Mark Dobeck had just three people working for his company when he set up shop in the business incubator offices run by Bozeman's nonprofit business-development outfit, TechRanch.

By the time Dobeck Performance "graduated" from TechRanch about three years ago, its sales had grown to $2.4 million and the company had created 25 jobs in Belgrade. Some of his employees are Montana State University engineering and computer science grads.

Without TechRanch, "I wouldn't be here," Dobeck said. "It's just incredible.

"I'm very good at what I do — I'm a mechanic," said Dobeck, whose company sells high-tech electronic fuel-injection solutions to motor-sports manufacturers "I'm not an accountant — I don't like that side (of business).

"They (TechRanch) make it a no-brainer. Right away, we had phones and Internet access, and there's a constant stream of people ... very talented individuals you can talk to (about business startups). It's just like having a shrink. ... I thought it was a great experience."

Yet after 10 years of helping Dobeck and scores of other entrepreneurs start new businesses around Montana, TechRanch itself is in trouble, running on fumes.

"We do great work," said John O'Donnell, 46, TechRanch executive director and founder. "We've never been busier. We're serving entrepreneurs around the state. Our programs are mature, our networks are robust. We're nationally recognized."

TechRanch assists high-tech startups that can create "those high-paying, intellectually stimulating, clean jobs that are helping reduce (Montana's) brain drain and increase the tax base for Montana," O'Donnell said.

But TechRanch has a potentially fatal flaw in its own business plan.

The business incubator has always relied almost solely on federal dollars, usually earmarked funds or money inserted in the federal budgets by Montana's congressional representatives. But in the past few years, earmarked funds have become increasingly harder to get.

"If we don't see some daylight in a few months we may have to turn the lights out," said Gary Bloomer, 45, client development director of TechRanch.

"We think we've got less than six months," Bloomer's boss O'Donnell said.

Montana No. 1 in entrepreneurship

TechRanch, in the Nopper Building in the Advanced Technology Park on West College Street, today has seven start-ups paying $300 to $500 a month to use TechRanch's office space and access its networks of business, marketing, finance and legal experts. The nonprofit organization charges minimal fees for its services, but gets no money from the state of Montana, MSU, Tech Park or the city.

O'Donnell and Bloomer, TechRanch's only full-time employees, said they are frustrated that everyone from the governor to the president touts job creation, yet there's no money in the state budget or federal economic stimulus funds for business catalysts like TechRanch.

O'Donnell pointed to a recent U.S. Chamber of Commerce report that named Montana No. 1 in the nation for entrepreneurship and innovation.

"Montana ... places first in overall business start-up activity led by Bozeman-based TechRanch, an organization formed uniquely by private business leaders to coordinate entrepreneur support activities in the state," the chamber report said.

O'Donnell and Bloomer listed highlights of TechRanch's 10-year track record:

—300 to 500 jobs created by companies that went through the Bozeman incubator, including high-tech firms like Bacterin and Foundant Technologies.

—200 companies assisted, from Bozeman to Miles City, Dillon and Great Falls.

—$50 million in venture capital raised by incubator companies.

—35 technologies discovered by MSU researchers investigated for business potential, with some leading to business startups.

—500 MSU business management students given a chance to do market research or provide other assistance to real-world entrepreneurs.

"The bottom line is, this has been a great return on investment for taxpayer dollars," O'Donnell said. "We don't create jobs — the entrepreneurs are the star of the story. They're taking the big risks, creating the payroll. Our role is to help them launch and build, and increase their odds of being successful.

"We have a deep understanding of how business is being done in the technology sector in the 21st century. ...We understand very well what the business plan needs to look like, what kind of margins they need, what talent they need to recruit. It all has to be packaged and done properly to raise money from sophisticated investors."

TechRanch also manages the Bootstrap Montana program, and it has awarded no-interest micro-loans to 20 Montana companies so far. Bootstrap Montana is funded by the family foundation created by Greg Gianforte, founder of Bozeman's RightNow Technologies.

Homegrown entrepreneurs

Bozeman Mayor Jeff Krauss said supporting TechRanch would have been a perfect way to use stimulus money, but federal and state rules didn't allow that.

"It has created little businesses around town, and every little business helps," Krauss said. "If they fail, it will be a long time until we get one of those going again."

Bozeman has used federal block grant money to promote business through loans, but TechRanch has far more potential, the mayor said.

"We practically bribed a company ... to come here from Jackson Hole, and they paid low wages," Krauss said. "Knowledge-based businesses — that's where Bozeman's future lies, not in being the low-cost alternative to Jackson Hole."

O'Donnell said when he came to Montana 10 years ago to start TechRanch, he made it clear he wasn't interested in trying to recruit companies away from other states. The best way for Montana to build its economy was with homegrown entrepreneurs, he said.

Tom McCoy, MSU vice president for research, has served on TechRanch's board since the beginning. The idea got started, he said, in discussions with the late MSU President Mike Malone, college deans, the former city manager, Gallatin County representatives and the Gallatin Development Corp.

The first funding came from TechLink, an organization in the Tech Park created to get technologies from the U.S. Department of Defense and other federal agencies into commercial use.

For years TechRanch got about $500,000 a year from the U.S. Small Business Administration, McCoy said. But in the past two years, federal funds have become "very, very tight."

"It has nothing to do with performance," McCoy said. "It's just a challenging economic time."

U.S. Sens. Baucus and Jon Tester and Rep. Denny Rehberg have all supported TechRanch. But for the coming fiscal year, McCoy said, House Republicans, including Rehberg, have pledged to support no earmarks.

Both Democratic senators have told McCoy they've submitted requests to fund TechRanch, whose formal name is Technology Venture Center Inc. But O'Donnell acknowledged that by the time the congressional battles over budgets are done, even if money is earmarked for TechRanch, it could be out of business.

"We hope not," McCoy said. "They've certainly done a superb job. I think they've been the most productive of any [economic development effort] in Montana.

"If they can't pay the bills, like any small business, they're going to be out of business," McCoy said. "That's the brutal reality of the recession of 2010."

Evan Barrett, chief economic development officer for Gov. Brian Schweitzer, said, "We think they do a good job" at TechRanch. But if the state had to pick up funding for every federal project, "We'd go broke."

The state is facing a huge deficit and will have to cut funding "to all kinds of wonderful things," Barrett said. "This is the worst time to be looking for new money from the state of Montana."

Solutions

To survive, O'Donnell said, TechRanch has to change its business model.

That means ending dependence on federal dollars and instead raising private money — from corporate underwriters, program fees or wealthy donors.

TechRanch just received its first corporate sponsorship of $20,000 from NorthWestern Energy, to jump-start clean and renewable energy companies.

"If you're an innovator at the university in biofuel, carbon sequestration, geothermal, wind energy — we want to help you commercialize your discovery," O'Donnell said.

The incubator's dire financial straits raise the question of O'Donnell's business competence. O'Donnell, who worked for Costco Corp. in Seattle and an Internet startup company before moving to Montana, replied that the problem is the nature of the clients they were created to serve.

"We serve hungry entrepreneurs who lack capital," he said.

Federal 990 IRS forms for the past three years show TechRanch has been getting hungry, too. Revenue fell by half over three years, from $1.3 million in 2007 to just under $600,000 in 2009. In the same three years it cut spending, from $1.2 million to $715,000, dipping into carried-over funds to cover 2009's shortfall.

O'Donnell's salary on the IRS forms is $145,000, half of which comes from his work for Montlake, a Seattle venture capital company, he and Bloomer said.

"A lot of other states are rolling out the red carpet for organizations like ours," O'Donnell said, pointing to photos of impressive new business development centers in other states. There's the $10 million building at the University of Wyoming, a $6 million building at Virginia Tech, a $4.9 million building at South Dakota State University. Most states provide financial support as well, he said.

"We're doing more here with a whole lot less," O'Donnell said.

Joe Walkuski, chief executive officer of 8-year-old TEXbase, located in the Tech Park, said TechRanch "absolutely" helped his company. His company offers software for clothing companies like Patagonia and Cabela's to help them manage data on textile materials, quality and supply chains.

"I probably would not have been able to do it without TechRanch," Walkuski said.

Six years after "graduating" from TechRanch, TEXbase is still in business and has seven employees.

"It's a success story I credit in large part to TechRanch being in existence," Walkuski said.

More important than office space, TechRanch connected him with experienced advisors. Walkuski said he got accounting advice from RightNow Technologies' chief financial officer, and ideas on technology, sales, legal matters and marketing from professionals who volunteer at TechRanch.

"Credibility" was one of the most important things his company got from TechRanch, said Mark Dobeck. That especially helped when he went seeking financial backing, and in retaining top MSU graduates as employees.

TechRanch's market analysis also persuaded him to change the company name to Dobeck Performance, to take advantage of his reputation in the industry. And it helped him get started faster, Dobeck said. With technology changing so rapidly, that's crucial.

"Without a TechRanch, you can't actually grow a company ... and get your name and product out there quickly enough," Dobeck said. "You have to compete very fast."

TechRanch is planning a barbecue to celebrate its first decade on Aug. 18. O'Donnell is hoping the event will mark the start of another decade.

"If we can figure out our funding woes and get back to doing business, Bozemanna, has lots of potential to be a hotbed of the new economy over the next 20 to 30 yeas," O'Donnell said. "This Tech Park should be ground zero for that. But none of that is going to just happen, willy-nilly. You need organizations like TechRanch to drive that vision."

Gail Schontzler can be reached at gails@dailychronicle.com or 582-2633.

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