Cultivating New Business

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Loren Schultz breeds new ventures the way some people raise orchids -- in a little box, with the right mix of nutrients and personal attention. He raises them at his Technology Center Inc., a nondescript, one-story building in Montgomeryville, Pa., that is a hothouse of start-ups. Given the fact that, of the 45 companies that so far have been nurtured at the center only 3 have failed to flourish in the outside business world, you have to admit that Schultz is a man with an exceptional green thumb.

Schultz's concept of raising little entrepreneurships all in a row dates to 1951. Back then, at the dawn of the technology age, he was part of Engineering Research Associates Inc. (ERA), a small firm that had more computers under development than any other company in the country. "ERA was simply a building full of rooms," recalls Schultz of the equally anonymous facility in St. Paul, Minn., "and each room housed a separate project. We had central purchasing and accounting, a machine shop, and an assembly area. But those little rooms were where the action was."

Other participants in the ERA project just happened to be none other than its president, William Norris, who went on to become chairman of Control Data Corp., and engineer Seymour Cray, who later founded Cray Research Inc. Eventually, Schultz followed their initiative and set out on his own, too, co-founding Decision Data Computer Corp. (DDCC), a manufacturer of computer-card equipment. It was not a bad path to take, as it turned out: Within five years, revenues had soared to $40 million. Schultz decided it was time to move on to another challenge.

When word got out that he was leaving DDCC, Schultz was swamped with "surefire" business plans. But he decided he didn't want to run a company again. "That gets routine and boring," he complains. "I'm an innovator. I like lots of crazy ideas."

One of the more innovative came to him one day in Montgomeryville when he spotted a vacant Honeywell Inc. facility that, he warranted, really should be filled with something stimulating. "A lot of thinking came together at that moment for me," says Schultz. With the difficulties of starting DDCC in the basement of his home still fresh in his mind, Schultz decided to create an environment in which many of the administrative nuisances and inefficiencies of gearing up a business are eliminated. He bought the 20,000-square-foot building in 1976, whitewashed the walls, carted in some furniture, and hung out a shingle that promised simply: TECHNOLOGY CENTER/AVAILABLE SPACE/SECRETARIAL SERVICE.

That proved to be plenty. Within a year, the building was filled to capacity with 23 young companies aspiring to establish a name and market niche for themselves.

The astounding survival rate that Technology Center's graduates have since achieved is no statistical aberration: Schultz carefully screens the business plans of newcomers that require capital. Once an entrepreneur is admitted, the benefits are numerous. Budding chief executive officers can rent office, light manufacturing, or assembly space at prices no entrepreneur can resist: Floor space averages $5 a square foot, and offices are available for as little as $125 a month; utilities, a receptionist, and a conference room are thrown in for free. A copying machine, telephones, word processing, and bookkeeping and accounting services are all available at rates close to cost. "When you're starting up," reasons Schultz, "you don't want to put your money into rent or furniture or hiring a secretary. You hold on to your cash -- and your equity."

It turns out, though, that the most significant low-cost resource isn't the rent or receptionist, but the synergy of the 23 presidents who work there. Resident entrepreneurs constantly bounce ideas off each other, trade sales leads, sit on each other's boards, and may even end up doing business with one another. Schultz himself is a case in point: An electronic device he patented is being marketed by Technology Products Inc., an occupant of the center.

With the original rooms continually filled to the rafters, Schultz started a second Technology Center in Lansdale, Pa., in 1982. A third is being launched in Minneapolis this fall and Schultz plans to have a total of 10 centers by 1985, with Austin, Tex.; Cincinnati; Pittsburgh; and Beaumont, Tex., among the locations being considered.

The new operations, like the earlier ones will operate at a break-even level. But it is not entirely charitable work. A number of young companies seeking financing sometimes find a source close by: Schultz himself.