As a new $47 million tech incubator officially opens its doors this week near the Los Angeles River, backers hope it will finally turn downtown into a long-promised hub for green technology companies.

The La Kretz Innovation Campus, which had a soft opening earlier this year but has its official opening on Friday, is one of a few business incubators nationwide specifically for solar, electric vehicle, and other green technology companies. The 60,000-square-foot converted furniture warehouse features space for dozens of companies as well as lab space, rooms for prototyping manufactured products, and training space.

It’s the major piece of a “green technology corridor” through downtown originally envisioned by former Mayor Antonio Villaraigosa to come to fruition. It’s also one of the largest – if not the largest – technology incubators in the L.A. region, both in terms of square footage and number of full-time tenant businesses.

“This is a major step in our mission of building a world-class clean technology innovation hub in Los Angeles,” said Fred Walti, chief executive of the Los Angeles Cleantech Incubator, which runs the facility.

This venture differs from other technology incubators in three crucial ways: It focuses exclusively on companies that do business in renewable energy or environmental mitigation, it has lab space and a special room with machine tools for prototyping, and its companies often take longer to cycle through.

“Unlike the typical technology incubators, which inhabit the fast-moving world of online business, alternative energy and clean tech companies often spend years developing and prototyping their products,” Walti said.

Participants range from battery technology and solar companies to pollution-monitoring businesses. Each pays about $500 a month in rent, but that covers less than 10 percent of the incubator program’s $3.5 million annual operating budget. The rest of the operating budget comes from government grants. The incubator program itself has a staff of 22.

DWP ratepayer funds

The clean technology incubator actually began five years ago with $1 million in seed money from the now-defunct Los Angeles Community Redevelopment Agency. The incubator housed a handful of startup tenants, including electric vehicle-charging companies and a solar power firm, in temporary space in a converted bus garage a couple of blocks away.

But even then, plans were in the works for a much larger facility dedicated to shepherding clean tech companies from the idea stage to viability.

After receiving a $3 million donation from real estate developer and property manager Morton La Kretz, the Los Angeles Department of Water & Power in 2010 spent $8 million to acquire an old furniture and fabric warehouse and contributed an additional $11 million to convert much of the common area to a lab and space for the agency to demonstrate alternative energy technologies. About $18 million of the $19.7 million in direct DWP funding came from ratepayer funds.

The DWP and city of L.A. officials also cobbled together an additional $25 million in local, state, and federal government grants and other funding to finish the job.

In exchange for its funding of the incubator campus, the DWP gets first dibs on alternative energy and water-efficiency technologies that are developed and honed at the campus. The agency hopes those technologies will help it meet strict state and city mandates for renewable energy and water conservation.

Startup struggles

Since the incubator program started five years ago, 61 companies – mostly startups – have been admitted. Of those, 41 are now in residence. Walti said that of the remaining 20, half graduated, two got acquired, and eight folded.

That failure rate is much lower than the rate among startups that don’t participate in incubator programs, Walti noted.

In the world of business incubators, it’s just as common for companies to fold as it is for them to graduate, according to William Hsu, co-founder and managing partner of Santa Monica’s Mucker Capital, which invests in seed and pre-seed stage companies.

“The average new venture outcome is failure while the top 1 percent of startups generate the majority of returns,” Hsu said. “Incubators in general have a low success rate simply because of the reality of the business we are all in.”

For one La Kretz tenant, Pick My Solar, the incubator has been essential.

Max Aram, its co-founder and chief executive, said the incubator has helped turn an idea into a functioning business. The company operates an online bidding platform of solar rooftop panel installers from which homeowners and building owners can choose.

He said the company, which now employs 25, will soon outgrow the space at the campus.

“Without the expertise provided by the incubator, there were at least two or three points where we would have folded,” he said. “Having people around you to give you confidence in making the right decision was absolutely vital.”

For reprint and licensing requests for this article, CLICK HERE.