As the economy foundered two years ago, software developers Adam Lowry and Michael Richardson joined the ranks of the unemployed when the tech startup they worked at went under.

They saw an opportunity to team with friends and start their own business. Strapped for cash, though, they thought about ditching their entrepreneurial ambitions in favor of contract work.

"We knew we'd have to pay the bills," Lowry recalls, "and it was going to be difficult to balance doing this."

Thanks to an obscure state program, they didn't have to make a choice. It allowed them to draw unemployment benefits while they and two friends launched the business, exempting them from the usual requirement that they look for work full-time while on state assistance.

The payoff: One of the best-known technology startups to emerge in Oregon in many years. Their company,

, captured an early lead in the global market for mobile apps, enabling pop-up notifications on smartphones and purchases within other companies' apps.

It has since

and now employs 28 at its Pearl District headquarters, which doubles as a clubhouse for Portland's emerging mobile technology community.

Lowry and Richardson, now lead engineers at the company they co-founded, credit the state program with launching a thriving business that might not have happened otherwise.

"I really don't know if we could have done it without that," Richardson said.

The Oregon Self Employment Assistance Program is designed to give the unemployed the option of starting their own business instead of hunting for a new job.

"You don't have to look for work, and whatever money you make in your business you get to keep," said William (Pat) Sanderlin, who coordinates the program for the Oregon Employment Department. "That's the carrot right there to keep it going."

Participants must present a business plan. At Urban Airship, it was the first one they wrote -- though the company took off so fast that it became obsolete almost immediately. "We executed on the business plan probably in the first hour and a half," said co-founder and CEO Scott Kveton.

The program dates to the original North American Free Trade Agreement legislation, through a provision pushed by the late Sen. Ted Kennedy, D-Mass., and by Sen. Ron Wyden, D-Ore., who was then a congressman. But only seven states opted to participate, and in Oregon only about 2,400 people have taken advantage of it since the program began in 1995.

Oregon Self Employment Assistance Program

The deal

: Six months of unemployment benefits while you start your own company, with a bonus: You don't have to look for work, and you can keep whatever you earn.

The catch

: After six months, you either have to drop out of the program or, to continue receiving benefits, start looking for a job and give up on your business.

Information

:

Official website

Facebook page

One big reason is that the program ends after six months. Participants can still collect regular unemployment benefits so long as their eligibility and extensions last, but they have to give up on their new business.

"With so many extensions now," Sanderlin said, "there's a big temptation to say, 'I can't do this'"

The department reckons that the cost of benefits paid to participants isn't any higher than it would be without the program, since recipients would be eligible for jobless benefits in any case. Sanderlin said a rough estimate puts administrative costs at $100,000 annually.

In an informal "census" this year of enrollees since 2004, Sanderlin said that 77 percent are still in business. He also asked for their companies' annual payroll.

"I was gobsmacked," Sanderlin said. "It was $7,888,210."

For Julie Thomas, a Ph.D and former Intel technical writer, the program is giving her a shot at a new career.

The chipmaker warned her in 2006 that it was planning to eliminate her job, and Thomas began thinking about going in an entirely new direction. "When this job goes away," she recalls thinking, "I want to do something other than work in a cubicle."

She succeeded on that front: After being laid off from her six-figure job in fall 2009, Thomas began cobbling together a business plan for water therapy for dogs.

Early the following year she learned about OSEAP and began collecting $496 in weekly benefits while she picked a site and set up the utilities and pool. (The amount of monthly jobless benefits is based on how much you earned while working.)

"Having that six months gave me the cushion that I could focus on the business plan," Thomas, now 62, said.

The business -- Doggie Paddle -- opened last fall on Southwest Macadam Avenue in Portland serving older dogs and those who with leg and joint problems.

While not making a profit yet, Thomas said she's got enough savings to take her shot at making the business work and fulfilling a dream.

"I don't miss working in a cubicle," she said.

The program doesn't work for everyone. Two years ago,

while receiving $487 a week through OSEAP.

"The state of the economy was making it a slow go," O'Daly recalls.

After a few months, an old colleague called "out of the blue" offering him a job as a service manager with a technology company in California's Silicon Valley.

While O'Daly liked Oregon, and really wanted to make a go of it on his own, he couldn't turn down the opportunity in California.

"If I'd been single, maybe I would have tried to continue to do it," said O'Daly, 56.

Instead, he and his wife moved south, and he went to work for Terix Computer Service in Sunnyvale, Calif.

"It's a solid job, it's a steady job, and the company is growing."

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