Power play

Entrepreneur, June, 1997 by Heather Page

When 25-year-old Brad Wardell began developing software for an OS/2 computer game in 1993, nobody had ever sold any games for this operating system. At the time, software developers just didn't see any real market for them. But Wardell had an idea: a new space-based strategy game called Galactic Civilizations. He'd been hanging out in Internet news-groups discussing his concept with fellow OS/2 users, and many couldn't wait to try their hands at it. So Wardell, convinced that OS/2 was becoming a mainstream operating system, began developing the game in hopes the market would expand.

Turns out, he was right: Today, 8 percent of the world's PCs run on IBM's OS/2 platform. What's more, Wardell's Canton, Michigan-based company, Stardock Systems Inc., expects sales of $3.5 million this year and has a strong foothold in the OS/2 software market.

Was Wardell's venture a lucky guess? Perhaps. Yet, in many ways, it's not really surprising so many small technology-based companies like Wardell's are finding seemingly sudden success. On the contrary, myriad marketplace indicators point to the fact that all systems are go for today's start-up technology companies. An alignment of the entrepreneurial planets, if you will, is making the climate riper than ever for starting or growing a high-tech business.

"There has never been a better time to start a technology-based business," says Mark Rice, assistant dean of Rensselaer Polytechnic Institute's (RPI) Lally School of Management and Technology and director of RPI's entrepreneurship center in Troy, New York. "All the necessary ingredients are becoming more abundant, and the opportunities to pursue [such a business] are becoming more plentiful."

OPPORTUNITY'S KNOCKING

In this era of global economies, rapidly emerging industries and dramatic social change, the world is evolving at breakneck speed. As a result of this fast pace, gaping holes and discontinuities that are not being met by current products and services are emerging in the marketplace, says Rice. These gaps provide entrepreneurs with unparalleled opportunities to improve existing products or create entirely new ones.

Meanwhile, Rice says, changes in technology are occurring equally fast, with innovations making headlines seemingly every day. When you combine these two facts, "there's a greater set of opportunities to match up emerging market needs with new technologies," says Rice.

Consider the case of Craig Skevington and Mary Bayly. In his previous business, Skevington, 43, had developed an information management program for manufacturers to track production processes in real-time. With momentous changes shaping the health-care arena, though, Skevington and Bayly, who worked for Skevington as a marketing director, saw a healthy opportunity to tailor the application to this growing industry - and to build an entirely new company, which they did in January 1996.

"With so many changes going on in managed care, a lot of organizations are combining, and the information systems needed to link them together [didn't] exist," says Bayly, 39, co-owner of Flow Management Technologies Inc. in Clifton Park, New York. "We had the core technology; we just needed to adapt it for the health-care field."

Admittedly, not every entrepreneur has access to cutting-edge technology like this. Yet a shift in attitudes among today's scientists and top innovators is quickly changing all that, says Rice. With lucrative contracts drying up in recent years, government, corporate and university laboratories have changed their focus from primarily long-term research to the "transfer" of technology for commercial needs. Consequently, a host of laboratories at the forefront of high-tech research - including the Massachusetts Institute of Technology Lincoln Laboratory in Lexington, Massachusetts; Sandia National Laboratories in Albuquerque, New Mexico; and the Wisconsin Alumni Research Foundation in Madison - have active technology transfer programs, pairing entrepreneurs with the necessary technologies to build their businesses.

Government agencies such as the Small Business Administration (SBA) are also tackling this issue. The Small Business Technology Transfer (STTR) program, initially a three-year pilot program started in 1993, was developed by the SBA to help nonprofit research organizations, universities and small businesses cooperatively bring technologies and products to market. The SBA estimates more than $50 million was awarded to entrepreneurs in the STTR program by the end of 1996. (Congress has extended the STTR program through September.)

These types of programs are effectively placing technology in the hands of those most capable of turning it into viable ventures: entrepreneurs. Moreover, not only is it now easier to identify which technologies can make the shift into the commercial sector, but more systems are being created to facilitate their transfer, says Chuck Rancourt, director of RPI's Office of Technology Commercialization. University programs like RPI's Rensselaer Technological Entrepreneurship Council, which brings students and faculty with technical and entrepreneurial backgrounds together to network, locate investors and learn about technology commercialization, are becoming more common.