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USC to Shutter High-Tech Incubator

June 06, 2002|KAREN ROBINSON-JACOBS | TIMES STAFF WRITER

Calling it a "six-year experiment" that had run its course, USC officials have decided to shut the school's technology business incubator, known as EC2, on June 30.

The project, which was funded by the university, helped more than two dozen technology firms such as Womenswire.com and GameWorld Technologies get their start by giving them a variety of services, including work space in the Adams Boulevard center and access to cutting-edge technology. Some of the start-ups maintained their offices elsewhere but still had access to the center's services.

Officials cited several reasons for shuttering the incubator, from falling investment yields that reduced available funding to the dot-com collapse that made the exercise seem less relevant.

The name EC2 was short for Egg Co. 2, with "egg" referring to the center's role in hatching businesses. Opened in the fall of 1995, it was one of the first high-tech business incubators in Los Angeles.

EC2 doubled as an incubator and a media research facility, focusing on digital technologies. The $1.5-million annual cost to run the nonprofit operation came from the USC Annenberg Center for Communication.

Part of the center's aim, officials said, was to study the effect of communication technology developments on society and to examine the role of a business incubator in academia.

Given advances in both areas, and the school's desire to focus on developing arenas such as multimedia literacy and technology uses in interactive storytelling, the decision was made last year to pull the plug at the end of this school year.

"We made a decision that we wanted to focus in some different areas," said Todd Richmond, managing director of the Annenberg Center. "It came to a point where, when we looked around at what we want to be doing, we decided it was time to wind the project down. We're in a different environment than we were five years ago."

Jon P. Goodman, executive director of EC2, said that when the center launched, "the Internet was nothing anybody really thought about. Today, the question is not whether you're going to get on the World Wide Web but how."

With the center closing, Goodman and two partners plan to launch a venture capital fund focusing on information technology companies.

Most of the 15 center employees are being transferred to other jobs at the school, and the remaining start-up tenants are being nudged out of the nest earlier than they had planned.

"I have enjoyed being there and I would have stayed," said Ronald J. Pion, chairman and chief executive of Medical Telecommunications Associates, which is developing applications to improve Internet communications for health-care workers and patients. "It was a wonderful networking opportunity. It allowed us to utilize technology that, as a young company, we would not have been able to afford."

The center also was home to the Los Angeles Regional Technology Alliance, which conducts research on technology markets in California. It too is finding a new home.

Elsewhere in the nation, schools, such as Georgia Institute of Technology and New York's Rensselaer Polytechnic Institute, have given life, respectively, to MindSpring Enterprises, an Internet service provider that has merged with EarthLink, and MapInfo, a $100-million firm that produces desktop mapping software.

But EC2 was not the birthplace of scads of well-known tech companies.

Over the years the center raised about $4 million in fees from seminars and rents charged start-up companies on its campus, located on university land north of USC. But officials said EC2 was never self-sufficient.

Both Goodman and Richmond said profitability--either for the center or its offspring--was never the goal.

"Our goal was not to build for-profit businesses for the university," said Goodman. "EC2 was designed to have the incubator serve as one more focal point through which we can better understand the environment and the technology."

Closing EC2 runs counter to the trend seen nationwide in which business incubators associated with or funded by universities are growing, both in number and girth, said Dinah Adkins, president and CEO of Ohio-based National Assn. of Business Incubators.

"University-based incubators are increasing, not closing," said Adkins, noting that in 1980, there were only three nationwide. Today, according to the association, there are more than 174.

Adkins said that although the number of for-profit incubators, such as Pasadena's Idealab, have dropped from about 350 at peak to fewer than 100 today, the growth in school-based incubators can be seen nationwide.

"University incubators are doing well, nonprofit [incubators] are doing well," Adkins said. "All parts of the industry are doing well except for the ones that got caught up in with the dot-coms."

The growth is seen everywhere except California, experts say.

"California has always felt that it was an incubator and so they didn't need separate incubators," Adkins said. "Given the number of universities in California, there is very slim support for business incubators."

Richmond, of the Annenberg Center, described many of the nation's school-based incubators as "production rather than research" oriented, in which the focus is on converting the school's intellectual property into cash.

"And that was really, in my mind, not what EC2 was about," Richmond said. "We were not trying to commercialize companies ... that would go out and make a ton of money. The focus of our incubator was on basic research, and on learning what is the role of it in an academic setting."

And that research will continue, he said, just not in the form of an incubator.

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