Investing in a High-Tech Future
by Fred D. BaldwinPhoto Gallery
A West Virginia firm called Information Research Corporation, whose software helps convert engineering specifications into workflow plans, employs over a dozen people. Galaxy Global Corporation, whose products enable computers to avoid new mistakes by learning from old ones, employs about two dozen. ProLogic, Inc., which maps huge databases in three dimensions to make patterns stand out, has about 65 employees, a branch office in northern Virginia, and customers around the country.
These three firms are all on the cutting edge of computer software development. And all share the same address: 1000 Technology Drive, Fairmont, West Virginia.
That address is also the corporate headquarters and showcase facility of the West Virginia High Technology Consortium (WVHTC) Foundation. The foundation is a complex organization with a simple goal: to make West Virginia a nationally recognized leader in information technology. Think of it as West Virginia's version of California's Silicon Valley or North Carolina's Research Triangle. It's made an impressive start.
The WVHTC Foundation's mission emphasizes small-business growth by helping West Virginia's small businesses compete more effectively in national and global markets. The means by which it does this include a business incubator, Web-based platforms for exchanging crucial marketing information, and many kinds of training and technical assistance.
The foundation's creation was an early step toward West Virginia's current economic strategy of focusing on high technology, biotechnology, and biometrics. (Recent state initiatives include establishing a strategic research and development tax credit for technology-related businesses and creating a more attractive environment for venture capital investment needed by research-intensive high-tech companies. These and other activities have helped create an estimated 1,200 high-technology jobs over the past three years.) The idea for the foundation grew out of a series of strategic decisions in the late 1980s and early 1990s on the part of the state's business and political leaders. "Technology," says Jim Estep, the foundation's president and CEO, "was seen as the wave of the future. West Virginia needed to have a stake in that game."
A Stake in the High-Tech Game
In 1990, representatives of six private companies, three large and three small, formed what was then called the West Virginia High Technology Consortium, supported by key political leaders, notably Congressman Alan B. Mollohan. As these and other firms demonstrated a capacity to handle increasingly complex computer programming tasks, several federal agencies, including the FBI, NASA, and the National Institute for Occupational Safety and Health, agreed to locate technology-oriented laboratories in Fairmont.
By 1993 the consortium had grown to more than 50 members, who were eager for Fairmont to become a high-tech research and development center on the Silicon Valley model. They thought of themselves as more than a loosely knit group of firms who happened to have offices in Fairmont, and they wanted potential customers to think of them as a collective resource. Moreover, many of them were facing a shortage of skilled workers—what Estep calls "negative unemployment rates." So they created a new nonprofit foundation whose first task was to plan for physical facilities combining appealing working conditions with all the broadband connections to the Internet any high-tech firm could ask for.
In 1996 the foundation completed the construction of the Alan B. Mollohan Innovation Center, a 120,000-square-foot facility. Financing came from a combination of private capital with the help of seed money from federal economic development partners, including the Appalachian Regional Commission. The center provides office and laboratory space for 24 high-tech firms. Most of these tenants pay market rents, but some of the center's space is reserved as a business incubator for start-ups, often one-person or two-person entrepreneurial ventures. As of mid 2003, the incubator housed seven fledgling firms. They pay rents well below market levels and enjoy free or low-cost access to services ranging from graphic design to marketing. So far, six firms have successfully "graduated" from incubator status. Graduates of the incubator may stay on as full-fare tenants, and often do. The physical facilities are an attraction, but the chance for synergy with other high-tech firms is even more important.
The Value of Teaming
"I could find cheaper space and even good broadband connections somewhere else," says Bob Wentz, founder and CEO of Information Research Corporation, which began its corporate life in the WVHTC Foundation incubator and remained as a tenant. "But then if I find a client and can't do everything they want, the deal dies. Here I can walk down the hallway and find someone to partner with. The teaming arrangements are fantastic."
That kind of synergy—what Wentz calls "teaming arrangements"—has been and remains a major part of the WVHTC Foundation's game plan. For example, ManTech Advanced Systems International, which specializes in information technology applications and was one of WVHTC's founding members, outsources to small firms as a regular business practice. ManTech, whose corporate headquarters are in Fairfax, Virginia, houses approximately 100 employees at the Alan B. Mollohan Innovation Center and another 50 or so in Hinton (in the southeastern part of the state).
Robert S. Kidwell, a ManTech vice president and senior technical director, says that his company commits that at least half of all contract work flowing through its West Virginia branches will be done by smaller firms across the state. As a result, ManTech has helped create 14 start-up companies in the state. "Last year we gave back $7 million to the small-business community in West Virginia," Kidwell says.
The WVHTC Foundation actively promotes "virtual companies"—business coalitions formed around specific tasks that can dissolve when the task is complete or morph into something new when change is required. Estep explains that many West Virginia counties are home to small manufacturing operations, especially in metalworking, that have historically turned out specialty products on demand for coal companies, sawmills, and factories. They had the tools and people to manufacture items like machine parts but lacked any practical means of learning about U.S. Department of Defense contracts, much less competing on complex production jobs.
"You would often find these mom-and-pop operations with specialized expertise," Estep says. "And a Navy buyer might need five or six of them together on a project. So we started to think of virtual companies."
To facilitate small firms' access to market information, the WVHTC Foundation developed a Web-based portal called VCLink (www.vclink.net). (The "VC" stands for "virtual company.") It's a state-of-the-art system that not only provides information about jobs and business opportunities but also facilitates partnerships by providing business tools and an electronic infrastructure for collaboration. If the old "information highway" metaphor for the Internet still applies, VCLink is the information analog of hundreds of industrial access roads and loading docks. One measure of VCLink's appeal is that in March 2003, the North Carolina Global TransPark Authority, a state agency charged with real estate development and other measures to attract industry and bring economic opportunities to eastern North Carolina, contracted with the WVHTC Foundation for a license to develop its own version of VCLink.
"If all of Appalachia were able to use this system," says Roger Duckworth, the foundation's vice president for technology management, "it would digitize the Region. The automated functions in the database push the right information to the right company at the right time."
Historically, the firms affiliated with the WVHTC Foundation have been heavily dependent on federal contracts, most often in defense, space science, and law enforcement. Aware that dependence on public-sector work entails business risks, the foundation's leadership has made self-sufficiency its number-one goal. "We want to be able to do our mission over time," Estep says, "through any ebbs and flows."
This means increased emphasis on commercialization. In September 2002, the WVHTC Foundation launched its Innova Commercialization Group. Innova has three goals: to increase West Virginia entrepreneurs' awareness of start-up and expansion opportunities, to convince venture capitalists around the nation that West Virginia is an untapped investment market, and to help both groups (entrepreneurs and investors) put together satisfactory deals. The program has taken off in a spectacular way, Estep says. Eight venture capitalists now regularly review West Virginia investment opportunities, and (as of mid 2003) Innova is working on over 40 potential deals.
In addition, the WVHTC Foundation's member firms are moving toward commercialization. For example, Galaxy Global Corporation, one of the smallest of WVHTC's six original founders (starting with a $25,000 contract in 1990) now grosses about $3 million annually, according to Zeny Fernandez Cunanan, Galaxy's president and CEO. One of the firm's most promising projects—the Data Metrics Program, which will automate error checking and help predict error probability during early-phase sofware development—is being developed for NASA. But Cunanan notes that this kind of code can be used in almost any computer-controlled manufacturing processes.
ProLogic, Inc., which has done knowledge management work for the Navy, the Army, and NASA, has developed a commercial product called KMSuite with the help of Army and Navy Small Business Innovation Research grants. Basically, the software displays characteristics of large databases in the form of topographic maps. A military application might include spotting potential targets, including U.S. facilities that might be targeted by terrorists. Business applications include cataloging diverse kinds of commercial assets, from patents to employee expertise.
Jay Reddy, ProLogic's founder and CEO, says that the WVHTC Foundation significantly accelerated his company's growth from an incubator baby to what he jokingly calls a "toddler." In particular he credits the foundation with helping ProLogic make contacts for work on the Tomahawk cruise missile and other information-rich problems.
"In West Virginia there are obviously not a whole lot of local opportunities for our kind of company," Reddy says. "We needed an agency that could help us get attention from large organizations. It [the foundation's help] gave us a lot of exposure, not only to the complexity of customer requirements, but also to the approach that eventually led to the completion of KMSuite."
Fledgling firms now in the WVHTC Foundation incubator are also oriented to commercial applications, rather than federal contracts. Beoworks Studios, USA, founded by Brent Berardi, a native of Bridgeport, West Virginia, specializes in a technique for adding animation to Web sites. ClinServices, also a new, and still tiny, firm, provides interactive training and certification services for clinical technicians. Kathryn Stanley, ClinServices executive director, says the firm's customer base has grown to over 6,000 registered users, and it adds about 250 more each month.
A crucial ingredient for success in the high-tech world is the ability to attract and retain knowledge workers. The work done by high-tech firms like those in Fairmont can, in principle, be done anywhere there are computers, high-speed Internet connections, and bright, well-trained people. So the WVHTC Foundation's Fairmont campus, originally 26 acres, has by now expanded into a 500-acre research park enhanced by amenities—some completed, some planned—like ponds and hiking trails. "This will be an ideal place for the knowledge worker," Estep says, as he points to existing or planned hiking trails and ponds. "It's going to be a place where, when you come here, you say, 'I've got to work here!' "
Estep also believes that self-sustaining growth for the WVHTC Foundation will require cultivating a reputation for specialized expertise. Accordingly, in 2001 the foundation formed an alliance with the International Biometric Group, a trade association representing the biometrics industry, whose firms develop and market security products based on individual human characteristics (e.g., fingerprints, iris scans, and face recognition). The WVHTC Foundation facilities are slated to be certified as a center for ensuring that new biometrics software applications meet rigorous standards.
Biometrics, regularly used in military and law enforcement settings, has huge commercial potential at airports, hospitals, and ATM machines—anywhere security and accurate identification are important. Helping make sure those systems work as planned in both government and commercial settings looks like a perfect fit for the next phase of the WVHTC Foundation's evolution.
Fred D. Baldwin is a freelance writer based in Carlisle, Pennsylvania.