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Real Estate Entrepreneur Paves Way for the Next Microsoft

Robert Guller, Founder, Technology Entrepreneurship Center

When Bob Guller bought the 500,000 square feet of office space at 900 Walnut and 210 North Tucker in downtown St. Louis out of bankruptcy with his wife and parents as partners in 1995, the buildings housed a few tenants in the telecom industry.

With the dot.com boom heating up and demand for space that met these companies' critical needs – such as high-speed Internet connections and temperature control – word spread that the Bandwidth Exchange Buildings were a good place for startups.

On the one hand, from a real estate perspective, startup companies don't make the best tenants. They have no credit, no money and no track record. They take up small amounts of space, tend to shrink and grow rapidly, and require at least as much time and attention as bigger companies. On the other hand, Guller says, "They were interesting to have around."

The confluence of IT and telecom startups knocking on his door to lease space and an appreciation of the value of advice and support he had recently discovered as a member of the Entrepreneur's Organization (www.eonetwork.org) inspired him to create a nonprofit incubator for IT and telecom companies and donate space to house and operate it.

TEC - An Industry-Specific Incubator

"Bob recognized the value of having an industry-specific incubator that gives companies access not only to the resources in his buildings but to a rich social network of entrepreneurs in the same industry," says Chris Dornfeld, entrepreneurship collaboration director for the Skandalaris Center for Entrepreneurial Studies at Washington University who serves on the executive committee of the Technology Entrepreneurship Center (www.tec-stl.org/) that grew out of Guller's vision.

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Most incubators are started by universities, corporations or economic development agencies. Guller wanted to create an incubator with no agenda other than to nurture the growth and development of new companies. "When you get money from a single source, it affects your mission," he says. "Technology Entrepreneurship Center (TEC) was started in the same bootstrap manner as the companies we serve, which helps us to better understand the needs of our clientele."

Guller, who earned a law degree from the University of Michigan in 1993, began exploring his incubator concept in the late 1990s. In 2002, he hired Jean Roberson, the CFO of a former dot.com tenant, to help establish TEC as a 501(c)(3) nonprofit organization. With the help of a cadre of like-minded individuals he recruited to serve on TEC’s board of directors, Guller has been successful thus far in winning support from the City of St. Louis, the State of Missouri, St. Louis Development Corporation, Bank Midwest and a diverse group of public and private organizations.

Still, as Jim Brasunas, who joined TEC as president in February 2003, observes, "No way this could have gotten off the ground without Bob.

"Bob provided the space and the opportunity for this to happen. Lots of incubators have to raise $3 to $4 million for a building. We only had to raise $300,000 to $400,000 to build out a floor. Bob and his wife, as well as his father's family foundation, made personal donations. Bob basically underwrote my salary for the first year."

The significance and impact of Guller's contribution of time, energy and resources to launch and sustain TEC and foster economic development in St. Louis have not gone unnoticed by others. Guller was presented the Kauffman Community Award on August 5, 2005, at the EO International University in Montreal by Kauffman Entrepreneur-in-Residence Sue Hesse. The award, established in 2002, honors outstanding efforts of individual entrepreneurs and EO chapters that have made a significant difference in their communities and valuable philanthropic contributions to society.

Strength through Mentoring

TEC occupies 20,000 square feet on the sixth floor of the 18-story building on Tucker, of which 10,000 square feet have been built out to accommodate ten tenants. The plan, according to Brasunas, is to start construction on the other 10,000 square feet in 2006 and eventually serve up to 20 tenants.

TEC's five current tenants range from one-to-six person companies, occupying 150 to 620 square feet. All tenants, regardless of size, pay a $300 monthly incubation fee and a $20 per person telephone and data fee. They also pay for the square footage they occupy, with lower charges for open space. Total monthly tenant costs range from $550 to about $1,500.

Unlike most incubators, which take equity in their successful companies, TEC takes a "graduation premium," which is two percent of their first-year revenue after graduation up to a maximum of $50,000. With 20 companies on board and one or two graduating each year, Brasunas expects TEC will earn sufficient income to break even.

Brasunas can tick off an array of services TEC offers to increase a startup company's chances of success, including low rent, website hosting and free donated furniture TEC solicits from companies and organizations all over town. It also provides assistance with business planning and strategies, access to business, university and support networks and eligibility and help in obtaining tax credits.

But, says Brasunas, TEC's biggest strength is its mentoring program.

"With each company we admit, we put together a mentoring team that consists of me, two or three of our board members and one or two other volunteers. We have about 14 mentors in the program. We try to design teams to address what we perceive to be the needs this company will have over the next six-to-twelve months and meet formally with the CEO every six-to-eight weeks for three or four hours."

TEC's first official tenant was Global Velocity, which is bringing sophisticated networking systems to market based on research performed at Washington University.

When approached to move into the incubator, its president and CEO Matthew Kulig was intrigued by Guller's focus on communication between universities and businesses and growing companies that identify and help bring innovation to the marketplace. Indeed, Guller made a point of including representatives from area university tech transfer offices on TEC's board of directors.

Kulig also liked the fact that residing in the incubator gave him access to tax increments from the state, low overhead and proximity to industry colleagues, advisors and potential customers.

"As a startup, any feedback or input is valuable, especially from people like those on the mentoring team who’ve been through similar experiences in starting their companies," says Kulig. "If all of a sudden I have to hire 50 people, I'm not locked into a long-term lease. And once our product is launched, we’ll want to work with all those telecom companies housed in Bob's buildings."

The Next Big Thing

Looking at the big picture, Kulig adds, "Incubators are vital to economic development."

Guller obviously agrees. Why build businesses? For two reasons, he says.

"Personally, entrepreneurship is a much more satisfying way to make a living. You work really hard, put your heart and soul into it and it's yours – from the thrill of doing well to the knot in your stomach from doing poorly.

"On the community level, Fortune 500 companies coast along and shift jobs from one to the other. Economic development – the next big thing – comes from small companies led by entrepreneurs. I'd like to be able to say that the next Microsoft came out of here."

At age 38, like a proud parent, Guller looks forward to watching TEC help those potential Microsofts for many years to come and has started to think about ways to replicate the TEC model in other cities.

© 2006 Ewing Marion Kauffman Foundation. All rights reserved.

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