- The Washington Times - Monday, October 16, 2000

Five young technology companies hatched from a state- and county-funded incubator in Rockville last week, ready to move into the business world on their own.

"Graduation means that these five companies have outgrown the space, and are also financially strong enough to lease their own space that can accommodate their growth," said Duc Duong, who has managed the incubator, the Maryland Technology Development Center, since it was started two years ago.

Three of the graduates are biotechnology companies. One develops medical technologies and another is an information-technology firm.

"We've had a lot of access to expertise from members of the High Tech Council. They are in the same building as we are, and we can just walk down the hall and talk to someone," said Carol Agayoff, vice president of Spectrum International Inc., the info-tech firm. The incubator "gives you an environment where you can grow your company without necessarily incurring the costs and concerns you'd have had if you were out on your own."

The 50,000-square-foot facility is under the leadership of the High Technology Council of Maryland. Its purpose is to help start-ups grow and become self-sufficient and successful.

Last week's graduates are Spectrum, medical technology company IMACOM and biotech firms Tetracore LLC, Neurologic Inc., and Avalon Pharmaceuticals Inc.

"It's always nice to see companies graduate and go on their own," said Montgomery County Executive Douglas Duncan. "As these companies graduate and leave, they stay in the county and create revenue and jobs."

On average, info-tech companies incubate for two years. Biotech firms remain longer, because developing their products is more complex, Mr. Doung said.

Incubators lure start-ups with below-the-market rents and flexible leases. Biotech firms, for example, are not looking for ordinary office space. Close to 50 percent of biotech firms in Montgomery County use space that they have revamped and outfitted with specialized equipment and ventilation, creating costly laboratories.

But incubators already have such labs in place. They also offer business mentorship and exposure to networks of investors. In exchange, they take either a minimal equity percentage in a company or royalties once the business becomes profitable.

The four founders of Tetracore opted for royalties. Former scientists with the Navy, they pooled $100,000 from savings and started the company late in 1998.

Tetracore moved into the incubator just over a year ago. It develops reagents that detect signs of biological warfare. Its clients are fire and police departments, state and local governments and government contractors.

The company grew from three to 24 employees. And unlike most start-ups, it has reached profitability.

"We are going very nicely," said Bill Nelson, company president. He said Tetracore made some money last year and this year will make $3.5 million to $4 million in sales.

The company is moving to Gaithersburg, as is IMACOM, another graduate.

Founded in 1993, IMACOM converts imaging systems at X-ray rooms from film-based to digital. Locally, it has done this for several X-ray facilities and hospitals such as Reston Hospital.

"The benefit is no X-ray film, so you don't have to develop film, or deal with chemicals for processing, or the time delay of developing," said Tim Muich, chief executive officer. "So the images come up as they are being taken."

Digital imaging is popular with X-ray facilities because it's quicker and more efficient. Makers of X-ray products have digital equipment, but it costs about $1 million. Upgrades such as IMACOM's are cheaper, and can be done for less than $150,000.

This year the company has installed 419 units worldwide, said Mr. Muich.

IMACOM was the first company to move into the incubator; previously it had been at another similar facility in Rockville. The company has had more than $2 million in sales this year, and Mr. Muich expects it will make $10 million to $15 million in the next five years.

"We think we've got a company that has the talent to develop additional products," he said. "And we have the distribution and sales organizations in place to add these products."

IMACOM, which has 14 workers, will release a new product soon, a digital imaging archive system. To market it, the company will seek about $2 million in venture funds.

Like Tetracore and IMACOM, Spectrum International didn't start with venture funds. When it started in 1993, the company got a large contract and its founders decided to rely on it for future funds.

Their risk paid off: Spectrum made about $250,000 its first year, and today has $2.5 million to $3 million in yearly sales.

"What we do is provide products and services for records management and document management we developed software for that purpose to work with clients who are federal agencies and some private sector companies," said Ms. Agayoff.

Records management is 50 percent of Spectrum's business. Another 40 percent comes from consulting work with local schools. The rest comes from electronic commerce: Along with several other infotech companies Spectrum does all the purchasing for the General Services Administration.



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