It was just about a year ago when the 50-something former Marine with more than 30 years high-tech experience decided to "rise above the noise level and put the pieces together" for his own startup: The Santa Barbara Technology Incubator.
Twelve months later, the incubator is busy growing several technology companies and also provides much-needed office space on a short-term basis to high-tech startups in Santa Barbara. Of course, the incubator continues to seek innovative technology companies to nurture to maturity.
Since January last year, Dennis Cagan and company have become a fixture in the Santa Barbara technology community, and they have reviewed hundreds of business ideas that ranged from the ridiculous—a couple of cemeteries, at least one of them "virtual" to potentially lucrative, cutting-edge technology in peer-to-peer networking.
SBTi, as it is known locally, offers up to $1 million in startup financing, operational and technical infrastructure, and mentoring in exchange for a piece of the hoped-for profits when the company succeeds on its own merits down the road.
But Cagan, chairman and chief executive officer for the incubator, has been a little disappointed in the quality of the ideas that were pitched to the incubator during its first year in operation.
"Yes, I think it's safe to say we were disappointed," he said. "We may have just worked through that pool of stuff that was floating around that no one else had done. We hope that we start seeing some that really come to us first."
The incubator helped review projects for the Central Coast Venture Forum last year, and it will be involved again this year on the selection committee.
"We'll see all the business plans before they get to the Venture Forum because we will be helping to evaluate the business plans for the Venture Forum," Cagan said. "So we'll get an early peek." The incubator will also help sponsor UCSB's Entrepreneurship 101 in March, and it is working with CalPoly, Pepperdine and Santa Barbara City College.
Cagan said his group has seen a few decent ideas, but almost no decent management teams," and he wants potential startups to know that starting and growing a business is more than just sauntering into the incubator with an idea tumbling around in your head.
"We saw one (idea) where someone wanted to build the world's largest cruise ship, like a billion dollar cruise ship," Cagan said, rolling his eyes at the memory. "Now we may come to discover someday that that's not a stupid idea, but it's not going to come from some recent college graduate in Santa Barbara without a pot to piss in. It's going to come from Carnival Cruises or Disney. You can't just wake up one morning and say, 'What if?' and then start a business. There's got to be a little more to it."
That "more to it" should include a management team with a little experience, he said.
"We haven't had any really solid, experienced entrepreneurial leaders come to us with an idea. The incubator has had over 300 business plans submitted. My guess is about 10 percent were laughable. Out of 300 we invested in five. As it turns out, only one of them really had a business plan associated with it. So realistically, out of 300 business plans, we only picked one business plan."
Cagan said people pitch ideas that include their skills, the skills of other people they have interested in their idea, and the idea itself, which has been documented to one degree or another. The incubator then lays it all out on the table to see if it can pick out the parts that could make it work or at least give it a high degree of potential.
"If one part has some really unique, innovative technology that, in our judgment, we have never seen or heard about before," Cagan explained, "well that's a pretty big piece, so that would allow us to forgive a lot of other deficiencies, like maybe they've never started a company before, there's only two of them, or maybe they just graduated from high school.
"Or, if one of (the principals) is very, very seasoned, really knows what they are doing, been through it before, started companies, gotten people to give them money before, then we might forgive some of the other aspects, although that type of person generally wouldn't present to us something half-baked."
Cagan said the "absolute ideal" proposal would be a "very tight, well-written business plan, without a lot of fluff, with an executive summary that says what the idea is. It would include a description of the business, an outline of the management team, and some type of financial projections as to how much money it will take, what that money will do, and when they might need money again later.
Finally, the incubator is "looking for a critical mass, if possible, of the people they have involved who sort of know what's going on," he said.
Cagan said he questions whether the incubator is the place where "some kind of breakout thing would come from," but he thinks with the right ideas presented in the right way, the incubator and Santa Barbara have a shot at it.
"We are focusing on incubating companies with a good enough idea that we get to a point in the evolution and maturity that they've got enough assets so that whoever is the breakaway player, the natural thing for them to do would be to acquire this little thing and merge it on in.
"As long as we get up above the noise level with something, it doesn't have to be the best or the biggest because the way the best and the biggest are put together these days is through putting the pieces together."
"You can't just wake up one morning and say, 'What if?' and then start a business."