Business incubators--organizations that help entrepreneurs get off the ground through mentoring, funding and facilities--have been around since the 1950s. At the turn of the millennium, for-profit incubators were a hot commodity until they deflated with the dotcom bubble. But this year, despite a down economy, the luster is returning to incubation. President Obama has pledged $250 million a year in federal funds to seed a regional network of such organizations--an effort aimed at growing jobs and innovation. So people are talking about incubators again.
“This is the first time in the U.S. that a new administration has made this kind of commitment to innovation, entrepreneurs and technology,” says Dinah Adkins, president and CEO of the National Business Incubation Association. “This is the first time we’ve had a presidential administration that wants to invest in this.”
Hopes are high at a time when many community-based nonprofit incubators are expanding into outlying areas and experiencing modest successes. Laissez-faire economists be damned; experts say incubators pump prime regional economies better than ever. There are 7,000 incubators and counting around the globe, and they create jobs, grow companies and help technology evolve. “We are capitalists,” Adkins says. Now, more than ever, capitalism could use a jump-start.
“Classically, in a tough economy, if the unemployment rate rises, you will see more people turn to entrepreneurship,” says Marie Longserre, president and CEO of the Santa Fe Business Incubator. “So we’re in a great position.”
About 90 percent of American incubators operate on the Elvis-era nonprofit model, taking funds from cities, chambers of commerce and universities, and helping people with little more than good ideas get training, cash and office space. If old models of Western economies have oil, crops and minerals at their core, new models in the incubation world see people, research and technology as core resources you can find almost anywhere. The goal is not only to create jobs, but also to establish regions as specialty centers. Silicon Valley is a classic example of an area that’s been boosted by incubators over the past 30 years. (San Jose, Calif., is arguably the most incubator-packed city in the nation.)
In most cases, all it takes to apply is a business plan and a need to access research, funds and facilities. Most nonprofit programs don’t ask for much in return: future mentorship, fundraising consideration and data tracking to determine an incubator’s success rates. Longserre says potential entrepreneurs applying to her program in Santa Fe, N. M., should plan on a three- to five-year incubation if they expect any success. At the University of South Carolina’s Columbia Technology Incubator, potential entrepreneurs are vetted by a committee that admits winning proposals throughout the year. Some programs even offer help with writing a business plan. Often the best incubation program is the one closest to home. More than anything, entrepreneurs just have to reach out.
“These incubators are some of the most important things we do, forming the basis of our society,” Adkins says. “We need to teach people how to be successful entrepreneurs and not just cogs in corporate environments.”
While dotcom incubators have come and gone, there is a new wave of for-profit, tech-flavored incubators that often call themselves “accelerators.” Their aim is to help young, but established, companies find high-level leadership, such as a CFO; get a first or second round of venture capital; and outsource basic jobs, so they can focus on growth. In return, they ask for as much as a 70 percent stake in the startup. A few dozen such accelerators, like Y Combinator, have cropped up this decade. “They deal with somewhat later-stage companies that have established themselves in their markets but simply need to scale up,” Adkins says.
Green tech, clean tech, medical devices, personalized medicine, alternative energy and water resource technology are all hot properties among traditional incubators and accelerators alike. In fact, many old-school incubators are surprisingly high-tech, often attaching to a university and helping academics, graduates and local business folks use the school’s skills, resources and data to take new ideas to market.