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Aggressive support for companies, jobs missing in America

[caption id="attachment_14207" align="alignright" width="216" caption="Optics veteran Lindsay Austin lauds the Suzhou incubator in China, where his startup has a manufacturing operation"][/caption]

NORTH BAY - After a recent visit to his startup's new manufacturing operation in a China, veteran high-tech executive Lindsay Austin has a new sense of urgency about the enormous competitive challenge the U.S., California and the North Bay face.

The Chinese, the Santa Rosa resident warned, are surging ahead of the U.S. in creating and nurturing startups and encouraging innovation.

"In the U.S. we prop up a failed company like GM and pour money into public works infrastructure projects, but the government knows that business incubators provide communities with greater results at less cost than any other kind of stimulus," said Mr. Austin, who serves on the board of the Sonoma Mountain Business Cluster, an incubator in Rohnert Park. (The cluster is the subject of a supplement in today's issue.)

[caption id="attachment_14208" align="alignleft" width="216" caption="Well-funded incubators like this one in Suzhou are wooing entrepreneurs from other countries"][/caption]

The U.S. Department of Commerce released a report early this year that said incubators provide up to 20 times more jobs than water, sewer and other projects at a cost of $144 to $216 per job compared with $2,920 to $6,872 for the latter.

But the U.S. government wants incubators to be funded by the private sector or self-funded. Meanwhile, the Chinese government is subsidizing state-of-the-art business parks that cater to an entrepreneur's every need, including funding.

Several years ago Mr. Austin and his partner Ningyi Luo started Pavilion Integration Corp. (PIC) to build light engines for high-performance OEM applications. When their first products were ready for market they approached the venture capital community.

"We got no offers. Our market was only $100 million, and they wanted a $1 billion market," said Mr. Austin, who had served as president and CEO of startup SpectraSwitch and also as vice president and general manager of the JDS Uniphase Commercial Laser Division.

Dr. Luo, who was born in China, suggested Suzhou Industrial Park. During talks, the park put them in touch with an investment group of people from the Chinese and Singapore governments who were willing to put in $1.1 million for a 10 percent stake in Pavilion.

"After that we doubled sales in a year. This year we'll double again, and this time private investors in Asia are coming forward. The initial investment gave us the traction we needed to get started. And now the government investment group has a nice stake in PIC," said Mr. Austin.

"Wouldn't it be nice if that stake was in the hands of a Sonoma County investment group?"

The business park built the production facility exactly to the partners' specifications with no money down and a reasonable rent. The venture group assisted them to recruit proven staff.

"They're earning a quarter of what they would over here, but Suzhou is no sweat shop. They're living well and they have a work ethic that is outstanding," he said.

Suzhou, about 40 miles west of Shanghai, is built on a scale that's hard to comprehend in the U.S. Covering more than 100 square miles, it has three large lakes, multiple research parks, several major university satellites, large residential areas, retail, entertainment, schools, parks and preserves.

Pavilion is located on 212-acre Bio Bay, which is focused only on biotech and nano technology.

"China is growing rapidly because they really assist new businesses. They see their funding as an investment in job creation and community development in addition to profit," said Mr. Austin.

The U.S., he said, takes a fragmented approach to drive innovation, with programs offered by the Defense Department for military uses, and some by the National Institutes of Health and Department of Energy, "but these funds are targeted for specific applications and not driven by market needs.

"Small business has never been a big focus of the government, so entrepreneurs have survived by boot strapping their businesses, then obtaining the help of angels and VCs. This is no way to compete against the overwhelming investment by the Chinese," he said.

He'd like to see community-based investment in job creation such as the Sonoma Mountain Business Cluster and programs such as the Santa Rosa Chamber's Entrepreneurial Pathways.

Banks, foundations and cities need to step up to the plate and help incubators to pay down debt and build an endowment, he said. Then the incubated companies could be supported by micro-loans.

Most startups fail through lack of funds at a critical point in their development, as Mr. Austin knows well from his own experience.

"We can either fight over shrinking pieces of a shrinking pie, or we can wake up and stimulate those programs that increase the GDP by investing in them.

"Otherwise, what our grandkids will need to get a good job are Chinese lessons and a visa."