Michigan Business Incubator To Convert Old Classrooms Into Space For Startups

A Michigan-based science and technology business incubator is expanding its reach across the Ann Arbor area with a new location, creating a home for startups founded by local university graduates.

A growing number of colleges have opened their own business incubators in recent years. The University of California, Berkeley, Harvard University, the Massachusetts Institute of Technology, Stanford University, and the University of Pennsylvania boast workspaces and support for student startups. Some research suggests that companies built in university incubators create more jobs and see greater profits than others. For colleges that can’t bring an incubator in-house, proximity to a space like MI-HQ is essential for keeping business-minded graduates nearby.

Michigan Innovation Headquarters is set to acquire Eastern Michigan University’s former College of Business building in Ypsilanti, Mich., for $2.6 million. The shared workspace will be MI-HQ’s fourth location and is expected to open in early 2023. Its spot near a college campus will introduce MI-HQ’s tenant companies to a “pipeline of talent,” MI-HQ president Mark Smith said. EMU will move its College of Business to a location closer to its central campus.

At its existing workspaces, all located in Ann Arbor, MI-HQ leases office and lab space to companies—largely science, technology, engineering, and mathematics operations—with an emphasis on cross-company collaboration. Since many of the companies work on projects in related fields—including biotechnology, drug and medical research, and robotics—in the same physical space, they are able to help each other solve problems and create new partnerships, Smith said. MI-HQ also offers tenant companies human resources and legal assistance, as well as help with accounting and intellectual property strategy.

The proximity of the existing workspaces near college campuses in the Ann Arbor area has helped MI-HQ become a key resource for recent graduates and university faculty involved with startups. Jeffrey Kittendorf, who operates several companies out of MI-HQ locations, said the workspace is attractive for businesses because rent is affordable and the proximity to universities provides access to talent.

“We’ve been a landing spot for a lot of the spinouts from the Office of Technology Transfer at the University of Michigan, and we are cultivating that relationship with Eastern Michigan,” Smith said, adding that the MI-HQ locations are also incubating companies from Michigan Technological University and Michigan State University.

Renting space from a private business incubator has become an attractive option for students launching startup companies because the incubator offers greater flexibility and resources than a university or small research lab setting.

Arborsense, a company developing wearable monitors for biochemical markers like alcohol, launched at the University of Michigan but expanded to occupy space at a MI-HQ location because of the need for lab and office space, said John Seamans, manager of the Michigan Biomedical Venture Fund, which invests in biomedical startups using University of Michigan-licensed intellectual property. Arborsense leaders were able to discuss with MI-HQ how the space could be customized to best fit their use, a perk they likely wouldn’t have had in a university incubator space, Seamans said.

The new MI-HQ location will provide graduates from universities in the area an opportunity to stay local without being restricted to using lab space at the university, Sanjib Chowdhury, director of EMU’s Center for Entrepreneurship, said.

“We don’t have any lab space in downtown Ypsilanti,” Chowdhury said. “When a student graduates from science, healthcare, and engineering, they graduate, they become alum, they may not have that much control over the lab in the university. For those students, if they start a venture and they need the lab space, we will be able to help them out working with MI-HQ to get some space for those students.”

MI-HQ has avoided hefty construction costs—and established relationships with universities—by purchasing and rehabilitating buildings that aren’t now being used. Rather than build from the ground up, Smith purchased EMU’s 160,000 square foot College of Business building for $2.6 million.

Smith said he has built plans for two new buildings on MI-HQ’s existing campus, but the costs of construction have rapidly escalated over the past several years.

“It just becomes uneconomical to do it, where I can still acquire structures at very reasonable costs and renovate them,” Smith said. “Ypsilanti is a great building for us because the size of the rooms, the classrooms, is very conducive to lab space.”

One of Kittendorf’s MI-HQ-incubated companies, PharmaForensics, is an intellectual property litigation support company he co-founded. His company takes advantage of MI-HQ’s collaborative network and assists other tenant companies with tasks like performing chemical analyses.

“Sometimes it’s one off, and we’ll help each other out,” Kittendorf said. “Sometimes it could turn into, ‘This is an interesting collaboration, would you be willing to partner up with us? We’re seeking some small business grant money and we need expertise like yours.’ And we’ve done that as well.”

Kittendorf praised MI-HQ’s focus on fostering collaboration between tenant companies, adding that the workspaces fill a need for “an ecosystem, especially around universities,” for science and technology ventures.

Though the Covid-19 pandemic did force some companies to operate remotely, many still worked out of MI-HQ locations because lab work could not be performed at home. During the pandemic, MI-HQ housed one of the largest Covid-19 test processing facilities in Michigan, processing about 50,000 tests per week.

The University of Nevada, Las Vegas, recently launched an innovation incubator offering students to integrate their startup work with their curriculum. To participate in the incubator cohort, UNLV students must either participate in an innovation class, conduct innovation-related research, or complete a senior design or capstone project in a related field.

Launched in collaboration with Blackstone
BX
private equity, UNLV’s incubator recruits teams of students and provides co-working space in a Blackstone-owned building and mentorship from experts within academia and the community. Blackstone—which lets UNLV rent space for free—and the University both benefit from their partnership, said Robert Rippee, executive director of UNLV’s Black Fire Innovation Hub.

“[Blackstone] gains because it brings a technology incubator into a pretty traditional office park, which helps them to diversify clientele and shows there’s more activity in the tech sector,” Rippee said. “And for UNLV, it gives us a space. We didn’t have to buy it.”

The partnership with Blackstone has also opened the incubator up to collaboration with neighboring tenants at Blackstone’s complex, including consulting and law firms, who sometimes act as mentors and guest speakers for students, Rippee said.

Rippee said the idea of incubating startups among university students is an emerging trend, adding that UNLV’s incubator aims to better support students as they transition to running their startups full-time after graduation.

“That’s the whole idea, is that we want to extend the relationship with the student beyond graduation,” Rippee said. “We want them to exit and go to market with the idea, but it is bridging that gap between what they’ve done in their higher education journey and entering the real world.”

MI-HQ will work this year on finalizing a list of tenant companies for the new Ypsilanti location in advance of its early 2023 opening.