Title	Hatching Start-Ups
Date:	8/17/2000
Author:	Maria Zate
Source:	InsideVC.com

Every entrepreneur wants to launch the next big thing, and savvy investors want a piece of the action early in the game. Bringing these elements together is the mission of longtime entrepreneur Dennis Cagan, chairman and chief executive officer of the Santa Barbara Technology Incubator.

"We take two raw materials, entrepreneurs and new ideas. We invest in them, bring them to our factory here, add our secret sauce, and hope that in three to nine months we'll have shaped them into a well-packaged start-up company ready for its first round of venture capital," Cagan explained.

SBTI invests from $250,000 to $1 million in high-tech ideas to help turn them into viable companies. And it touts "full-service" support -- providing entrepreneurs with office space in downtown Santa Barbara, administrative assistance, all the necessary office equipment, and the most important resource of all, said Cagan -- the guidance of an experienced management team.

In exchange for nurturing the fledgling firm, SBTI gets a piece or all of ownership and hopes to cash out big time when it sells its interest to venture capitalists.

"Twice what we paid isn't enough. We want to get five to 10 times what we've invested," Cagan said.

Cagan hatched the incubator idea last November and moved quickly to get his own start-up off the ground. Within six months, he was able to attract more than $6 million in financing.

"We raised the largest amount of seed capital ever within the Tri counties," he said.

The funding came from investors such as Compaq, Silicon Valley Bank, Santa Barbara Bank & Trust, Montecito Bank & Trust, the Nida & Maloney law firm, and individuals -- most from the Santa Barbara area. By May 25, the company opened its doors.

"Our start-up is an example of what we can do for other companies," he said. "We're eating our own dog food, as they say."

Cagan's entrepreneurial entrees have served him well over the last 30 years. He's been involved with some of Santa Barbara's most successful technology firms, including Wavefront Technologies, Software.com, Commission Junction and Supply Solution.

Since setting up shop, SBTI has processed about 150 applications from businesses, and it hopes to launch about a dozen firms each year. Entrepreneurs hoping to take refuge under SBTI's wing must submit a business plan and must be willing to operate from Santa Barbara. Within about 10 days, an applicant finds out if SBTI has any interest.

Two companies so far have caught SBTI's attention and funding. One is Ants.com, a Web site that matches free-lance workers with employers. Founded last September, Ants.com is backed primarily by funding from Bertelsmann Ventures, but SBTI owns about 10 percent of the firm and provides it with office space.

Jason Carmel, one of Ants.com's founders, said having the support of an incubator is invaluable for a start-up.

"Running a business and learning on the job is extremely difficult," he said. "In our case, we had the ideas, but none of us had ever run a company before. An incubator's resources and knowledge can take a lot of the pain out of starting a new firm."

-- Maria Zate's e-mail address is mzate@insidevc.com.