At Rensselaer Polytechnic, a Hothouse to Nurture Student Talent

By MARTIN VAN DER WERF

Look, it's college, awright. So there shouldn't be any surprise in seeing an undergraduate like Vincent J. Pasceri walking the halls in stocking feet, rubbing his eyes, his hair tousled to a peak.

But this is a business office, and Vinny, as he is known, is its C.E.O.

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Pacing the floor talking into his telephone headset, sometimes fresh off the couch where he spent the night, Mr. Pasceri is every bit the struggling small businessman just trying to keep the doors open.

At age 21, he is heading up his third company, and now, he and 19 of his friends are in a mad race against the wireless electronics industry and a May deadline to get a new product to market. May is important for two other reasons -- that's when the financing runs out, and that's when Mr. Pasceri and many of the workers at ProductivityNet graduate from college.

Rensselaer Polytechnic Institute fans the flames of this hothouse. A degree, even from one of the nation's most advanced and respected technical institutions, is not enough to compete in the job market, the institution believes. Entrepreneurial drive is the key. It is out to create an entire army of Vinnys, uber-motivated technophiles obsessed with making the next big discovery, and turning it into riches.

R.P.I.'s business incubator is one of the nation's oldest, founded 20 years ago at the urging of George M. Low, the university's president from 1976-84. A former director of the Apollo space program, he thought the cooperation of government, industry, and academe that had made Apollo possible could be combined to encourage economic development here in the upper Hudson River valley.

The incubator has built an enviable record of success. More than 170 companies have "graduated" from the 1930's-era building that was once a Roman Catholic home for wayward teenage girls. A flag with each company's name hangs from the ceiling of the unheated, enclosed wooden footbridge that links the building with the rest of the campus. About 80 percent of those companies are still in business. They, collectively, have created 1,500 jobs and, last year, they generated $200-million in revenue. Ninety percent of the companies have remained in the region.

The incubator has been so successful that it has spread to two more buildings, a renovated circa 1871 office building downtown and a former chemical plant across the Hudson River in Watervliet.

The R.P.I. incubator has stimulated software development in the area, and such businesses are now one of the region's leading industries. There are 350-400 software companies in the Albany-Troy-Schenectady region, most notably MapInfo Corporation, a leading manufacturer of mapping and demographics products.

MapInfo was started in 1986 by four R.P.I. students and Michael D. Marvin, then the director of the institution's Business and Manufacturing Center and now chairman of the company. "I funded it out of my own pocket," says Mr. Marvin. "Fifteen thousand dollars, and I had to borrow it." MapInfo now has $100-million in annual revenues.

Yet, as much success as the incubator has had, it is about to change -- to further emphasize student-run companies.

Historically, about one-third of the companies entering the incubator have been run by students, says the facility's director, Bela L. Musits, who chooses, along with one assistant, which companies may move in. However, in the last year or so, he has seen that proportion grow to about 60 percent. Still, Mr. Musits estimates that only about 200 students are actively involved in starting companies, a tiny fraction of the 6,000-plus on the campus.

However, beginning with this fall's incoming freshmen, all students will be required to take courses in entrepreneurship, or to have an "entrepreneurial experience" before they graduate, says the institution's president, Shirley Ann Jackson.

Rensselaer doesn't expect every student to start a company, though it hopes more will. The university will increase the number of design and studio classes, send more students to work at small growing businesses, and start an entrepreneurs' dorm.

Already, a student design competition, with a $20,000 top prize, has grown from seven entrants to 36 in the three years it has been held.

Winning a place in the incubator means constant exposure to other professionals a small company needs; experts in financing, intellectual-property law, accounting, and marketing regularly donate their services. Students and others running companies are invited to business-plan forums, where they practice making pitches for financing to a panel of venture capitalists. Once a month, there is a dinner, by invitation only, where student business owners are invited to sit down with other business owners and potential investors.

Thirty-two companies are now physically located in the three sites of R.P.I.'s incubator, and another 40 companies are allowed to take advantage of the programming offered there.

Karthik Bala, now the chief executive officer of Vicarious Visions, says he attended Rensselaer specifically because of the incubator. He and his brother, Guha, decided when they were in high school in Rochester, N.Y., that they wanted to make video games.

"I got a job [in high school] as a marketer in a gaming company, and ended up as head of marketing," he says. As he headed to college, he thought, of the incubator, "This is exactly what I need. I don't have any idea what I'm doing."

Last year, sales for Vicarious Visions, which published its first game in 1996, were just under $6-million, but Mr. Bala, with contracts to develop games for Sony and Sega, among others, expects them to go over $10-million this year. He is 25; his brother, the company's president, is 24.

There are many other success stories. Molecular OptoElectronics Corporation, which makes components for fiber-optic networks, just raised $20-million in financing. Its work force of 190 people is seven times larger than a year ago. Starfire Systems is manufacturing a liquid polymer that converts to a high-purity ceramic used in heat shields and brakes for aircraft, which was developed in an R.P.I. laboratory. It "could easily be a half-billion-dollar company by 2005," says its president, Walter Sherwood, an R.P.I. graduate who founded the company in 1995.

Back at ProductivityNet, Mr. Pascera and his friends are working on software that would allow a network administrator to diagnose and fix problems remotely from a wireless device, such as a Palm Pilot or a cell phone.

Mr. Pasceri has built up his staff, filled mostly with programmers, through the promise of options on now nonexistent stock, but also by keeping everyone in pizza and soda, and the atmosphere light.

His employees dream of slaying the industry giants.

"I had an absolutely miserable experience at Lucent Corporation" during a summer internship, says Mike McCutcheon, of Sugar Loaf, N.Y., a senior majoring in computer science who recently turned down a job offer and signing bonus from Microsoft. "I thought, 'Why would I want to do that again?' Here, our deal is we're going to break Vinny's knees if he doesn't get the money."

That laughing in the face of uncertainty is just the kind of fearlessness Rensselaer hopes to cultivate. "These," says Mr. Musits, "are the innovators of tomorrow."

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