Business Incubators Boost Entrepreneurial and Economic Development

By Tom DiFiore

The term incubator is so ingrained in the business lexicon of the 90’s and the 2000’s, that little consideration is given to the origin of the word, used today in business context to signify a place – with support services ranging from mentoring to financing – where start-up companies can grow (or hatch) their idea or product. The origin of the term in today’s vernacular is not only decades old, but actually quite literal. Purportedly, the first incubator included a poultry-producer tenant, who literally hatched chickens and the birth of the term incubator.

Today, there are over 1,000 operating incubators in North America, and 4,000 worldwide, ninety percent of which are not-for-profit entities, frequently aligned with a university. The non-profit incubators support not only the individual entrepreneur, but are also focused on economic development in the founding community or region. In fact, the non-profit National Business Incubation Association (NBIA) – the leading association for the industry, states that its mission is to “advance the business creation process to increase entrepreneurial success and individual opportunity, strengthening communities worldwide.”

“Typically cities that are interested in spurring economic development will subsidize the incubator,” said Tracy Kitts, vice president and chief operating officer of NBIA. “There may be a myriad of stakeholders involved, but economic development is the impetus for their involvement,” he added.

“The first step is to work with someone qualified to conduct a feasibility study for an incubator in your community, and [subject to the outcome], create a business plan,” said Kitts. “Use our association to get in touch with other people who have done it. The NBIA group is quite collegial, and willing to help. They do not see themselves as in direct competition because of geographic limitations. Start contacting other people in other communities; find out what worked, and what didn’t work,” he added.

Tomorrow is Today in Carrollton, GA Where The Burson Center is a Reality

One of the first tasks the Carroll Tomorrow organization performed in their quest for a non-profit incubator was a feasibility study. “Professional market research and a feasibility study are very important,” said Slater Barr, president and chief executive officer of Carroll Tomorrow, a non-profit community organization in Carrollton, GA. Carroll Tomorrow was created to support the public-private enhancement of the economy and the quality of life in Carrollton and Carroll County. Their vision of “tomorrow” included a small business incubator that has taken a fairly typical timeframe of five years – from feasibility to ribbon cutting – to hatch.

“It was really the leadership in the community that had the vision for this,” said Barr, whose organization oversees the Burson Center. “Within two weeks of my arrival in Carrollton to head Carroll Tomorrow, about twenty individuals called me to a meeting to express their desire and vision for an incubator, and to discuss how we might cumulatively compile enough money to make it happen.”

According to Barr, Dr. John Burson, for whom the center is named, offered to lend a 25,000 square foot building he owned to house the center, but his initial generosity required even greater generosity ultimately. As the pursuit for grants, and other funding evolved, Carroll Tomorrow encountered what Barr refers to as a “key moment,” when the various funding sources rejected the idea of investing in an incubator housed in a privately owned building. Barr went to Dr. Burson to break the news.

Barr said he told Dr. Burson that they’d found the funding, but that Burson would need to donate the building. “Dr. Burson blinked a few times and said, ‘you know what? We can make that happen.’ I believe he saw it as a way to give back to the community,” said Barr, who praised Burson’s business skills and philanthropy in other areas as well.

With the building and land donation in place, Barr and his colleagues at Carroll Tomorrow were able to secure a total of $1.6 million in grants from federal, regional, state, county and city sources, but managing the timing among the granting constituencies proved to be a challenge.

“My experience is when you go for multiple grant sources, they all want to be the last link in the chain. At some point, you have to get everyone to the table at the same time. They all have different funding cycles, and different grant and match requirements. It’s like a jigsaw puzzle. They all want to make commitments contingent upon others, so it required a great deal of shifting, tweaking and shuffling around. It’s very complicated; you can’t kid yourself that it’s not,” said Barr.

Like many non-profit incubators, the Burson Center has an affiliation with the local university, in this case, The University of West Georgia in Carrollton. While the center is owned and operated by Carroll Tomorrow, it is supported in many ways by the university. The school holds clinics, and provides MBA students from the School of Business to conduct research, and to serve as interns, providing valuable experience for the students, and meaningful support for the center.

“We have a good relationship with the university, and have even tapped resources from the university that are not so obvious [as working with the Business School],” said Barr. “The Fine Arts Department supplied us with photography students who took over 2,000 photographs of the community for the center, which helps us to tell the story,” he added. The photographs have become a permanent exhibit on site at the Burson Center, and provide décor for the facility.

The Burson Center will officially open within weeks, and will operate as a true, mixed-use facility offering manufacturing, warehouse and assembly space, along with offices suitable for a technology company or a consulting, or service business.

Barr says, “The real challenge in the early stage is having all the operating costs without the occupancy. It may take a few years until we’re up to capacity, but we have the most attractive location in the community. It’s critical to have the operations and the facility right from the start, with a good value proposition. We did a lot of research and found that it was important for our center not to be too specialized. Everyone wants tech companies, but we’re also a fairly rural community.”

In addition to providing space at a discounted rate that is approximately 80% of the market rate, the Burson Center also supplies tenants with a furnished office, telephones and Internet for a fee; printers, copiers, a conference room, library, and receptionist, all of which reduce start-up costs for their incubator tenants. They even offer use of the some of the facility’s affiliate programs for a small monthly fee, which helps to offset expenses.

“This endeavor could not have happened without the help of Dr. Burson, the city council, the county economic development authority and the OneGeorgia Authority,” Barr said.

The bottom-line between for-profit, and not-for-profit business incubators is … the bottom line.

For-profit incubators are designed to provide returns on the shareholders’ investments. The National Business Incubation Association has both non-profit and for-profit members, although over 90% are non-profit. “A well run non-profit puts the profits back into the program,” said NBIA’s Kitts. “The for-profit model wants to profit off the success of the company.”

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Links
National Business Incubation Association
The Burson Center
Carroll Tomorrow
Colorado Springs Technology Incubator
Capitol - Technology - Entrepreneurship - Knowledge
Maine Center for Enterprise Development

Reading List
Developing a Business Incubation Program: Insight and Advice for Communities

NBIA’s 21st International Conference on Business Incubation will be held in Seattle, April 1-4, 2007. The Fall Training Institute, which offers in-depth workshops is October 25-27, 2006 in Denver. For more info, visit: www.nbia.org