. The reason we were interested in SPARK and MEDC was both for the funding opportunities and for the mentorship and networking. We were starting SkySpecs immediately out of our graduate programs without any prior experience running a business. The support from SPARK and MEDC was everything we needed to ensure we put the right pieces in place to set ourselves up for the best possible chance at success.

Lee:  What did this access to talent and funding support help you achieve?

York:  Our interns and contractors are impacting the company everyday, challenging the thought process of our strategy and fearlessly executing. Through their work, we’ve managed to establish a distribution partnership with the industry-leading provider of interactive patient care, GetWellNetwork; we’re in sales talks with several top-tier pediatric hospitals who want to use our technology; we’ve engineered (and are filing patents for) new products that will completely change the hospital experience for kids.

Ellis:  The funding helped us get going, helped us raise our seed round of $600k from angels, family, and friends, and helped sustain us through prototyping and early customer deployments when we won Accelerate Michigan. All of these types of funding were critical in our sustainability and growth. I don’t believe we could have done it without this support.  We have received support from Techstars. We participated in the business accelerator in New York City, but have stayed connected to the programs in Boston and Detroit. We have had tremendous support from Michigan based angels and VCs. When we raised our Series A in November 2015, we spent a lot of time looking on the coasts, but found almost all of our support very close to home in Michigan.

Lee:  What are your plans for future growth – hiring and investment?

York:  We’re getting ready to unveil a couple new pieces of content for the app and start trial uses with those at the end of the month. Our larger goal is to be in two more children’s hospitals besides C.S. Mott at the end of the year and begin raising our seed round at the beginning of 2017. With that investment, we plan to round out our development and sales teams.

Ellis:  Right now we are focused on deploying our product to our customers in the wind turbine industry. We just showcased our product at the WindEurope conference in Hamburg, Germany and connected with many potential customers and partners in Europe. We are going to expand the business in the U.S. and Europe while simultaneously looking for new opportunities to grow our technology and expand our capabilities. This will require growing our team, raising another round of funding for faster growth, and executing on our pending contracts.

Lee:  What advice would you give to aspiring entrepreneurs or businesses that have stalled growth-wise?

York:  1)  Don’t be afraid to change your strategy or tactics and try something new; 2)  don’t be romantic about how you make money – you have to learn how to make money because you are growing a company, not a product  3)  Fall in love with the problem you are solving, not the product and 4)  meet everybody. You never know who can help you.

Ellis:  My advice for new entrepreneurs or businesses that have stalled growth-wise is to take a hard look at what you are working on and figure out why it has stalled. We have been through some tough times at SkySpecs, but when we took a step back and looked at the overall picture, we were able to see why we were stalled and what we needed to change to continue to grow. Sometimes this is a very hard conversation with the team or even with yourself, but you have to separate your personal emotions from the needs of the business. There is always a way forward with enough determination and motivation. Resources and time will always be limited, but there is always a way forward if you look hard enough and cut ties with what isn’t working.

Lee:  Regarding growth, what challenges have you had to overcome?

York:  There’s a big learning curve in the healthcare market. We’re learning a lot about how hospital departments work and how they approach new technologies.  While the resources have been an unbelievable help to us, we’re always looking for capable and committed technical talent (modelers, animators, developers) – people who understand augmented reality and can fit into our workflow and culture. We want to anchor the AR market here in Michigan and attracting talent is a big part of that.

Ellis:  SkySpecs had to overcome transitioning from a hardware company to a software company (something that many of our mentors advised early on, but we were adamant we could be both), overcome multiple periods where funding was running low and we had to come up with a solution to keep moving, and overcome focusing on many market verticals to just focusing on executing in wind turbine inspection. It may seem like these are all obvious hurdles to overcome, but they were challenging when we were in the middle of it. This last year has been a huge step forward for SkySpecs in terms of focus, development, execution, and positive traction.