Appalachian City Incubates Several Successful Technology Companies

Jim Cossler, Youngstown Business Incubator

When the U.S. steel industry hit the skids in the late '70s and early '80s, Youngstown, Ohio was hit hard. With its economy so dependent on steel, Youngstown lost more than 50,000 jobs when the domestic steel industry withered away into nothing.

For decades, this ravaged steel town struggled to reinvent itself. Over the last few years, though, something special has happened in Youngstown. Several strong-minded business spirits are putting their heads together to create the rebirth of Youngstown as an innovative technology center.

The Incubator
The Youngstown Business Incubator (YBI), led by Jim Cossler, is one such organization that is taking the city by storm. YBI offers budding tech companies consulting services and facilities support, such as office space and bandwidth for free or at a deferred cost.

In today's economy, venture capital firms want to see that all risk is removed before investing in a startup. YBI works with entrepreneurs to mitigate risk, reduce expenses, and develop and execute viable business plans, which all helps to improve their likelihood of success.

Ultimately, Cossler, who refers to himself as the organization's "chief evangelist," is looking to build a cluster of business-to-business software companies in Youngstown. He envisions transforming Youngstown into a low-cost alternative to Silicon Valley and other high-cost tech hotbeds. In a recent article in Inc. magazine on the rebirth of Youngstown, Cossler said, "Software companies are easy to start. Pretty much all you need is a server and some computers. And if we have a bunch of tech companies here, we can build synergy."

However, the odds are stacked up against Cossler. Starting companies is risky business, especially for a town that is economically depressed. According to the U.S. Small Business Administration, two-thirds of new businesses survive for two years, and less than half make it for four years. With so much risk of failure, could tech startups really be the answer to reviving Youngstown?

Ideal Start-Up Environment
The top reasons that companies fail include management inexperience and insufficient capital. Other reasons include inadequate business plans, lack of market knowledge, weak management teams and concentration on tactical instead of strategic issues. Fortunately for Youngstown, these are all issues that YBI seeks to address. Further, being located in the resource-rich region of Appalachia Ohio increases the odds that a startup will be profitable.

Experts agree there are four ideal location criteria for entrepreneurial start-ups: access to business capital and support services, access to supply chain and markets, access to knowledge and labor, and access to a balanced life. All of these resources are abundant in Ohio's Enterprise Appalachia, and YBI is just one shining example of how entrepreneurs can benefit from having ready access to these resources.

For the companies that it helps to startup, YBI says that finding knowledgeable workers is never a problem in this area. Ohio's Enterprise Appalachia Region makes it easy to leverage academic centers and skilled labor. Cossler told us, "Enterprise Appalachia is home to 25 institutions of higher education and there are more than 50 universities within an hour drive of Youngstown. I don't think any other region can match this access to knowledge. Access to knowledge and labor is a significant advantage for entrepreneurs here."

Cossler also spoke about the cost of starting and growing a business in Appalachia Ohio. He said, "Location is irrelevant for software companies. Customers don't care where the software was made." As such, the companies that locate here have significantly lower operating costs than its competitors in Silicon Valley, making it easier for companies in Appalachia to earn a profit. Cossler said, "Operational and occupancy costs are less, and employees are a fraction of the cost too because the cost of living is so affordable."

Finally, Cossler believes that businesses in Appalachia Ohio have a better chance of survival because of the quality of life here – afforded to both company owners and employees. Locating in Enterprise Appalachia allows entrepreneurs to create a life of perfect balance. Cossler said, "We just recruited a guy from northern New Jersey and he can't get over the fact that he can call an hour in advance to get tee time. It's these small advantages that add up to overall satisfaction for both owners and employees living and working in Enterprise Appalachia."

All the Criteria for Success
Despite the risks associated with starting a company, YBI, under Cossler's leadership, has developed several successful companies, which were greatly helped by the advantages offered by Enterprise Appalachia. One success story is Turning Technologies, which began at YBI and is now located just next door. Turning, which develops audience response systems, is earning $33.5 million a year and was cited by Inc. magazine as one of the country's fastest growing software companies. Another YBI success is Zethus Software, a leader in cloud storage technology. Recently, Zethus announced a worldwide strategic alliance with Bruker AXS, a global market and technology leader in materials research and quality control instrumentation for elemental and crystalline structure investigations. As part of the alliance, Bruker will collaborate with Zethus in implementing and distributing the Zethus Cumulus CyberLab technology with Bruker AXS' X-ray instruments.

Thanks in part to the advantages of Appalachia Ohio YBI-grown companies have successfully launched 24 new commercial software applications, receiving 17 intellectual property patents. These companies have generated more than 300 jobs with an average salary of $54,000. The YBI companies also have global sales in 90 countries. With all the national press surrounding YBI, the organization is poised to grow. Currently, YBI is planning to expand its campus in downtown Youngstown into a four building campus. And, they have 24 new companies in the pipeline. Who said being in the business of starting business was risky? With a lot of passion and a resource-rich region like Appalachia Ohio – anything is possible. Thank you, Ohio!

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