A SmartZone in the Copper Country
By Marcia Goodrich
It's been ten years since the Michigan Tech Enterprise Corporation SmartZone opened its first business incubator. Since then, it has created hundreds of jobs and injected millions of investment dollars into the local economy.
Michigan Tech researchers are shepherding their discoveries to market, one gee-whiz innovation after another. Students are getting internships and a chance to work with top companies even before they graduate. Those same companies are opening offices in the Copper Country and bringing in well-paid, professional jobs. Idle buildings have been brought back to life with millions in grant funding, heading off blight and creating vigorous centers of commerce and community.
A few numbers may be in order: the MTEC SmartZone has supported 44 technology companies, created 32 start-up companies, attracted 6 Fortune 500 companies, created 351 high-tech jobs, established 4 incubator sites, and graduated 10 companies into the local community.
All this in a place that a popular postcard once described as two miles past the end of the Earth.
The SmartZone has been so successful that both Michigan Governor Rick Snyder and Senator Debbie Stabenow came to Houghton last summer to bask in the glow and add some shine of their own.
Snyder, who once chaired the Michigan Economic Development Corporation, said he was particularly pleased because SmartZones were conceived on his watch. "It's exciting to see an idea I helped create make such a difference in so many people's lives," he said at the August 12 tenth anniversary celebration, adding that good ideas are not enough. "The credit goes to the people who implemented it."
Stabenow was equally complimentary. "You are helping to set the pace for innovative technological development in the state," she said.
To get a visceral sense of the SmartZone's promise, it pays to talk with its executive director, Marilyn Clark '73 '78, who explains that the business incubator creates high-tech local jobs in two different ways: by supporting would-be entrepreneurs and by luring established companies to set up shop locally with the promise of bright, hardworking student labor.
The move was initially controversial, Clark said. "When we started this strategy, companies came here to get high-quality engineering talent at low cost," she said. That outlook has changed. "Cost is no longer the driver; it's talent. Nobody can get enough engineering talent, so that's why they come here."
That's what motivated material-handling firm Dematic to set up shop in the SmartZone, first by opening a small R&D office for interns and then adding full-time staff to work on mechanical, electrical, and software project engineering.
Dematic is one reason the likes of Amazon and Walmart are so successful. The company designs and builds distribution systems that speed products through warehouses and distribution centers. It's a complicated process: "When you're ordering online, one click is the easy part," said Thomas Klanderman, Dematic's vice president of engineering.
Michigan Tech alumni working at Dematic were the first to push for a company presence in the SmartZone. "We have been hiring a lot of Michigan Tech graduates, and a certain percentage wanted to stay in the UP, if there were jobs," he said. "They told us about the SmartZone, and we put two and two together. The SmartZone creates the package."
Klanderman expects to have about twenty-five interns and staff in the SmartZone by May. "The caliber of the students is excellent," he said. "They are well prepared, and the work ethic is great in the UP. Plus, the SmartZone has been great to work with as we've grown our business up there."
The SmartZone also helps would-be entrepreneurs start a business from scratch. For many, SmartStart is the first step in that process. A collaboration between the SmartZone and Michigan Tech's Office of Innovation and Industry Engagement, SmartStep is a five-week workshop that asks three tough questions: So what? Who cares? Why you? "Every researcher thinks they have the best idea since sliced bread and have no competition," said Clark. "What most of them have is a solution looking for a problem."
By the end of the program, about a third of the participants realize they don't have a viable product and go back to the drawing board, saving themselves money, time, and probable heartbreak. Another third graduate and form what Clark calls "lifestyle businesses": "They create jobs for themselves, go back into the community, and rent space, and that's fine."
The remaining are innovators with a promising high-tech product that could lead to more skilled jobs in the community. "Those are the people we really want to help," she said. They move into incubator space in one of the SmartZone's four buildings and receive an array of free or low-cost business-development services, from accounting assistance and legal services to high-speed Internet and financial counseling.
There's even an elegant meeting room with videoconferencing equipment that SmartZone entrepreneurs use to connect with their customers. "We have a company that sells to Bank of America and Chase," Clark explains. "When you meet with clients like that, you want to make sure you look big." You don't have to be a SmartZone business to use the facility, either. It's available to the public.
MTEC Smartzone: The Backstory
When Phil Musser signed on as director of the Keweenaw Economic Development Alliance (KEDA) in 1985, he knew he was facing an uphill climb. "The economy was in tough shape after the mines closed," he said. Nevertheless, KEDA was 10 soon helping manufacturing and service companies get a handhold. "We'd begun to develop relationships with tech firms, but we felt they needed a separate organization," he said.
Then along came SmartZones. The Michigan Economic Development Corporation invited communities, usually with universities, to submit proposals to establish special districts where high-tech business would be nourished. Funding would come from state property taxes generated by new development within the SmartZone borders.
With Michigan Tech's Pete Radecki and Jim Baker '93 '95 '05, and with the enthusiastic collaboration of the cities of Houghton and Hancock, Musser put together a proposal that was just what the state envisioned. Then, the consortium rustled up $1.6 million, mostly from government grants but also with help from local banks and utilities. Those dollars led to renovation of the Powerhouse in 2003, establishing the SmartZone's first business incubator and funding for staff and operations.
"It was really exciting for KEDA," Musser remembered. "After the SmartZone started, we were getting spinoffs from Michigan Tech, like GS Engineering . . . Now those businesses are the core of our technology sector.
"They give us a diversity that helps us weather economic downturns," he said. "Smaller companies are agile, better able to respond to markets, and now we have a very good base to work from."
The secret to the SmartZone's success has been teamwork, said Hancock City Manager Glenn Anderson. "We've been as successful as we have because of the collaboration between both cities, Michigan Tech, and KEDA," he said. "Other communities ask me why we've done so well, and I tell them we've eliminated the turf wars in the interest of economic development and job growth."
Both Houghton and Hancock have enjoyed new jobs, new residents, and new investment. "The SmartZone also played a pivotal role in establishing the Jutila Center," Anderson said, by renovating one floor into incubator space after Finlandia University purchased the old hospital.
"And we seem to have changed the culture to some extent, opened minds to the idea of commercializing research," he added. "It has exceeded my expectations. We had hoped for job growth and investment, but its far more successful than I had thought. I expect a very bright future."
Michigan Tech had its own reasons for backing the SmartZone. "Like a lot of universities, our biggest problem is attracting and retaining talent," said Vice President for Research David Reed. Universities hire people, and those people come with partners. Finding work for significant others can be a challenge. "The University can't employ all of them, and the hospital can't employ all of them. Our solution is to try to grow business and employment opportunities in the community."
Now Michigan Tech faculty are moving their innovations from the pages of academic journals to the marketplace. "And there are the 350 jobs in the community, plus jobs in Walmart and gas stations and restaurants that wouldn't be there either, without the new SmartZone jobs," said Reed. "At the end of the day, that's what it's all about."
Profile of a Startup: FM Research Management
The infection started after her wisdom tooth was extracted. Then it morphed into a serious disease of the bone, osteomyelitis. To treat it, Megan Frost had to dose herself daily with drugs through a catheter inserted into a vein in her arm.
"I had forty-five days of self-administered antibiotics, and I had to change the dressing every two days," said Frost, an associate professor of biomedical engineering. "It was actually pretty disgusting. I thought, ‘This is crazy. Why do we have to do this every two days?'"
Frost got well, and that could have been the end of it. But then she was invited to take a ten-month crash course for women on starting a business. With undivided support from the MTEC SmartZone and Michigan Tech, she was able to learn the basics of entrepreneurship while upholding her teaching and research responsibilities. Frost began working with the SmartZone, which provided a team of experts to evaluate her new product: an antimicrobial surgical dressing that only needed to be changed once a week.
"It's a billion-dollar problem created entirely by medical intervention," she said. "We are looking to do something that can fight it, and the SmartZone absolutely got the ball rolling."
The SmartZone helped her find a partner, Jeff Millin, the former CEO of Pioneer Surgical, in Marquette. "One thing I realized early on was that I have a very good understanding of the science and technology, but I don't know the first thing about business," Frost said. "I was looking for someone who could be a partner, and Jeff has been awesome."
They are now in the process of getting FDA approval to market the dressing. Their goal is to establish a presence in Hancock, with ten or fifteen scientists doing R&D to solve health problems.
"It's pretty exciting," Frost said. "It's been really intellectually stimulating to take a fundamental idea developed in the lab and make it into something useful. Plus, we can actually help make people's quality of life better. There's a lot of pain and suffering that goes on with those infections that's completely unnecessary."
Michigan Technological University is a public research university, home to more than 7,000 students from 54 countries. Founded in 1885, the University offers more than 120 undergraduate and graduate degree programs in science and technology, engineering, forestry, business and economics, health professions, humanities, mathematics, and social sciences. Our campus in Michigan’s Upper Peninsula overlooks the Keweenaw Waterway and is just a few miles from Lake Superior.