Swain retires as CEO of Hub tech incubator

Cathy Swain, who oversaw the launch of the Hub of Human Innovation in El Paso, a schoolhouse for startup companies, has retired as president and CEO.

Swain, 66, became the Hub’s first chief executive in 2011 when the technology incubator was founded as part of a broader effort by city leaders to create more high-skill, high-wage jobs by cultivating fast-growth firms in the region.

Since its launch four years ago, the Hub has had 36 client startups. They’ve raised a total of $901,063 in investment capital and had combined revenues of $14 million, according to the most recent data collected by the Hub.

“One of the things that was most important to me personally was to bring to the region a global perspective, a sense of what is possible,” Swain said, speaking by phone from Vermont.

The region, she said, “is on the defensive and people need to believe in what is possible.”

Under Swain’s watch, the Hub worked with the Massachusetts Institute of Technology to launch a mentorship program based on MIT’s Venture Mentoring Service. The program pairs people who have ideas with mentors who have business savvy.

The Hub also formed a partnership with the technology incubator in Juárez and was designated as a “Soft Landings International Incubator” by the National Business Incubation Association. The designation identifies incubators that specialize in helping companies break into new markets.

Swain, whose last day on the job was Aug. 31, said she retired to be close to her family in Vermont, especially her new grandbaby and granddaughter. The non-profit incubator and its 18-member board have launched a national search for a replacement.

“I really felt like things were on such a great plane in El Paso that it was the right time,” Swain said. “The baby was due, and my son had made clear that he wanted me to be close.”

Leaving the Hub, she said, was like “sending your teenager off to college.”

El Paso’s startup community is in its infancy. Local venture capital is scarce, and the Hub is El Paso’s only technology incubator. In Austin, the state’s tech startup center, there are 26, according to Jaime Rhodes, founder of the Alliance of Texas Angel Networks.

“The important thing to know is 10 years ago this wasn’t all happening in Austin,” said Rhodes, who is based in Austin. “This takes a concerted effort by the community.”

Swain invited Rhodes to El Paso earlier this year to speak about angel investing and see what they could do to get an angel investor group organized in El Paso.

“I saw great potential,” Rhodes said.

The Alliance of Texas Angel Networks was created to foster the growth of startup activity in Texas, Rhodes said. Its member angel groups invested $45 million into 100 companies last year.

“I was impressed by the work done in El Paso,” he said.

An effort to form a local angel investor group that would provide seed funding for startups is under way, but Hub board chair Gary Williams said they are not ready to make an announcement yet.

Challenges

The Hub, which is located in Downtown at 500 W. Overland, is itself a startup. And as with startups, many business incubators fail.

“It is really hard when you are starting something brand new. We had never done something like this before,” said Williams, who is filling in as CEO.

The Hub has struggled to gain financial support from the private sector. The majority of the incubator’s $500,000 budget is supported by a $1-million grant from the city of El Paso that’s paid over four years and a grant from the State Energy Conservation Office.

About 11 percent of the Hub’s budget is supported by fees and rent paid by its clients and private contributions.

But that’s beginning to change, and the Hub has received some private-sector grants to be announced soon, Williams said.

“We are starting to win the confidence of the private sector,” he said.

El Paso is not the only city that has become fascinated with the notion of startup hubs and aimed to become the next Silicon (fill in the blank), inspired by a growing body of research highlighting the job-creation power of fast-growth tech firms.

Lincoln, Nebraska has Silicon Prairie, Las Vegas Silicon Strip and New York has Silicon Alley.

“We need to pursue more high-skill, high-wage jobs, and there is so much literature that talks about high-growth industries being in the tech sector,” said Emma Schwartz, vice chair of the Hub board and president of the Medical Center of the Americas Foundation.

Against all odds

Boosters like Schwartz say the El Paso region does have some things that set it apart. It boasts a manufacturing center, one of the largest in North America, just south of the border in Juárez. Rents are low and local universities are building new lab space and attracting talent.

“Against all odds, I think we are going to do it and surprise a lot of people who underestimate our capabilities in the region,” said Schwartz.

But El Paso is a challenging place for startups to raise venture capital and it doesn’t have a large startup community that can provide motivation and support.

“One of the bigger challenges going forward is going to be fundraising,” Williams said.

The city also doesn’t have a big technology sector to serve as a source of spinoffs, although the foundation for a technology park is being laid at the Medical Center of the Americas. The MCA is a decades-long project in South Central El Paso that encompasses the Texas Tech University Health Sciences Center, Paul L. Foster School of Medicine, Gayle Greve Hunt School of Nursing and the county hospital.

El Paso’s only angel investor group – Camino Real Angels, which provided seed funding to startups – disbanded more than four years ago after members became discouraged when they couldn’t generate enough deal flow.

There is one venture capital firm with offices in El Paso – Cottonwood Technology Fund – that was supported early on by El Paso businessman Woody Hunt. The firm invests mostly in the Southwest and Northern Europe, and hasn’t announced any major investments in El Paso-based startups.

When she first came to El Paso, Swain said she came to the conclusion that, “The biggest enemy of the region was the inferiority complex. The number of times a week I would hear: ‘Oh, that’s El Paso.’”

But that mentality is changing, said Swain, whose optimism is contagious – a trait that is required working in the startup world where failure is common.

Born in a Midwest town of 7,000 people in southern Illinois, Swain left small town life for the big city.

After completing her post-graduate studies at Stanford University, she started a career on Wall Street, where she worked in investment banking. Later, she worked on Main Street in Vermont, focusing on rural community development.

In 1999, Swain came to Texas where she watched over the University of Texas System’s $23-billion endowment fund as director of investment oversight. Later, she served as the UT System’s assistant vice chancellor for commercial development.

The Hub’s clients include Ruskat, a company that has developed a medical device called Hospital in a Box; NegaWatt Energy Solutions, which helps companies reduce their energy use; and Phidev, a software development company.

Another client, American Water Recycling, was founded by a group of graduate students at the University of Texas at El Paso who believe they have discovered a cheaper, more efficient way to clean polluted industrial wastewater.

As of Friday, the Hub’s board had received 44 résumés for the CEO position.

“There’s been a lot of interest and the quality has been varied,” Schwartz said. “There are some people stretching very hard and some very qualified people.”

“It’s a critical, critical hire,” she added.

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