Created in 1994, the Software Business Cluster (SBC) is a nonprofit incubator focusing on software and Internet businesses, the first of its kind in California.
The SBC, with 20 client businesses, identifies entrepreneurs with good technology who are starting software and Internet companies and provides them with business support and services. The incubator was started with three goals: attracting such companies to downtown San Jose to help the city become the "Software Capital of Silicon Valley"; creating a network of business support services to improve start-up success and growth; and addressing the financing needs of SBC start-ups to ensure adequate capitalization.
"We are very focused on helping Internet companies through the early stages of their growth," says Jim Robbins, executive director and cofounder. One of the incubator’s most popular programs is the SBC Executive Associate Program, which assigns senior level managers to work on a pro bono basis with the companies on specific issues, such as marketing or fund raising.
About 85 percent of companies that enter SBC get venture funding or institutional investment. The SBC requires them to complete and polish their business plans. "[Then] we work with them on presentations for investors," Robbins says. "We make sure they have the kinds of things investors care about." Once incubator firms are ready to make their pitches, SBC’s Venture Capital Referral Program can provide referrals to investors. "We can say we are positive about the company and can recommend it," Robbins says.
"I was excited and surprised to win [the award]," he says. "I remember five years ago when the SBC was being started, and our concerns were attracting the first clients and staying solvent. We have come a long way and have worked with some very successful companies. It is a great honor to be selected by one’s peers."
SBC clients credit Robbins with making things happen. Krishna Subramanian, CEO of client company Kovair Software Inc., spoke for herself and others when she wrote: "Jim has always been there for us from day one — working with us on the business strategy, spending countless hours helping us refine ’the pitch’ ... helping us identify our key messages, and being a sounding board for us on our business plan."
The SBC became a formal partner with San Jose State University and the city of San Jose in 1996. The incubator operates under the auspices of the San Jose State Foundation, the university’s fund-raising arm. "They’re a well-known organization that brought credibility to us," Robbins says. Even more importantly, the Foundation gave SBC access to the resources of the university, including students, faculty and services such as accounts receivable and payable and payroll.
The city of San Jose now has more than 75 software/Internet companies downtown, compared to fewer than 10 when the incubator was formed in 1994. Thirty-five or more have graduated from the Software Business Cluster.
The SBC is working toward financial self-sufficiency with a new program charging 1 percent equity of each new SBC company, to be placed in a nonprofit fund. About half of SBC’s operating revenue comes from the city of San Jose, but the new fund is expected to eliminate the need for this support within about four years. Additional revenue comes from rental income from the incubator companies.
Partnerships with the city, the university and private companies make the SBC a very stable operation with a lot of community support. "It makes everybody more interested in being involved," Robbins says.
Three graduate companies — Agile Software, Calico Commerce and E-Gain Communications — went public in 1999 and three more SBC firms are expected to go public this year. Ninety-two percent of SBC companies are still in business, creating more than 1,500 jobs.
"It’s become well-known that San Jose is a good city for Internet companies to start out," Robbins says.
To help celebrate the incubator’s success, the city of San Jose helped to sponsor a five-year anniversary celebration for SBC in June 2000.
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