How much are customer connections worth to startups? A lot more than investor capital, apparently.
That’s according to entrepreneurs at San Pedro business incubator PortTech Los Angeles.
A bit of a startup itself, the specialized 6-year-old incubator grooms entrepreneurs in clean technology and services – primarily for the ports of Los Angeles and Long Beach. That narrow focus has enabled it to forge ties with both ports, the goods-moving businesses operating there as well as state and federal agencies that support innovators in the clean tech industry.
Such ties helped Torrance’s Transient Plasma Systems Inc. connect with Norway’s Wallenius Wilhelmsen Logistics, a potential customer in freight moving, said Dan Singleton, Transient president and co-founder.
His firm won PortTech’s “Shark Tank”-like pitch contest in 2014 and then a $100,000 award from a competition run by Wallenius and nonprofit Ocean Exchange for its plasma ignition technology, which cuts freight vehicle engine emissions while boosting fuel efficiency. PortTech advised Singleton to enter Wallenius and Ocean Exchange’s contest, coached him through the application process and sent a representative to the Savannah, Ga., competition.
“We won $100,000 from Wallenius, and it is fantastic. But even better, Wallenius came out from Norway and has begun talking to us on how to get to a product for them and that’s potentially worth more than the $100,000,” Singleton said.
Limitations
But NorthSouth GIS, in the Little Tokyo area of downtown Los Angeles, has not had such a great run during its three years as a PortTech client.
At roughly 10 years old, the company is further along than most of PortTech’s clients, with six West Coast seaports that have bought its geospatial databases and services, said Daniel Elroi, the firm’s chief executive.
Elroi believes that it’s time to pursue terminal operators and logistics companies, but PortTech hasn’t set him up with the one-on-one meetings he would like. He thinks it’s because his software and services aren’t as easy for PortTech to promote as a physical product would be.
He also wants more referrals and creative funding solutions from PortTech.
“I want someone in Los Angeles to be promoting me in Texas and Florida in a way that would stretch my marketing dollars,” Elroi said.
PortTech clients also haven’t attracted funding Pasadena Angels Inc., an Altadena angel investing group whose members have been judging pitch competitions and coaching the incubator’s clients for about two years, said Chris Wadden, chair of Pasadena Angels.
But he’s found the clients have produced sound business plans and PortTech staff vets them well for investors.
“We know people at PortTech and they are good, solid business people and put (their clients) through the rigors of analysis so the clients won’t go into the marketplace and try and find their way,” Wadden said.
Incubating business
The sign of a good program is one that prepares clients for when they do need funding, said Paul Orlando, an adjunct professor of entrepreneurial studies at USC.
“The effect of graduating from a program should be that the surviving companies are better potential investments for later-stage investors,” Orlando said.
He added that a knowledgeable incubator can be invaluable for a startup.
“While some founders can develop their businesses without outside help,” he said, “for many, a good incubator or accelerator helps speed up the learning process and minimizes mistakes (and) makes strong connections to both people in industry and investors.”
PortTech started in 2009 as a business incubator primarily for the Port of Los Angeles, a founding sponsor along with the city of Los Angeles and the San Pedro and Wilmington chambers of commerce, said Ann Lee Carpenter, PortTech’s marketing director. It has broadened since then to focus on regional economic development.
PortTech Executive Director Stan Tomsic said its long list of sponsoring and supporting companies, private investors, labor unions and public agencies opens doors for clients, while its ties to the ports and their tenant businesses help in getting their clients’ products and services tested, he added.
Otherwise, Tomsic said, “it’s very challenging, and not one I would call an open marketplace.”
International Technology and Services Inc. in San Pedro hired PortTech in 2013 to gain contacts, not funding, said Pilar Ortega, chief executive and founder, and Craig Rexroad, the company’s president.
Through PortTech, the pair learned it was targeting the wrong customer for its green environmental remediation products and services, so they switched focus to target environmental consultants who recommend remediation firms such as theirs, Ortega said. PortTech also provided a list of consultants to target.
As a result, International Technology and Services is selling to Long Beach’s Pacific Crane Maintenance Co., a crane operator at seaports, and two other customers, Rexroad said. Eight more deals are pending.
“We’re dealing with clients that have multiple facilities and multiple locations and their potential is massive” as they need products and services daily, weekly and monthly, Rexroad said. “When you’re able to integrate your products into these companies, it’s an ongoing relationship.”
SaveSorb in Gardena hit a wall when it tried selling its hazardous fluid spill cleanup products for equipment and vehicles to the ports’ businesses. It hired PortTech in 2014 and then became a finalist in its pitch competition that year, said Chief Executive Chase Ahders.
Through the event, SaveSorb gained several customers, including San Pedro terminal operator and stevedoring company SSA Marine, a division of Seattle’s Carrix Inc.
“The port was such a closed door we could never could get someone to tell us what they needed,” Ahders said. “PortTech helped us to have conversations with clients and learn what our clients need and how our products could help them.”
