BIRMINGHAM, Alabama – Innovation Depot’s place in the Birmingham economy is well-established but the business incubator’s contribution to the Magic City continues to grow.
In 2013, the 90 companies operating out of Innovation Depot had $123 million in sales and a $248 million in sales impact, according to a year-end report Innovation Depot shared with The Birmingham News and AL.com. Both figures were higher than a year ago.
Over the last five years, Innovation Depot estimates it has had a $1.25 billion economic impact on the Birmingham metro area. More than 540 employees work for Innovation Depot and its client companies.
Devon Laney has now taken the reins as the president and chief executive officer after the founder and long-time leader Susan Matlock retired the first of this month. Laney said just as Innovation Depot helps businesses grow, it has to look at its own operations to ensure it is evolving as an incubator.
“We’ve established we’re good at what we do,” Laney said. “We’ve set a standard already. The challenge is to not say we’ve done a good job and rest on our laurels. We have to ask, ‘How do we set the new standard for what business incubation can be going forward?’”
Improving emerging industries’ access to capital, helping companies find new markets and fostering greater collaboration among companies in the incubator are some areas that can always improve, Laney said.
One big area that Laney has identified to help the incubator’s client companies is to convince some of Birmingham’s and Alabama’s large corporations to look at Innovation Depot firms to provide that specialty product or service before outsourcing to some out-of-state business.
“They might not find what they’re looking for here, but the fact is they probably can,” Laney said. “The companies are not too small to do business with big companies. They’re already doing it.”
Of the 90 client companies currently housed at Innovation Depot, 42 are in information technology or software, 14 are in biotechnology, 11 are in engineering technology and 15 are in product development and business services.
Between the companies, they are doing business in all 50 states and in more than 40 countries around the world.
Among the companies that enjoyed big successes in 2013 are:
- Soluble Therapeutics, a UAB-licensed technology, was able to secured $750,000 in additional investment to expand service operations and the biotech company now has four labs in the Innovation Depot and is adding employees.
- InstaGift launched its new e-gift card and rewards software in time for the 2013 shopping season, leading to record processing of $1 million in transactions during holiday season.
- Medsnap secured a partnership with VIVA Health through which the health insurance company will use the firm’s MedSnap ID, which allows VIVA’s care managers visiting members’ homes to reconcile the medications patients are taking.
- FreeTextbooks.com grew more than 50 percent for the fourth consecutive year, reaching into five new states and 14 new college campuses. The company also closed two CAPCO investments from Redmont Capital.
- Malcovery, another UAB-licensed technology, started operating Jan. 1, 2013 and in less than a year transitioned from an incubated technology within UAB to a standalone commercial cyber security company. The company more than doubled its staff from seven to 16 and has engaged with 10 Fortune 500 companies.
In 2013, Innovation Depot received 119 applications for service, had 15 companies graduate and add 17 new client companies. The incubator is currently around 90 percent full.
Innovation Depot is the business incubator for companies that form out of the University of Alabama at Birmingham research and technology. Laney said about one-third of the companies in the incubator came out of UAB.
“We are the embodiment of UAB research,” Laney said.
Beyond UAB, promising startups seek out Innovation Depot based on its reputation for helping companies grow effectively, Laney said.
When Matt Landers and some of his friends were looking to leave Microsoft to start new software development company, Platypi, they looked across the country. When Landers visited Birmingham and saw Innovation Depot, he called his friends in San Francisco and told them to pack their bags.
“I saw we could get the support we needed as we get established,” Landers said.
Matt Morgan, chief operating officer, said it was a matter of the company knowing what they don’t know.
“The reality is we know what we’re doing when we’re doing coding,” Morgan said. “We don’t know what we’re doing with the rest of it.”
An incubator like Innovation Depot is designed to help companies learn “the rest of it.”
Platypi is readying the first version of its line of mobile business apps aimed at helping departments like human resources and customer relations management. It hopes to have something to unveil at the upcoming Microsoft Build Developer Conference April 2-4 in San Francisco.
Next door to Platypi, InstaGift is plotting how it will build on last year’s successful launch of its mobile gift card business. CEO Nate Schmidt said the company has the luxury of focusing on its growth prospects because it is in Innovation Depot.
“You can act like a big company even when you’re small,” he said. “You can go through the building and see other small companies and share ideas.”
Brian Hilson, chief executive of the Birmingham Business Alliance, said while the large, mega-projects in economic development grab the headlines, startup companies, small businesses and entrepreneurs like those found at Innovation Depot are the greatest drivers of growth.
“When you look at the cities that consistently perform well in economic development, it’s cities like Austin and Raleigh that are home to research universities,” Hilson said. “We have that in UAB and, by extension, Innovation Depot.”
Hilson said BBA continues to recruit the large projects and promote the expansion of existing industry, but just as vital is fostering the creation and growth of startups. Innovation Depot’s 2013 numbers reveal that, he said.
“It is a very good snapshot of a large part of Birmingham’s economic growth and its future,” Hilson said.
Getting access to capital is always an issue for small businesses and startups. Innovation Depot not only helped tenant companies raise more than $10 million from private investors like Angel investors, venture capital and other sources.
Innovation Depot also operates a receivables lending program in partnership with the Regional Planning Commission of Greater Birmingham through which companies can get short-term loans against money the companies are owed from their clients. The loans can often help a company make payroll or meet some other immediate need until it gets paid from its customers and can pay off the loan.
Innovation Depot and the RPCGB made 52 of those loans for a total of $1.2 million in 2013.
It’s one more way Laney said Innovation Depot serves in its nurturing role as an incubator, giving its startups every chance to succeed.
“We have to be innovative in helping provide solutions,” he said. “Our success is really measured by the success of our client companies.”
March 23, 2014