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Star Tribune                      Monday                                    JULY 29, 1997

He helps high-tech firms get started

 Harlan Jacobs is a one-man economic development force

 


Dick Youngblood

Harlan Jacobs, a moderately successful private investor with a highly developed sense of adventure, has transformed himself into a one-man economic development force with a truly innovative approach to helping high-tech companies get started.

It's an approach, honed in the Twin Cities area during the past three years, that he's now endeavoring to export to smaller Minnesota cities seeking to expand their economic base.

 

What Jacobs did in 1993 was found a for-profit business incubator company called Genesis Business Centers Ltd. His idea is to swap shares in selected high-tech start-ups in return for a year's worth of office space and utility payments and such services as management consulting, financial counseling and introduction to potential investors.

"I tried to interest some venture capitalists, but I couldn't get anyone to believe in my idea," said Jacobs, 47. "So I decided just to go ahead and fund it myself." It has turned out to be about a $200,000 decision so far.

Joint effort

Using cash "harvested" from a couple of fortuitous investments made in the mid-1980s, he leased 10,000 square feet of space in a Columbia Heights office building for a Genesis incubator and cut a deal to begin assisting start-ups in which the Anoka County Capital Fund had invested. The fund, aimed at helping high-tech companies get started in Anoka County, is a joint effort of the county commission and area businesses.

The result has been to give a handful of start-up companies a critical lift at a vulnerable time in their history, said lames Grabek, whose four-year-old company, Comedicus Inc., spent a year in the Genesis program. (The company soon will introduce to the European market a device that delivers drugs into the sac around the heart to provide more effective treatment of cardiovascular dysfunction than current intravenous methods.)

"[Genesis]  meant that we could spend scarce cash reserves on product development rather than rent and utilities," said Grabek, whose entrepreneurial credentials include co-founding GV Medical with Manny Villafana one of our most prominent developers of medical devices. The savings on rent weren't the only benefits, he added: The incubator also meant "getting the development team out of their basements and together in a business like atmosphere."

Status report

Throw in the potential investors Jacobs kept bringing through on tours, plus the moderate-priced professional services he located, and the result was to "give us the breathing room we needed to grow," Grabek said.

The impact after just three years is reflected in a comparison of the four companies in the incubator program and the five that have "graduated" after a year of assistance. Consider:

The incubator companies have a total of nine employees and project 1996 revenues of just $600,000, Jacobs said.

The companies, which Jacobs selected for their "high potential," include designers of a bioartificial liver for use by patients awaiting transplants, a dual-control microscope for use in microsurgery, a personal security device and a software system that automates the collection of medical and pharmaceutical data for clinical studies.

Star graduate

The graduates have 75 employees and anticipate total revenues of $4 million to $5 million this year. The companies include Comedicus as well as the developers of a fiber-optics sensing and control system for use in hazardous industrial environments, a line of specialty pumps for medical devices and a specialized printed circuit board that gives multimedia and video conferencing capabilities to ordinary PCs.

The star of the graduating -class, however, is SurVivaLink Corp., developer of a rugged, inexpensive automatic heart-defibrillator for use by emergency-response teams. The company, with revenues that are expected to triple to nearly $3 million this year, is poised to complete a public offering soon at $6 to $8 a share.

At that price, the shares Genesis accumulated in return for the year SurVivaLink spent in the incubator would be worth about $70,000. By comparison, Jacobs figures he spent about $15,000 on rent and utilities for the company.

With the Columbia Heights program humming smoothly, Jacobs has set his sights on out state expansion of the Genesis concept. The strategy is to find startup companies willing to consider outstare locations in return for expansion capital invested by the host cities.

Cities sign on

That should not be much of a problem for Jacobs, who said he's accumulated "hundreds of business plans" since he started Genesis, "many more than I could afford to pursue on my own. Many of them would make "solid investments" for out state communities, he said.

If necessary, the companies would be incubated at Genesis centers that Jacobs would develop in the Twin Cities area, with its ready supply of high-tech expertise, then transplanted to rural Minnesota when they're ready.

Economic development organizations in three Minnesota cities -- Madison, Elk River and Bemidji -- recently agreed to pay $5,000 each to retain Jacobs as a consultant  and  matchmaker.  The groups either have raised, or are raising, an equity investment fund to attract cash-hungry prospects to their cities.

Said Jay Novak, commissioner of the Minnesota Department of Trade and Economic Development: "It's truly an innovative idea. with some real potential" for benefiting both rural communities and emerging high-tech companies.

Copyright 1995, Star Tribune.  Reprinted with Permission of the Star Tribune.  No further re-publication or redistribution is permitted without the written permission of the Star Tribune.

 

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