Virtual incubator seeks bricks and mortar office site

FORT COLLINS –The Fort Collins Virtual Business Incubator is ready to get physical.

The incubator, founded in 1998, wants to take over the former city of Fort Collins office building at 200 W. Mountain Ave., which now stands vacant.

In a proposal to city officials, the virtual business incubator has asked for discounted rent in the 6,500-square-foot building. In turn, the incubator could rent the space at below-market costs to startup businesses.

“We are taking a serious look at it,´ said Fort Collins City Manager John Fischbach. “I can’t make any type of commitment ?until we talk to city council and do an analysis of what the benefits are.”

The 200 W. Mountain space became vacant after the city opened its new office building at 215 N. Mason St. City officials were planning to seek a short-term tenant in the building; long-term plans call for tearing the building down to make way for a performing arts center.

If the city accedes to the request, the incubator would convert from its virtual status — an incubator without walls — to a conventional incubator facility.

Business incubators, a concept that gained popularity in North America during the 1990s, are business-assistance organizations intended to spur the growth of new companies.

Typically, the incubator provides low-cost professional services, such as legal aid, accounting, management consulting. Qualified companies also receive space in an incubator facility at reduce rents.

The city of Fort Collins, then lacking funds for building, established the virtual incubator model in 1998. Client firms could get access to the same professional services, but needed to provide their own working space.

In its virtual existence, the Fort Collins Virtual Business Incubator has helped to shepherd 15 technology startups. Those firms have created 63 jobs at an average salary of $71,000 and raised $30 million in equity capital.

Still, a physical incubator could be meaningful because it eases the burden of rental costs, which crimp cash flow for a young business, said Kathy Kregel, executive director of the virtual incubator.

Theoretically, incubator companies also gain from interaction and collaboration with other startups.

“It’s a great recruiting tool” for the incubator, Kregel said. “You can kick the tires.”

Kregel has cast aside concerns the incubator would compete with commercial landlords.

“The more I thought about it, the companies going in there (the incubator) would not be in position to rent commercially available space. Basically, all we’re doing is pulling them out of garages.”

The 200 W. Mountain building could accommodate up to six new companies at a time, said Mark Forsyth, a member of the High-Tech Network, a private group of high-tech professionals in Fort Collins attempting to stimulate job opportunities.

The High-Tech Network helped Kregel develop the “incubator with walls” proposal to the city.

“I don’t know of any other viable way of making this happen,” Forsyth said. “Kathy has done a lot of investigations. The financial model just doesn’t work if you need to lease commercial space.”

As proposed, first-year incubator tenants would pay 50 percent of market rate — full price for a similar building is $10-$12 per square foot. Rent would increase to 60 percent of market in the second year and 70 percent in the third year.

The rent structure is “fairly consistent” with the discounts the incubator now provides on other services, Forsyth said.

Forsyth said the facility would benefit downtown Fort Collins by creating more activity for restaurants and shops. He also suggested Fort Collins should respond to the opening of a private incubator — Huang’s Pro/Tec Suites — in Loveland.

“I know some local startups that are looking at that,” he said. ” I guess it would be in Fort Collins’s interest to keep some of these startups in town rather than have them move to Loveland.”

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