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In 80s, incubator boosted businesses in Yellow Springs

EYE ON OUR ECONOMY This is the fourth in a series of articles examining the economic landscape of Yellow Springs.
 

Click to view all the articles in this series.

 

After several decades of postwar robust economic health, Yellow Springs in the 1970s and 80s, like much of the rest of the country, saw a significant drop in job opportunities. And as in many other towns, leaders found themselves, for perhaps the first time, thinking about how best to spur the local economy.

In the six years between 1980 and 1986 the village lost about 250 local jobs, dropping from 1,926 to 1,670, according to a Yellow Springs News article reporting on the July 9, 1986 Council meeting. All of the major industries had contracted, with Vernay decreasing from 585 to 475 jobs, Morris Bean from 432 to 240 jobs, YSI from 371 to 319 and Antioch College from 207 employees to 148. Bright spots on the economic front included growth at Antioch Publishing and Friends Care Community, plus a new business, Cernitin, which employed 96.

Council members were troubled by the numbers.

“We need to actively seek out small business development,” Council member Hazel Latson said at the meeting.

One of Village government’s first attempts at revving up the economy involved hiring villagers Vicki Morgan and Phyllis Schmidt in 1986 as Yellow Springs Associates, in an attempt to improve the image of Yellow Springs to surrounding communities. At the time Yellow Springs suffered from a reputation as being “anti-business and anti-welcoming,” according to Morgan in a recent interview, a holdover from the 60s protest activity. Tasked specifically with spurring population growth, the two women produced, among other things, a video and brochure which they distributed to area realtors, who were invited to town to look for themselves.

While job growth wasn’t the consultants’ main focus, they also combed through Village regulations to show Council areas where the Village could be more business friendly, Morgan said.

All in all, Morgan believes the Yellow Springs Associates’ two-year effort paid off.

“I think we made a difference in terms of the reputation of the community as a welcoming town,” Morgan said, citing not only the outreach to area realtors but attempts to strengthen the local downtown business association, which later became the Yellow Springs Chamber of Commerce. “I think we got the ball rolling, made Yellow Springs a player.”

In the 1980s and 90s Village government dipped its toes into the economic development waters in two other ways, including supporting a business incubator and administering a fund to make loans to small businesses. This fifth article in the Yellow Springs News series on the local economy focuses on these efforts, with a look at more recent development activities next week.

Incubating success

For a small business incubator, a success story is a business that grows so much it must eventually leave. The leaders of two of those success stories, Applied Sciences and Klein Associates, recently reflected on the positive role a local business incubator played in the development of their companies, which, 30 years later, are still alive and well.

“I like the incubator concept,” Max Lake, the head of Applied Sciences, said last week. “If more space had been available, I would have loved to have stayed.”

The incubator, called the Miami Valley Regional Small Business Center, was launched in 1986 by retired Mead Corporation lead counsel Walker Lewis. Lewis believed strongly in the Miami Valley’s history of innovation and wanted to promote new business development, according to villager Sue Jackson, the center’s executive vice president. So Lewis, with the help of retired YSI head Hardy Trolander, gathered together business leaders and educators to serve on the center’s board. Funding came from state development funds and the Mead Corporation, according to Jackson, and the center was located at the Fels Building on the Antioch College campus. Village government became involved when it purchased the Fels building from Wright State University for $60,000 and rented it to the incubator for $1 a year, “in the interest of job preservaton and support,” according to an April 1987 article in the Yellow Springs News. The Village later sold the building to Antioch College.

To Max Lake, the main draw of the incubator was the opportunity to feed off the ideas and experience of other small business creators.

“It did work pretty well, especially the atmosphere of networking,” Lake said. “Being among other small businesses, we could help each other.”

That networking among entrepreneurs was the center’s main purpose, according to Jackson, who brought in innovative speakers and thinkers to spur new ideas. Also essential were the services the center provided, such as secretarial, accounting and legal expertise, which small businesses need but can rarely afford.

At its height, the incubator housed 33 businesses, according to Jackson.

“It was a joyous and wonderful business-building time,” she said.

Gary Klein, who launched Klein Associates, also found it a good experience to house his cognitive science research and development company in the incubator, but for different reasons than Lake. Klein Associates moved to the incubator in its early years, directly from Klein’s home, and the incubator was useful mainly as an opportunity to rent a larger space for a reasonable price. The company was able to afford eight or nine offices, Klein said, along with the use of a large conference room.

“The incubator offered the best value,” Klein said in an interview last week.

However, Klein didn’t find the interactions with other incubator residents as stimulating as Lake did, partly because the businesses were so different. Nor did the services offered benefit Klein Associates.

“We were hoping for that, but didn’t get it,” he said.

Still, 30 years later, having sold Klein Associates, Klein is again, with his wife, Helen, launching a new business and has come full circle, to a place where an incubator would again prove helpful.

“I’d love to be in an incubator again,” he said. “I think a properly run incubator with the specialty services a small business needs would be of tremendous value.”

Klein Associates, which employed 37 workers when he sold it, eventually outgrew the incubator, and while Klein cast around for a local site to expand, none were available. So he took his business out of Yellow Springs “reluctantly,” Klein said, renting a large space in Fairborn. Rental was the only option at the time, Klein said, because his company didn’t have the resources to build.

Applied Sciences also left the incubator due to lack of space in town, according to Lake, who said the company had grown from about three to six employees. He found what he needed for his materials science company in a larger already-built space in Cedarville, where it continues.

One of the first incubator residents, Dennis Turner, who ran Turner Research out of the incubator for seven years, also found the experience helpful. Interaction with others was there when he needed it, Turner said, and he especially appreciated his access to advice from seasoned entrepreneurs, such as Lewis.

“Walker could look at a situation and come up with a solution that I’d never have thought of, and that showed his experience,” Turner said in a recent interview.

Unlike Klein and Lake, Turner did not leave due to company growth. While he employed seven workers at the company’s high point, his business, which offered engineering solutions to the disabled, shrank to a smaller size when a contract with the state expired, allowing Turner to get back to working on his own, which he prefers.

Other incubator residents included Health Links, which produced health safety monitoring systems for the home; Innovisions, a publishing company run by Dennis Geehan; Patti Dallas’ Golden Glow Records; Ontos, a computer consulting firm; psychologist Marsha Bush; New Day Films, a documentary film cooperative; and Pideac, a hand ID system business owned by Chuck Colbert.

The incubator began winding down in the early 1990s, partly due to the poor health of Lewis, according to Jackson. But she believes the center made a positive impact on the Yellow Springs economy.

“For the time it worked, it worked very well,” she said.

Funding small business

In a second economic development effort, in 1985 the Village launched an Economic Development Revolving Loan Fund, or EDRLF, in an attempt to help small businesses grow or keep them in town. Specifically, the fund aimed to help local businesses add more employees.

The fund began with a suggestion from Lee Morgan of Antioch Publishing, whose company needed to purchase a larger press. To get the necessary funding, Morgan suggested taking advantage of a federal program that provided (via the state) grants to small communities to use for economic development. Village Manager Kent Bristol asked consultant Fritz Leighty to assist the Village in applying for the grant, and after receiving it, the Village loaned the money to Antioch Publishing. That company over time paid back the loan to the Village, which used the income, $275,000, to seed the EDRLF.

Almost 30 years after the loan fund began, 17 local businesses have been granted loans ranging from $5,000 to $50,000. Most of the activity took part in the late 1980s and early 1990s and for the past 10 years, the fund has been largely depleted by a loan of $300,000 to Community Resources, which used the money, along with $100,000 from the Yellow Springs Community Foundation, to purchase land for the Center for Business and Education, or the CBE. The loan was granted interest-free, with the understanding that CR would repay the loan when CBE properties sold. However, because the CBE has not yet been developed, the fund remains depleted.

But even before the fund was drained, the EDRLF’s effectiveness was spotty, according to several involved with the fund. While the loans gave a temporary boost to the 17 businesses, 15 of those companies are no longer in business, or no longer in town. And five loan recipients defaulted on paying the loans back.

Asked if the fund was effective, Leighty, who continued to serve as a consultant to the Village, stated, “So-so.”

The challenge of finding worthy projects in such a small community was considerable, he said, partly because the grant program required that applicants had already been turned down by a bank, which made the applicant pool even smaller and riskier. But while the success rate of the companies funded isn’t, in Leighty’s words, “stellar,” it’s not far out of line with the reality of small business development, where about 70 percent of start-ups don’t make it.

But some of them make it for a while, and thus do provide jobs, Leighty said. Antioch Publishing, now completely decamped to Minnesota, was a booming job source for villagers for decades. And a few of the loans were outright successes. Especially, Leighty points to a $40,000 loan to The Winds Cafe, which allowed that restaurant to expand to a new location — two decades after receiving the loan, the business is a local institution.

“You can’t help but be proud of it,” he said of The Winds.

Besides The Winds and Antioch Publishing (now Creative Memories), the EDRLF provided loans to the now defunct Village Lanes, Custom Communications, Organic Grocery, Life of Riley, No Horsin’ Around, Gypsy Cafe and Euphorbia. It also loaned money to Peach’s Grill and to several start-ups created by the late inventor Chuck Colbert, who had developed a new technology for personal identification.

“We had high hopes for that,” Leighty said of the Colbert companies. “He had new technology. Unfortunately, others did too.”

Other recipients included the Craig ­Matthews law office, which later moved to Centerville, and Young Concepts, which was later sold by owner Sam Young and moved to Dayton.

The company, which made “Corner Cats,” received a $50,000 loan that allowed it to use a new technology for its cat-shaped molds, according to Young. At its most successful, the company employed 26 people full-time in the late 1990s, and the loan played a part in the company’s ability to expand.

“No doubt about it,” Young said of the loan fund. “I think it was a wonderful thing.”

One of the overseers of the EDRLF, Ellen Hoover, has harbored concerns about the fund’s effectiveness for a while, she said in a recent email. The requirements of the federal program — specifically, that loans lead to new jobs and not be used for current salaries or operating expenses — makes them less useful for other, equally vital needs, such as strengthening existing businesses, she said. The program also requires that businesses match loan dollars, a requirement especially difficult for start-ups in current economic times. In general, she said, the loan fund seems out of touch with current needs of small business.

Hoover, formerly economic development director of Springfield, would like to see the Village fund a micro-loan program geared toward very small businesses, with smaller caps on loans and more flexibility in how the money is used. She also believes the loans should go hand in hand with business courses or mentoring relationships that can give new entrepreneurs valuable expertise.

But it’s not clear if the Village currently has the staff or resources to attempt such an effort.

“At this point, Council would have to decide if funding another loan fund or making many changes to the current one is even feasible or desirable,” she wrote.

Next week’s article will focus on recent economic development efforts, such as the creation of Community Resources, the hiring of a Village economic sustainability coordinator and the establishment of an Economic Sustainability Commission.

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