Yerke aims to foster Internet businesses with new incubator

Elm Grove businessman Norman Yerke knows what it takes to start and operate a business. After all, he’s established a number of companies and has fostered growth to more than $100 million in sales.
Now he wants to help others realize that kind of opportunity – via the new arena of business, the Internet.
Yerke, of Geoffrey-Allison Investments at 13500 Watertown Plank Road, is starting an Internet incubator, modeled partly after a West Coast incubator, idealab!, that helped spawn such successful companies as eToys, Free-PC, and WeddingChannel.com.
“It’s so changing the landscape of international and American business,” Yerke says of the Internet. “They’re doing this on the West Coast; I know we have the talent here, also.”
As at idealab!, Yerke would provide the financing to get the Internet-based operations going. He would also provide administrative help, management advice, and office space. “Creative individuals will provide the ideas,” he adds.
[While he’s currently located in Elm Grove, he’s building a new facility -Park Ridge Office Centre – on a 45-acre wooded setting just north of the I-94 and Highway 164 intersection in Waukesha.]
Yerke, who is also CEO of Mega Construction and C&C Erecting, recently placed a classified ad seeking prospects for the incubator. “I received 20 calls in three weeks,” he said, noting that respondents included existing retail operations and persons who hoped to start businesses. He’s asking the prospects to provide a business plan and he’ll undertake the due diligence involved with any business financing deal.
He anticipates it will be three to six months before the first company would become operational, but he also is very optimistic of the opportunity. “It’s a very exciting prospect,” he says. “And it’s only in its infancy.”
The privately-held idealab!, founded by entrepreneur Bill Gross in March 1996 and backed by a number of other financiers, currently has about 20 businesses in various stages of development.
As with any incubator, not all of the idealab! start-ups have thrived, according to published reports. But those such as eToys have done well.
Idealab! is based in Pasadena and has 25 employees. While financing the start-ups, idealab! does not take a controlling interest in the firms. It does take an equity stake in return – up to 49% — for the start-up capital, technology and services; its maximum investment in any one firm is $250,000.
Yerke, meanwhile, said he’s not yet ready to put a cap on what he’d invest in a company. His current plans are to be the sole financier for the incubator here.
Another West Coast operation similar to idealab! was recently established by Jack Winebaum and Sky Dayton. The two have started eCompanies in Santa Monica, Calif.
Winebaum developed and launched Disney Online and oversaw The Walt Disney Company’s Internet initiatives including ESPN.com, ABCNews.com, ABC.com, Disney.com, and the company’s interest in Infoseek and the Go Network.
Dayton is the founder and chairman of Earthlink, an Internet service provider with 1.15 million customers. Both EarthLink and Disney will be founding strategic investors in eCompanies.
Yerke can be reached in Elm Grove at 414-821-3075. The growth of e-commerce as a means of selling products and services via the Internet has brought attention to the way state and local taxes are applied to Internet purchases. Shopping via the Internet is similar tax-wise to shopping via catalog – if a store does not have a physical presence in a state, that state cannot compel the store to collect state sales tax on an item purchased by a customer living in the state.
Catalog sales aren’t tax-free – income tax forms contain a line for use tax, on which consumers are supposed to indicate how much they spent on goods purchased out of state. But state and local officials around the country fear that tax filers don’t honestly pay use taxes, and with the boom in Internet shopping states stand to lose big money.
Last October Congress passed the Internet Tax Freedom Act, which imposed a three-year moratorium on Internet taxation and called for the formation of a committee to study the issue.
“The act isn’t meant to give Internet business preferential treatment,” said Jim Eads, a partner at Ernst & Young LLP’s Atlanta office. “The point is to make sure state governments can’t single out and tax commerce occurring via the Internet that will put it at a disadvantage vis-a-vis other commerce.”
From the small-business-point-of-view, the Internet provides a relatively inexpensive opportunity for entrepreneurs to start a business. Start-up costs are lower because a physical store is not needed necessarily, and the Internet allows for global exposure of a business.
“There is a huge opportunity for small businesses on the Internet, but many small businesses don’t have time to think about going online,” said Chris Zuzick, a vice president with Anderson/Roethle, Inc., in Milwaukee. “Fear of extra taxes will just prevent small businesses from using the Internet to their advantage.”
In addition to the issue of taxing products and services sold over the Internet, taxation of Internet access also is a concern the Internet Tax Freedom Act will address, Eads said. The moratorium applies to Internet access, and opponents of state-taxed Internet access say such a tax system would undermine the potential the Internet has for business.
“If Internet access is taxed, small businesses might look at it as an unjustified expenditure they can’t afford,” Zuzick said. “That will further prevent companies from using the Internet to grow their business.”