September 17, 2010

Business incubators, once a trendy place for entrepreneurs to start companies, fell out of favor in recent years. But some indicators suggest incubators are making a comeback as a breeding ground for startups, innovative ideas and new job creation.

Incubators are locations where startups share low-cost office space, access to business services and advice, as well as the unofficial support group that’s created by working next to other people who are in the same startup boat. Today, reports BusinessWeek, the National Business Incubation Association (NBIA) says incubators have reached a record high, with 1,200 locations nationwide, home to some 41,000 startup businesses.

While incubators used to be more general facilities, BusinessWeek says many of those that launched in the past few years are highly specialized. Often, their focus is on reviving a declining industry in the region where they are located, or on building off the expertise of those in that industry to innovate new products, services and concepts.

Joining in these efforts, the federal government is taking more interest in incubators as a way to boost job growth. In one study, the Commerce Department’s Economic Development Administration found that investing in incubators has a greater ROI than investing in public works programs in terms of creating jobs. The EDA put $80.7 million into incubators last year and says the spending created 8,746 jobs.

The interest in incubators has spawned new legislation. Representative Tim Ryan (D-OH) proposed a bill in April that would expand the types of incubators EDA is allowed to fund. Representative Suzanne Kosmas (D-FL) in May introduced the Early Stage Business Investment & Incubation Act of 2010, which would set up a $250 million funding program for incubators targeting high-growth industries.

But not everyone is sold on how effective incubators can be. The NBIA cites statistics that 87 percent of companies hatched in incubators are still around after five years, compared to just 47 percent of companies started outside of incubators. But Alejandro Amezcua, a Syracuse University Ph.D. candidate, says preliminary results from a study he is working on that examined 19,000 incubated companies found their failure rate was similar to that of companies outside incubators. 

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• Innovation

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Join the conversation ( 9 )

• Jill Finlayson 1 year 0 months and 15 days ago

  

  Hi Anita,Co-working spaces not only allow for shared resources (internet, space, reception) and ease of expansion, but they can foster networking, mentoring, and occasionally collaboration. In some places, they bring in guest CEO speakers, host funding events, etc. which offers learning opportunities and reduces the isolation sometimes felt by entrepreneurs.Specific examples of co-working spaces folks may want to check out include the Hub (with several hubs in the UC and globally) http://bayarea.the-hub.net/public/# and The Plug and Play centers in Silicon Valley http://www.plugandplaytechcenter.com/locationsIt seems natural to have these types of hubs near universities where students and entrepreneurs can meet. I also suggest public libraries move more into this space. Many libraries have rooms available for occasional use (great for people working from home who want a more formal environment on occasion) and larger conference rooms and presentation spaces available for reserving.Cheers,Jill

• Marie Hernan 1 year 8 months and 5 days ago

  

  This is a great opportunity for startup entrepreneurs. I think it's a reasonable investment and clearly, legislators think so too. With this kind of support, homegrown businesses have as good a chance as large scale businesses to thrive.

• Staci Wood 1 year 8 months and 15 days ago

  

  This type of support can work wonders for the individuals involved as well as the businesses themselves and the atmosphere they create is certainly one that is condusive to innovative thinking from new ideas being tossed around and bounced off of one another. It's a great way to support and motivate one another and bring fresh perspectives to the table.

• Anita Campbell 1 year 8 months and 15 days ago

  

  TJ, kudos to you on your Pittsburgh experience. The Youngstown Business Incubator is an example of an incubator making a tremendous difference in that town. Youngstown has had a tough row to how economically, but through some energetic leadership and community support, the YBI Incubator has been making national headlines with its ability to attract young tech entrepreneurs to return from college out of town, and re-settle in the area to launch and grow their businesses.- Anita

• TJ McCue 1 year 8 months and 15 days ago

  

  I'm glad to hear that they are making a comeback. I helped start one in Pittsburgh related to life sciences and it did well. But the co-working spaces and shared office concepts are awesome, too. They seem to serve a slightly different need, but I haven't looked closely at them.

• Anita Campbell 1 year 8 months and 15 days ago

  

  Adam, thanks for sharing information about Flagship Enterprises in Indiana. Sounds like a valuable asset to entrepreneurs in the community.- Anita

• Anita Campbell 1 year 8 months and 15 days ago

  

  Thursday, yes! Being able to network and connect with other startups everyday can help you stay motivated, learn about resources, and serve as a sounding board. I've often thought that today's "co-working" spaces serve a similar need -- they're informal incubators.- Anita

• Adam Hoeksema 1 year 8 months and 15 days ago

  

  I am the Client Services Manager at the Flagship Enterprise Center, one of the premier technology-based business incubators and accelerators in the country. We have been instrumental in developing World Class companies like Bright Automotive. Two years ago when Bright Automotive moved from Colorado to the Flagship they consisted of a small team of 2 or 3 entrepreneurs, and now they are on the verge of completely changing the fleet vehicle industry forever. Recently General Motors validated their technology through a $5 Million investment. The Flagship has successfully assisted other clean technology companies commercialize their products through our vast network of public and private partners. Other clients include Altair Nanotechnologies, Truck Emission Control Technologies, XADS, and Superdrive.The Flagship has recently expanded with a new 80,000 square foot, LEED certified, light manufacturing and prototyping accelerator building and we are actively seeking new innovative entrepreneurs that need help commercializing their innovative idea.If you have a great idea and just need some help getting to the next level, that is exactly what we are here for. Shoot me an email at adam@flagshipenterprise.org or call me at 765 622-7960. Finally, make sure to check out the Flagship Enterprise Center website at www.flagshipenterprise.org to learn more about how we can help make your dreams a reality.

• Thursday Bram 1 year 8 months and 15 days ago

  

  I've seen what amounts to informal incubators, as well as more formal arrangements. Just having another startup to commiserate makes the process of getting off the ground easier — while the other benefits of an incubator are immense, just knowing that you're not the only one going through the process can be incredibly helpful.