From the ground up: New nonprofit Davis Roots to nurture start-ups

As UC Davis works to spin out more start-up companies and the city of Davis mulls how best to keep them here, a new nonprofit organization aims to help both succeed.

Davis Roots, a business accelerator, is the brainchild of local entrepreneur Anthony Costello, former chairman of the city’s Business and Economic Development Commission, and UCD professor of technology management Andrew Hargadon, the founding chair of both the campus’ Energy Efficiency Center and what is now the Institute for Innovation and Entrepreneurship.

Their plan is for the accelerator, sometimes called an incubator, to bring 10 to 15 start-up companies a year under one roof. The goal is to have the accelerator up and running with the first group of businesses in one to 1 1/2 years.

The firms will receive guidance on founding companies effectively, including finding co-founders, assembling a board of directors and honing their pitches for potential investors.

“We’re really trying to make sure that a two- or three-person company that’s got a PowerPoint presentation and a crude working application can find someplace to work and find a community to support them,” Hargadon said last week.

Added Costello, “The goal of Davis Roots is to create a 10-person company with its own funding that then takes up its own office space in town and continues to hire and grow within the city.”

The pair bring ample experience to the task.

Costello has co-founded several high-tech and pharmaceutical research start-ups: BazuSports, LeapForm, Sparq Group, Nextrials and, most recently, Mytrus, a clinical research firm in San Francisco.

The holder of the Charles J. Soderquist Chair in Entrepreneurship at the UCD Graduate School of Management, Hargadon has focused his research on the development and commercialization of sustainable technology. He is the author of “How Breakthroughs Happen: The Surprising Truth About How Companies Innovate.”

They see Davis Roots as a next step for researchers from UCD and elsewhere who have patents or new technologies with commercial potential. Many already will have started shaping their ideas on campus under the guidance of the Institute for Innovation and Entrepreneurship.

“We can dress them up, but at some point they really need to leave the nest,” Hargadon said. “It’s not completely outside the university, but it’s outside enough that they can start to develop their own identity as a company.”

Not giving start-ups a springboard means the city has lost businesses to Berkeley or cities closer to home, like West Sacramento.

“(Businesses) have a lot of support and a lot of services and a lot of advisers and a lot of space, all those things, while they’re within the university and then they walk out the door and they’re sort of lost in the big world,” Costello said. “Then a big investor comes in and takes them under their wing — off they go and we never see them again.”

For now, Costello and Hargadon see their niche as working with young Internet-based or technology companies who either won’t need laboratory space or who aren’t yet at the stage where such space is needed.

Davis Roots may be able to aid a company in finding that kind of space at UCD or elsewhere later on, Costello said.

That’s just one of the potential partnerships they’ve talked about with the university and city over the past year. The pair hope that the city will consider providing space for the accelerator downtown.

Having shared space will be vital to securing funding from organizations warm to backing the nonprofit — and key to the success of the start-ups it houses, Hargadon said.

“You really can’t overestimate the value of seeing two or three other companies — or four or five other companies — struggling in the same time and space that you’re struggling — knowing that you’re on the right track and the work you’re doing is meaningful,” Hargadon said. “A lot of what we’re going to try to do is build that community here in town.”

Davis Roots is starting at a time when both UCD and the city increasingly have been focusing on just this kind of business development. A year ago, UCD began soliciting ideas for an “innovation hub,” and the city has assembled a task force to look at possible sites.

UCD Chancellor Linda Katehi’s drive to bring more of the campus’ research innovations to market has given the effort a strong push, but Hargadon and Costello said other factors have been at play, too.

The recession and state budget cuts have highlighted the need to take steps to make the local economy less reliant on government and university jobs alone. Even UCD’s funding sources, like the National Science Foundation, are pressing to see research move to the marketplace.

“It’s trite but true — the world’s gotten smaller and UC Davis and the Davis community are not quite the bubble that they used to be,” Costello said. “There’s a lot more interaction between venture capitalists and companies all over. Money has dried up over the past few years, so you sort of go where the money is instead of just finding money where you are.

“And I also think Davis demographics have changed. It’s been harder for young families to move to Davis and for people to raise their kids and grow their businesses in town. It’s been easier, frankly, to buy property and start-up companies elsewhere.”

Hargadon and Costello see Davis Roots as “another tool in the tool box,” one that begins to better realize the economic potential of the city and the region.

“This needs to be part of the response locally to help our city’s economic development in the longer run,” said Costello, a Davis native now serving as president of the U.S. Bicycling Hall of Fame. “Davis has such an incredible wealth of knowledgeable people and employable people. It has money that could turn into venture capital if it’s organized the right way.

“We have all the right tools to build really smart start-up companies in town. It’s a crime we don’t do it more often.”

City Councilman Dan Wolk said Davis should be “cognizant” of competition from other cities.

“What I really appreciate about what Anthony and Andy are trying to do is provide a place where these companies can incubate or grow and keep them in town — ideally indefinitely, but at the very least in the short- and medium-term,” Wolk said.

— Reach Cory Golden at cgolden@davisenterprise.net or (530) 747-8046. Follow him at http://twitter.com/cory_golden.