• by Liz Tascio , April 1, 2009

Incubating the next gaggle of digital indies

It's amazing how much more stuff you can cram into your brain when you actually have a desk," says a fresh-faced Michael Dory, research director for the newly launched Socialbomb.

This is Socialbomb's third day with desks. Adam Simon, Scott Varland and Dory camped out with their start-up at their alma mater for as long as they could, then got an invitation to move into SparkSpace, a tech incubator in New York City's Silicon Alley. The founders of Socialbomb somehow fit three desks, at snug right angles, in an office that's about 10 feet by 8 feet. The walls are temporary and moveable, so if Socialbomb grows, the space can grow, too.

On day three in its new office, Socialbomb remains a game-design firm with no product launches to its name, but it now has the credibility of an address, shared resources such as boardrooms and high-speed Internet, the formidable connections of SparkSpace founder and serial entrepreneur David Rose, access to community networking events, and the ability to knock on the doors of other tech start-ups who are in the same building.

These are the benefits of a tech incubator. Start-ups still begin in dorm rooms and garages, hoping for a big break, but these days some gain entry into communities like this, a middle room that's proving to be a win-win for start-ups and for potential investors.

A tech incubator does two important things: It brings start-ups into a community of other entrepreneurs all working through similar challenges, and it gives outside investors a chance to see more clearly what a start-up can do before committing capital. An investor who's wary of handing money to some guy with a laptop and a cell phone - and who isn't wary of that, these days? - can watch the start-up develop in the incubator and get to know the entrepreneur behind the idea.

Rose opened SparkSpace in 2007. Membership is by invitation, and to qualify, start-ups have to prove they don't just want to rent office space, they want to join the community. Once there, they have access to regular networking events, group lunch meetings, guest speakers, and the chance to share their lessons and experiences with each other.

Down the hall from Socialbomb, Panjiva, the first start-up to arrive in early 2007, is about to move out. That's the other goal of SparkSpace: A successful business is one that eventually leaves, says Nate Westheimer, this incubator's self-proclaimed "father hen" and the entrepreneur-in-residence of Rose Tech Ventures, the company behind SparkSpace.

When Josh Green, CEO of Panjiva, met David Rose, Panjiva was operating out of a borrowed office, and Green wanted to move his company into a space with like-minded entrepreneurs.

"We had spent about six months banging our heads against the wall and making no progress, so we were basically at the very beginning," Green says. Rose didn't think his idea was all that great, Green says, but if it failed, he wanted the opportunity to invest in Green's next idea. Panjiva moved into SparkSpace before it was SparkSpace, Green says, and Rose invested soon after. About a year and a half later, Panjiva, which connects suppliers of goods with buyers worldwide, had grown enough to move out - to graduate, as Westheimer puts it. Panjiva now has offices in New York City, Cambridge, Mass., Shanghai and India.

The week Socialbomb moved in and Panjiva was moving out into the real world, the mood on their shared floor was high. "Part of the value of the space is that it allows you to feed off the energy of others," Green says. "You really need that in the beginning when you're just a small group."

The idea of incubating start-ups is catching on outside established tech centers like New York City, Austin and Boulder. Voodoo Ventures, an Internet development company in New Orleans, is preparing to open Launch Pad 2, which will rent office space and support services to local tech start-ups. The first Launch Pad, begun in late 2007, already houses the offices of Voodoo Ventures and several start-ups.

Voodoo founder Chris Schultz moved to New Orleans in 2002 partly for cheap office space for his various start-ups and consulting gigs. In a manner befitting the philosophy of incubators, the idea for Launch Pad was born during a conversation he had with another entrepreneur, a Tulane MBA student. Now, Schultz is using Launch Pad to help New Orleans grow post-Katrina by supporting its nascent high-tech industry.

"As challenging of a time as it is for the country, New Orleans - we sort of took our knock-out blow in 2005, and in a lot of ways, we feel like we're further along the curve," Schultz says.

Schultz plans to move the original Launch Pad, currently in an office building on St. Charles Street, into a much larger building this year. He envisions a loft-like space with modular offices so companies can choose to rent more than one unit.

Launch Pad 2 will be a purely pay-for-play environment, Schultz says. Start-ups will pay lease and membership fees, not a share in their future equity.

"The word is getting out. We've got about 20 people on the waiting list, so to speak - they've expressed interest and are sort of waiting for us to open the doors," Schultz says. The environment in New Orleans is strong for start-ups like these, he adds. The tech community NetSquared opened a chapter in New Orleans last September. "In just six months, we're now the sixth-largest [NetSquared] group in the country; we just passed Atlanta," Schultz says. "There is a real sort of grassroots demand for this."

About six months after moving into SparkSpace, Socialbomb is going strong. Their first game has been in private beta since December, and they've got about 50 people - some former New York University classmates, some found through networking at SparkSpace - testing each new version. Even better: They're expanding into a little more office space.

While developing the game hasn't been easy, Dory says, working in a community of start-ups in the heart of Silicon Alley has given them opportunities they probably wouldn't have had access to on their own.
"A lot of what's interesting in New York seems to be happening right around the Madison Square Park and Shake Shack area," Dory says. "The space itself holds events on Fridays, where they try and get everyone together to talk about what they are doing, and have people from the outside come in."

Those Friday meetings have helped the guys of Socialbomb learn a little more about it, advertising and, of course, the challenges of being a start-up, Dory says.

"Part of it is just the community aspect, where you look at something and you realize, 'Hey, everyone is trying to do this.'"