Growing Baby Business





Press Articles




Focus News

November 21, 1996                                                                                             Vol. 6 No. 19

Harlan Jacobs believes there are large corporations starting in garages and basements all over.  And he's in the business of helping these startups get off the ground.


Atop a small shelf in his modest Columbia Heights office, Harlan Jacobs keeps a few pictures and a rather unusual object. It's about a foot long and looks more like a giant, off-white tootsie roll with poles protruding from each end.

Jacobs points this device out proudly. "It's a desalination cartridge," be said. "It turns salt water into good drinking water."

The device is a product from a company at which Jacobs served as Chief Financial Officer in the late 197Os and early '8Os. The company, FilmTec, was started by a group of guys and $25,000. It was sold to Dow Chemical Company for $75 million in 1985, and its owners came away with $3.5 million in the end.

"And it created 200 very high paying jobs," Jacobs notes.

Jacobs keeps the device and a plaque commemorating the purchase in his new office, home base for Genesis Business Systems. It serves as an example, a constant reminder of what Jacobs and Genesis can help other companies obtain

He has been called "a one-man economic development force," a risk-taking investor out to help garage technicians with good products get started in the business world  and maybe make a few bucks of his own.

Jacobs' company. a business incubator, is nothing new. Even he admits there are hundreds all over the country. each specializing in helping business get their start.

But using his experience with FilmTec, Jacobs has taken an innovative approach to the incubation idea and turned it into what should he a profitable company. Now in its third year of business, Genesis has helped 10 entrepreneurs get started. His first, Sur-VivaLink Corp., a medical device company, is ready for its first public offering. Another, NT International, Inc., is moving from the free-rent offices at the Columbia Heights business center to a location in Fridley because it needs the manufacturing room.

And Jacobs plans to use the Columbia Heights model to expand to other cities in Anoka County and statewide en route to his long-term goal of a nationwide network of Genesis Business Centers.

"It's like having baby chickens in an incubator," Jacobs said. "A small company is a lot like a baby chicken. You have to keep them warm, protect them, and take care of their needs until they grow up.


Jacobs holds his arms about three feet apart from each other. He is talking about venture capital - money used to invest in a growing company. Most investors, Jacobs said, come in on the far end of the venture spectrum, right before the company is about to go public or be sold.

But Jacobs' model puts money in the companies at the other end, when they just get off the ground. "We're involved in a company within its first 12 months," he said. Md usually, they're operating out of homes or garages by a handful of people or less.

Jacobs leases 10,000 square feet of office space at the Columbia Heights Business Center, and then gives them free rent in exchange for stock in the company.

"Most startup companies need cash, cash, cash," Jacobs said. "The last thing they want is to spend their limited funds on rent."

But many companies need more than that. "In simply working with them, a lot of them ask a lot of questions," he said. Jacobs provides some basic help with the business, and gets the company in touch with potential investors, or business angels who will provide significant startup investments to get the company going.

Jacobs started in Columbia Heights after working out a deal with the Anoka County Economic Development Partnership to help startup businesses in which the fund invested. The partnership is a joint effort by the Anoka County Commissioners and local businesses to invest in small, high tech companies.

Jacobs now believes that working with the community is important in the success of the business centers. While he is working with the communities of Bemidji, Madison (Minn.) and Winona for incubators there, Jacobs is also working with Anoka County to expand the business centers in Anoka and Elk River.

A few good plans

Jacobs talks often about some local success stories. "Some of these companies could be another Medtronic," he said, referring to the giant local medical equipment company that was started in the garage of founder Earl Bakken. He mentions Medtronic several times during a 9(~minute interview, each time talking in hopes of finding a similar entrepreneur.

For all the help Jacobs wants to give, Genesis is still a business. So of the hundreds of business plans he's seen, only 10 have been helped by Genesis.

Jacobs is indeed picky. Each potential client must meet five requirements:

They must have a good, hard-working management team.

The company must have a "truly innovative" high-tech idea. Some companies work in fiber-optics, others are software or medical supply companies.

The company must have the ability to generate significant profits, with a gross margin of 50-60 percent

The product must be protected either with a patent or trade secrets.

The company must have a commitment to either go public or be sold to a third party within three years.

It is the last requirement where Jacobs is protected, and where Genesis earns its profits. He prefers a public offering of stock so Genesis has an option to sell at any time.

"If you had money to invest in the stock market, you want to buy low and sell high," Jacobs said. "We're looking for companies hardly anybody knows. We're trying to get in on the low end."

Success stories

Jerry Cucci satisfied the first requirement when he sold his classic, 1967 Porsche 911S to help start NT International. It was then that Jacobs knew Cucci would be good for Genesis.

Once a company that was running in the homes of its four founders, NT now has about a dozen employees and is moving to a larger facility on East River Road in Fridley. The' company manufactures semiconductor measurement devices.

Its most successful product, a semiconductor sensor called a Teflon Electronic Pressure Transducer, is considered revolutionary in the field and is sold all over the nation.

Cucci was pointed in Genesis' direction when NT needed real offices to show a potential customer back in the summer of 1993. Genesis accepted NT, but the customer never materialized.

"Genesis believed in us early," Cucci said. "I know that, down the road when we look back, it will be very obvious what contribution got us started. It's not so easy starting out, but (Genesis) really helped us get going."

NT's stock value has doubled since the ACEDP first invested, and Cucci said another, large company is talking about buying 20 per-cent for double that value.

Genesis' first company, Sur-VivaLink, manufactures health equipment, primarily a device called a portable defibrillator. The device, used by police officers at scenes of a heart attacks, automatically detects whether a victim needs to be defibrillated. The device is credited with saving the lives of 16 people.

Three years ago, as founder Byron Gilman raised money for the startup, the company was located at his home, with staff meetings conducted at a local restaurant. Three years later, the company is based in Minnetonka, has 50 employees and a payroll of $2 million. About ready for its Initial Public Offering, Gilman is now receiving investments from Medtronic.

"It was two people with an idea," Jacobs said. "It just shows you how quickly something can happen. Sur-VivaLink could be our Medtronic."

But, with NT and Sur-VivaLink, Jacobs thinks five of 10 companies will be truly successful.

"If that happens then I can retire," he said, "(and) go on the speaking circuit."