SMALL BUSINESS

Dianne Buckner

Incubators warm up to small businesses as recession cools

Last Updated: Tuesday, January 18, 2011 | 2:05 PM ET

By Dianne Buckner, CBC News

I'm wondering if small business start-ups may find themselves in a "sweet spot" right now. After some of the crummiest conditions on record for entrepreneurs over the past couple of years, the stars seem to be aligning in a new and potentially profitable way.

Last week, the Bank of Canada released a survey of senior loan officers at the chartered banks. Seems the tightwad lending practices of the recession have loosened, and it's now cheaper and easier for small companies to get financed. Phew!

Meanwhile, business incubators are back in action. Again, the recession had put a serious damper on the activities of these entrepreneurial booster clubs.

"They're all over the place," enthuses Vivian Prokop, head of the Canadian Youth Business Foundation. "Some are focused on technology, some are about social entrepreneurship, there's even one aimed at incubating ventures in the fashion industry."

Prokop points out that incubators do two important things. They provide a workplace where otherwise lonely entrepreneurs can brainstorm with like-minded peers and advisers, plus they're cost-efficient, allowing start-ups to save money by using office facilities such as shared boardrooms.

"It's very expensive to start up a business," says Prokop. "Even a small thing like having access to a photocopier can be a significant savings to these young companies."

Tax money at work

What's driving this resurgence? For the most part, our tax dollars.

"There are many ways to incubate," says Rafi Hofstein of Mars Innovation, an incubator that focuses primarily on taking medical innovations into the marketplace. "But the majority are still funded by governments."

Hofstein says governments at every level recognized the need to step up and help start-ups as they struggled through the downturn. "The other sources of funding and development, which is angel investing and venture capital funds, have become very scarce."

I'd love to know exactly how many additional government dollars are being devoted to these types of endeavours, but it's almost impossible to track how and where funding may have improved. Both the federal and provincial governments invest in innovation in a number of ways, and sometimes in an indirect way, for example, via universities or community groups.

But Dean Vitisin isn't thinking too hard about where incubator funding comes from. The 23-year-old is too busy launching his new company, Triple-I Tracking Technologies, which will help oil and gas companies keep tabs on their equipment via ID tags that use radio frequencies.

"We incorporated our business in April and started using the incubator at NAIT (Northern Alberta Institute of Technology) in May," says Vitisin. "It's been a centre for our business operations."

Vitisin just got his bachelor of technology degree from NAIT in Edmonton, and his new business was actually inspired by a school assignment. He developed a similar system for PCL Industrial.

"They loved it, and saw potential for the technology in their future," says Vitisin, who is now negotiating a contract with his first big client, using the boardroom at his local incubator, novaNAIT.

In addition to saving money by using office space, he's also taken advantage of the mentoring and advisors available through the incubator.

"In the next couple of years we're looking to acquire bigger contracts and bigger clients, and hopefully in a few years we'll be a multimillion-dollar company," says Vitisin. "You gotta have those strong dreams."

Meanwhile, in Toronto, Chris Nguyen is singing the praises of the Digital Media Zone (DMZ) at Ryerson University. "I wish I'd had this environment with my first company," he says.

Learning environment

Nguyen and his partner Lee Liu were two of the founders of JobLoft, a recruitment website that initially gained fame as a Dragons' Den deal gone terribly wrong. When Dragons Robert Herjavec and Jim Treliving arrived to hand over an investment cheque, they were interrogated and insulted by Nguyen's professor. Herjavec tore up the cheque on-camera, in a completely unscripted moment of reality TV drama. Treliving, owner of Boston Pizza, later described the experience this way: "I felt like I was going to a wedding and ended up at a funeral!"

But Nguyen and Liu did all right nonetheless, selling JobLoft to onTargetjobs of Denver the following year.

"We did pretty well financially," says Nguyen. "It was a great stepping stone to future endeavours. We learned how to build and exit a company. And this time we've been able to minimize a lot of our mistakes."

He says the incubator has helped him solidify his new business plan, hashing it out with colleagues at the DMZ. "We've got a lot of advice, a lot of legal help and also funding opportunities," he says. "Now we're trying to take a big swing at social commerce."

Nguyen and Liu's latest venture is Teamsave, an e-coupon site. But they've attracted a biggie of a partner: e-Bay offspring Kijiji.

"They approached us," says Nguyen. "They wanted to be in the space, and they wanted a partner in the space."

There's no question good things are happening for entrepreneurs right now. Of course business always goes in cycles, and it does appear to me like a number of factors are on the upswing right now.

When Vivian Prokop arrived at the CYBF eight years ago it was working with 100 start-ups. This year it's helping 600. And the median age was 29 years old; now it's 26.

Prokop can barely contain her enthusiasm.

"I think there's a rebirth of entrepreneurship in Canada," she bubbles, "We're seeing younger people — unlike those of us who were encouraged to get a job with a pension — saying 'I want to be the boss.'"