Outsource incubates new firms

East Valley Tribune
August 13, 2006

Three of today’s hottest business fields – homeland security, energy efficiency and information technology – are being targeted by a Scottsdale-based company that incubates new companies.

Outsource International, which started in 1997 in real estate development, has morphed in the past two years into a firm that builds new companies and accelerates the growth of existing companies by providing management assistance and access to capital.

“We concluded if we were to be successful in creating high-paying jobs, we had to bring together talent and capital,” said chief executive Donavon Ostrom.

Outsource has recruited a stable of consultants with management and startup company experience to help entrepreneur/clients and also has raised capital from financial partners. So far the company has raised $700,000 and has a goal of attracting $5 million to invest in early-stage companies.

Outsource receives fees for its services and takes equity positions in the companies it assists, eventually being reimbursed when the company is sold or goes public.

Morteza Abbaszadegan, Ph.D.

An example of the type of enterprise it is attempting to launch is BioSense International, a Scottsdale based firm that was created in December to commercialize technology that quickly detects harmful bacteria in drinking water. The technology has potential in homeland security work to protect municipal water systems from bioterrorism. Also it could find uses in the beverage, pharmaceutical, microelectronics and other industries that need clean water, Ostrom said.

“The state of the art in testing for bacteria is to have a water sample tested in a lab, which can take 24 to 72 hours,” Ostrom said. “This technology detects and characterizes micro-organisms within minutes.”

The patent-pending monitoring device, which is in the prototype-development stage, was invented by Morteza Abbaszadegan, director of the National Science Foundation Water Quality Center at Arizona State University. The company is a joint venture of Outsource International and Arizona Technology Enterprises, ASU’s technology transfer organization.

Outsource recruited Robert J. Ritz, the former president of a company that built high-purity water systems, to serve as the chief executive of BioSense International and also recruited the firm’s technology manager, product development manager and sales and marketing officer.

“I’m pretty excited about this technology because it (bacteria detection) is the one parameter in water that is tested routinely that cannot obtain immediate results,” Ritz said. “This technology is doing it in less than 30 seconds.”

The standard test is to run the water through a filter that is small enough to trap any bacteria, put it in a petri dish and grow the culture for about 48 hours to determine what it is, Ritz said. The $35,000 BioSense bacteria monitor adds reagents to a water sample that immediately detect bacteria and tell what kinds are present, he said.

Such instruments placed in municipal treatment plants could monitor streams of water almost continually,
Ritz said.

“I do think this could eventually be legislated,” he said.

The company is developing its third prototype and hopes to have a working model available for the marketplace by the end of next year, Ritz said.
Other companies that Outsource has a hand in managing include a firm that plans to build biodiesel plants in Arizona and another company developing technology to make diesel engines run cleanly and efficiently.

In the information technology arena, Outsource is investing in a Chandler company called Crawdad Technologies. That company is marketing ASU-developed software that analyzes text and data to find patterns that help clients plan their business strategies.

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