NEW YORK - After setting up shop in 130 countries around the globe, massive Swedish telecommunications company Ericsson has decided to root down in Silicon Alley with a US$2.5 million technology greenhouse called CyberLab, announced today in Manhattan's financial district.
The CyberLab, funded in part with a token $750,000 loan from the high-profile New York Investment Fund - a private venture-capital fund led by Henry Kravis - hopes to become a hotbed for young entrepreneurs and the VCs who love them. But with steep rates to rent lab space and technology that well surpasses the needs of New York's content industry, CyberLab might scare off the start-ups it says it hopes to court. Instead, the space will showcase Ericsson's technologies for the benefit of the Wall Street mavens and New York broadcast industry the company would like to do business with.
Like CyberLab West, its Silicon Valley counterpart that opens in mid-November in Menlo Park, California, CyberLab will serve as a pay-to-play demo arcade where entrepreneurs can impress their VC suitors. Ericsson itself expects that the lab will "build competence in our own company and collaborate between companies - broadcast, mobile telephone, and biotech," says Guy Pinkham, vice president of business development for Ericsson. "That [communication] won't happen unless you build a mecca."
Pinkham likened the center to a "golf course or ski resort where you only pay for the resources utilized." The lab will offer 15 private rooms, two T3 connections, a 30-MB LAN, and an unspecified number of servers, says Pinkham. To use the facility (slated to open in January), entrepreneurs will be asked to pay $5,000 a week - that figure may slide with market pressure. Like any snobby golf course, admission will be scrutinized and monitored through an "advisory committee" of Ericsson and New York Investment Fund representatives.
The location of CyberLab - at 55 Broad Street, cattycorner to Wall Street - reveals much about Ericsson's ultimate target audience - financial investors. To inaugurate the lab, Henry Kravis, one of the founding partners in buyout firm Kohlberg Kravis Roberts & Co., spoke as a jilted financier, bemoaning the loss of dollars when the biotech industry left the city.
"A few years back, New York was the source for ideas in the biotech industry, but we lost out on the commercial application," Kravis said. "We cannot allow that to happen again."
Not surprisingly, the lab gives Ericsson a test center for its own mobile communications technology and then lets it turn a buck on the extra space. After an August investment in Juniper's next-generation router technology, Ericsson itself plans to use the facility to test IP streaming and the router itself, says Anthony Knape, the general manager of CyberLab.
"The CyberLab started as an internal experimental lab, and in the process it has opened out," says Knape. He says Ericsson wants to develop the IP technology in tandem with its wireless advances.
In the partnership with the New York Investment Fund, Ericsson gets necessary access to New York's high-power brain capital vested in the fund, says Kathy Wylde, president of the $60 million VC cache. "Ericsson doesn't need our money - they want the strategic participation of the 60 investors ... like ABC, NBC, CBS, and AT&T," Wylde says.
As much as Ericsson touts its interest in welcoming small businesses, actually it's much bigger businesses that are on its mind. In fact, it's hard to see the appeal of CyberLab for start-ups. As tight as New York is for space, many young companies choose real estate in SoHo and the Flatiron district specifically for their built-in conference rooms and demo spaces, says Wendell Lansford, CEO of Social Science, a software start-up. With his own in-house presentation space and a lone Solaris workstation, Lansford "wouldn't pay" to demo his NetDiscussion product at CyberLab.
While a $5,000 price tag might seem a pittance to broadcast companies, it's prohibitively expensive for fetal businesses - particularly the ones in need of incubation. "They kept talking about the small entrepreneur, but can the truly small entrepreneur afford that?" asks New York New Media Association executive director Lori Schwab. "Many companies I know couldn't afford that."
