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Sunday, 04 January 2015 21:00

Ottawa County incubator to help launch ag-tech innovations

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Executives at GrassRoots Energy LLC participated in an early pilot run for the Great Lakes Ag-Tech Business Incubator, which was recently launched as a nonprofit organization by Ottawa County. GrassRoots Managing Partner Frank VanKempen credited the incubator for helping the company grow from its earliest stages. Executives at GrassRoots Energy LLC participated in an early pilot run for the Great Lakes Ag-Tech Business Incubator, which was recently launched as a nonprofit organization by Ottawa County. GrassRoots Managing Partner Frank VanKempen credited the incubator for helping the company grow from its earliest stages. COURTESY PHOTO

Farmers, food processors and other people with agriculture innovations have a new venture to help get their ideas to market.

The Great Lakes Ag-Tech Business Incubator offers assistance to entrepreneurs involved in agricultural technology — from machines and equipment to software and services — who want to create a business around their innovation.

Formed by Ottawa County as a nonprofit corporation, the Great Lakes Ag-Tech Business Incubator aims to assist innovators across the entire spectrum of the commercialization process, including market research, business planning, vetting and validating concepts, securing patents and financing, and hiring a management team.

Organizers hope the incubator can become a key element to further grow Michigan’s $100 billion agricultural industry.

“Technology and machinery is always on the go and is always changing. If we can encourage some new products or companies that will be making these things to come to Ottawa County or Michigan, it’s a win for agriculture,” said Merle Langeland, a Coopersville dairy and poultry farmer and president of the Ottawa County Farm Bureau who serves on the incubator’s board of directors.

The idea for the ag-tech business incubator originated in 2012 when Ottawa County began looking for ways to drive job growth coming out of the recession. One of the top ag-producing counties in Michigan, Ottawa County eventually settled on a business incubator for agricultural technology.

Launched in December, the Great Lakes Ag-Tech Business Incubator operates virtually. The incubator contracts with county staff to provide direct assistance to clients and refer them as needed to an extensive professional network across the state for help. That help includes brokering office, lab or production space for a client.

Clients can also share their own expertise with each other to validate or improve concepts and test prototypes.

Attorney Kurt Brauer, a partner at law firm Warner Norcross & Judd LLP who chairs the incubator’s board of directors, expects it to draw high interest around the state, from “the bottom of Michigan to the tip of the mitt.”

“Every day in Michigan, someone is coming up with an idea to make the agriculture and food industry work better, work smarter, and help compete with other countries. People are always building better mousetraps,” said Brauer, who co-chairs the law firm’s economic incentives practice from the Southfield office.

“Probably the biggest risk the incubator runs in the next couple of years is being blessed with so many opportunities that we’re really going to have a hard time helping as many people as really need our help,” he said. “We’re probably going to have to turn people away that have great ideas and need incubator services and we may not have sufficient staffing to do an appropriate job helping them out.”

The business incubator plans to hire a business consultant immediately and will expand to three full-time consultants as demand dictates.

Brauer also sees the incubator providing a link between major industries in Michigan: agriculture and manufacturing. Manufacturers can produce promising innovations coming out of the incubator, he said.

“This fits hand-in-glove and really provides a bridge between the top two industries in the state,” Brauer said. “If that means that we can take technology dreamed up here, invented here and perfected here and even have it manufactured here — or manufacture products that we manufacture elsewhere — that would be a huge success.”

Ottawa County commissioners opted to proceed with the formation of the ag-tech incubator after a feasibility study indicated it has potential and that interest in it was high locally. Of the 227 Ottawa County residents who responded to a market study, 95 percent said they believed the incubator was a good idea. Of 166 people who answered the question, 107 of them said they were interested in using the incubator’s services.

The county then launched a pilot project to validate the concept with a handful of startup companies.

One of them was GrassRoots Energy LLC, a Marne-based company that makes machinery to produce ethanol on farms by extracting ethanol molecules that attach to the water vapor that’s created during the fermentation process.

GrassRoots Energy expects to begin selling its machines in early 2015. Frank VanKempen, the managing director and a partner in the company, credits the incubator with moving the business forward and said he strongly encourages “farmers and entrepreneurs with ag technology ideas to connect with this incubator if they want to establish a business and rapidly generate sales.”

For the county, the key to creating the ag-tech incubator was fashioning a business model that makes it financially sustainable. The state provided a three-year, $500,000 grant to support the operation early on, but organizers say their intent is to become self-supporting within three years.

“Everybody has seen incubators come and incubators go, and one of the primary reasons they go is either funding sources dry up or, if it’s being run kind of as a unit of government, when budgets get crunched, the first thing to go are the things that aren’t profit centers,” Brauer said. “After three years, we either are going to be successful, or we’ll try something different.”

Under the Great Lakes Ag-Tech Business Incubator’s business model, clients are not charged a fee for direct assistance from staff, although they would pay for professional services if referred, for instance, for legal help. Outside assistance could come at a discounted rate if the referral is to one of the incubator’s sponsors.

Instead of a fee for service, startup companies accepted into the incubator agree to pay 2 percent of their gross sales. The proceeds then go to support operations. After 10 years, clients can exercise a buy-out option.

The model tightly aligns the business interests of the incubator with clients and makes “our future completely contingent” on the success of client startups, said Mark Knudsen, Ottawa County’s planning and performance improvement director.

“If they don’t succeed, we don’t succeed,” Knudsen said. “If we can’t create profitable, successful businesses with high sales volumes, we shouldn’t be doing this. We will stay in business if they stay in business.”

The incubator also plans to partner with other Michigan counties that want to become members. Partner counties would refer their residents and businesses with innovations to the incubator. Barry County is the first to join as a member and a number of others are interested in joining, Knudsen said.

Organizers of the Great Lakes Ag-Tech Business Incubator have “no intention” of creating a physical space for the nonprofit and intend to maintain it as a virtual operation. Creating a home for the incubator takes the focus off of the core mission and diverts it to maintaining and managing real estate and to generating the funding to support it, Knudsen said.

In the first few weeks after the incubator opened in early December, it received 30 applications from prospective clients, some of which were looking to relocate to Michigan. One came from a company based on the East Coast. Another is located in Chile and works to develop drone technology for agriculture, Knudsen said.

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