MAKING the GRADE? UM's Technology Advancement Program gets mixed reviews from its fledgling alumni

April 13, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

At the tender age of seven years, the University of Maryland's Technology Advancement Program is considered an old-timer among business incubators. Yet even its director can't yet judge whether it's an unqualified success in nurturing new companies.

No company has been out of TAP for more than five years, so it's hard to say how many participants will survive, according to director Richard B. Frank. "Until they go five years on their own, it's anybody's guess," he said.

Still, some companies that have been through TAP have very strong -- and contrasting -- opinions about it.

Some say their time at TAP gave them much-needed credibility, access to research facilities and cheap office facilities.

But others say the incubator's comfortable, safe environment has made companies reluctant to enter the cold, cruel business world. They also criticize a requirement that they turn over a small percentage of their stock to the university -- which TAP says it will use to support the program.

TAP, which took in its first company in May 1985, is one of the oldest incubators in the nation, according to Dinah Adkins, executive director of the National Business Incubation Association. Of about 450 business incubators in the U.S., about 65 percent were established in the last four years.

And TAP is one of the better incubators, Ms. Adkins said. "We would consider it one of the top college incubators in the nation."

Situated in a collection of trailers on the College Park campus, TAP has enrolled 30 businesses. Of those companies, 11 are still in the program, 13 have graduated, one was acquired by another company, and five dropped by the wayside before graduating from the program.

For $7.50 a square foot of office space, the program provides young companies with access to university faculty and students, research facilities, instruction on running a business, access to sources of capital and everyday business support, such as secretarial service and copying machines.

TAP also has helped struggling companies get grants and loans, including Maryland Industrial Partnership awards.

The program costs about $300,000 to $350,000 a year to run. About $112,500 is covered by the rental fee charged participating companies. The rest comes from the university.

Most of the 13 companies that graduated from the program have remained in business. But they have only been out a few years; the first graduate left the program in 1988.

National studies show that about 80 percent of the companies that graduate from incubators survive for more than five years, Mr. Frank said. In contrast, about 80 percent of new businesses in general fail in the first five years, he said.

But incubator companies should have a better chance of survival, because they are carefully screened. TAP, for example, selected 30 companies from about 200 applicants.

TAP's corporate alumni and companies still in the program already have had an economic impact, generating 216 full-time and 76 part-time jobs, as well as 44 part-time jobs for students.

T. Venky Venkatesan, president of one of the companies in TAP, said the program compares favorably with another incubator he was working in at Rutgers University in New Jersey. TAP is "certainly in a better position than Rutgers because it has been around longer," he said.

Mr. Venkatesan's company, Neocera Inc., is involved in ceramic coatings used in electronic devices. He brought his company to the University of Maryland incubator in August 1991 when he took a position with the university's Center for Superconductivity Research.

But Dr. John O. Rundell, president of Molecular Toxicology Inc. of Annapolis, criticizes TAP's requirement that participants grant 2 percent to 5 percent of their stock to the university.

The stock requirement is an irritant because it implies the university will continue to have a say in managing companies that leave TAP, he said. However, companies can eliminate that particular concern by issuing the university non-voting stock, he added.

Harvey S. Fineman, president of Micronet Software Corp. of Silver Spring, is concerned that the program may be too $H comfortable for participants.

He had firsthand experience with this problem, being in the program for five years -- longer than any other company. "If I was on the outside, I would have made it quicker," he said.

Still, he said TAP allowed him to "accomplish a lot with fewer dollars."

Mr. Frank, the TAP director, acknowledges such concerns.

TAP tries to push out its offspring after three years, but this can be extended if necessary. Micronet, which makes software for computer document imaging, would have gone under if it had been pushed out any earlier, Mr. Frank believes.

The requirement of company stock or stock options is an effort to make the incubator program self-sufficient, so that it does not continue to rely on state funds. "It is not unreasonable for the company that goes through the program to help that program later," Mr. Frank said.

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