Incubator Business Babies

Like a fawning mother, EvoNexus nurtures promising
start-up companies

Story and Photos by Leonel Sanchez

Walk around some of the malls in San Diego County and you’re likely to run into a green and white kiosk that buys used cell phones.
The ecoATM could one day become a household  name. Don’t know what to do with those used cell phones gathering dust in your drawers? Want to get cash for them? Just take them to your nearest ecoATM kiosk.
“The consumer wins,” ecoATM Chief Executive Officer Tom Tullie said. “They turn trash into cash. Phones get a second life. They don’t hit landfills. Retailers like it cause they don’t have to manage e-waste compliance and maybe we make a buck too.”
Preparations are still being made for a large-scale rollout of the high-tech recycler. If the ecoATM catches on as expected, the start-up company behind the invention can thank a San Diego-based nonprofit for some much-needed support before it could run on its own.
The ecoATM Automated eCycling Stations company recently “graduated” from the EvoNexus incubator program for high-tech ventures. The incubator was launched last year by CommNexus, a nonprofit technology trade group with major companies such as Verizon and Nokia as its sponsors.
Ten start-ups were selected to participate in the incubator program and receive millions of dollars worth of services, including fully-furnished office space, utilities, broadband, mentoring, education and access to potential investors.
The start-ups are under no financial or IP licensing-related obligation when they leave the program. The goal of the program is to encourage innovation and create jobs. EvoNexus does this by providing the type of supportive services that allow young companies to concentrate on developing their ideas into viable products.
The program was conceived around the time venture capital was becoming harder to get, even for high-tech start-ups.
“We didn’t want to stand in line for stimulus money,” CommNexus Chief Executive Officer Rory Moore said.  “We already knew the city was broke. We decided to use what we had, which was a very influential board of directors with large and multinational companies represented.”
EvoNexus sponsors include PricewaterhouseCoopers, Procopio, Cesira, CFO Connect, Avnet and the San Diego Regional Economic Development Corp.

Visionaries
Moore remembers the ecoATM when it was just a cardboard design with a lot of promise. “We bought into the team, the market, the vision they had,” Moore said.
EvoNexus start-ups are given up to 24 months to graduate or become sustainable through revenues or private funding. EcoATM graduated in the summer after less than a year in the program.
EcoATM is one of the early success stories because the makers — many of them veterans of the semiconductor industry — did their homework and took advantage of their incubator experience. They based their idea largely on the absence of a convenient way for people to dispose of their used electronics. According to studies, only a small fraction of Americans recycle their cell phones. “We said we’re going to do something about this and make a business of it,” Tullie said.
The company has created an automated kiosk that scans used cells phones, calculates their value based on their condition and buys them for resale in secondary markets, mainly developing countries. Phone owners receive cash or store credit or can donate their proceeds to a charity. Phones not worth anything are properly discarded.
The ecoATM and IOsemi, a semiconductor company that targets cellular handsets, are the first start-ups to graduate from the progam. Together they’ve raised about $12 million in venture capital while in the program. EcoATM’s investors include Coinstar, owner of DVD rental kiosk leader Redbox.
Meanwhile the other start-ups are incubating, working away on the fourth floor of one of the Executive Square towers. They’ve raised about $8 million combined.
Perminova, a Web-based surgery information management system, was one of the last companies selected for the program. Robert Cass, the company’s chief executive officer, said the new office is an upgrade from the one it was subletting in Sorrento Valley. “But you gotta do what you got to do to pay the bills,” Cass said. “The biggest problem for any of us small business folks is lack of money to develop your ideas and grow your business. They gave all that stimulus money for road projects.”
Cass said he feels more confident about his company with the EvoNexus stamp of approval. “These guys put you through due diligence,” Cass said. “They vet you, they vet your company, your business model, who your people are to try to figure out if you’re worthy. They’re doing the same thing that the venture capitalists do. That’s actually a service they perform.”

UTC High Tech Cluster
The Irvine Company, which owns most of the office space in University Town Centre, became a major EvoNexus partner this summer when it provided free space at Executive Square to the 10 start-ups and CommNexus.
Doug Holte, president of Irvine Company Office Properties, said the company wants to transform the area into a destination for high-tech firms.
“This is really the evolution of UTC,” Holte said.“EvoNexus is a really perfect addition to the business community here in UTC. It’s at the nexus of a transportation grid in San Diego and at the nexus of a number of emerging sciences and industries. You’re in between the wireless power of Sorrento Mesa and the life science power of Torrey Pines Mesa and you’re physically within the grid of transit and highways.”.
Holte  said his company wants to be “cradle-to-cradle” providers for  high-tech firms. “As they mature we would like to keep them and would like to be there when they start their next company.”

Not Looking Cheap
The ecoATM company has come a long way in a hurry since the makers were meeting  at homes and at Starbucks coffee houses to discuss their invention. “It was totally bootstrapped,” Tullie said.
Still, the longtime executive at several successful companies wasn’t sure his company needed free rental space but the company’s other founders had started the application process already. He went along with it and quickly saw the many benefits of being in the incubator.
Within weeks of joining the incubator, the ecoATM team got help from some of the other start ups in the program.“The ecoATM relies heavily on visual inspection of phones using software. We’re not vision guys but a couple of guys in other companies here were,” Tullie said. The company also found help with insurance, shipping and writing an iPhone application. As for the free rental space, it turned out to be a good selling point. “Investors want you to be cheap but they don’t want you to look cheap,” Tullie said.
Being a part of EvoNexus, he said, “made us look bigger and better.”
“ It all goes to help us raise money and get customer,” he said.
The other EvoNexus companies are:
Medipac, maker of miniature disposable infusion devices.
MicroPower Technologies, whose technology drastically reduces the power required for video surveillance cameras.
PixonImaging, a real-time video image enhancer.
RealGifts,  which combines virtual gifting and e-commerce.
TetraVue, which is developing a high-resolution 3D camera and video recorder.
Hold-Free Networks, which aims to improve customer service using Web and phone interfaces.
Crisi Medical Systems, which is developing software and systems to improve patients and safety while lowering the costs associated with cardiac arrest treatment.