Business Incubators: Where Small Businesses Hatch

The entrepreneurial spirit is alive and well throughout the country, but particularly so in the Midwest as more and more talented people are being downsized from large manufacturing corporations.

But, if your idea to create the next Microsoft or achieve perpetual motion has grown beyond the spare bedroom or garage space you call your office or lab, perhaps you should consider moving into a business incubator.

You probably have seen office parks that provide “executive offices” that rent by the hour. That’s not an incubator, though it might well serve the needs of some people.

Type of Incubators
A business incubator (some are called ‘accelerators’) does for businesses what the agricultural incubator does for chickens: it provides the environment needed to hatch and grow and be successful.
Often a university or other educational institution is involved. TechTown in Detroit, for example, is affiliated with Wayne State University. The Flagship Enterprise Center in Anderson, Ind., works with both Anderson University and Purdue. Some, such as the Beachwood Development Center in Beachwood, Ohio, just east of Cleveland, add an additional component of the local chamber of commerce to its affiliation with Cleveland State University. Some, such as the MTEC SmartZone in Michigan’s Upper Peninsula, are a larger consortium of connected incubators that are clustered around a variety of educational resources and potentially receive additional assistance from the state’s economic development unit.

Almost all of them have one thing in common: they exist to serve the basic infrastructure needs of start-up businesses with a passion to succeed and grow out of the incubator state into commercial success.

Who qualifies as an incubator client?

Mark Paschal, of Vision Signs & Graphics, shows Chuck Staley their quality large printing during the Anderson Business Incubator open house. John P. Cleary / The Herald Bulletin

According to DeWayne Landwehr, executive director of the Flagship Enterprise Center, they’re “an open door incubator. That is, business owners come to us with their ideas for consideration.” Those business owners can range from a graphics company that needed space after working from home to an archery equipment development company to biotech, nanotech and other exotic high technology ventures.

University-affiliated incubators can use them to commercialize products developed in their own basic research labs.

Beachwood’s director, Howard Thompson, says that they look for “the technical basics -“ expertise and growth potential for job creation.” They “prefer motivated and aggressive entrepreneurs in the areas of aerospace, advanced materials, cleantech/agricultural-related, IT, and Bio-and Life-Sciences.” Other incubators either seek clients that focus on specific fields such as life-sciences, nanotech or “green” technologies.

Many incubators can provide preliminary assistance in reviewing business plans, helping evaluate the potential viability of the business -“ even whether a potential client is ready for an incubator at all.

What is life like in an incubator?

Beachwood Business Development Center

Once a company has been accepted in an incubator what can it can expect to find? Eric Sanders is a Beachwood agricultural-related client who found “the perfect environment: subsidized rent for six months, ready-to-move-into office space, T-1 Internet access, copying, printing and faxing capabilities, office support staff and a great environment to discuss business ideas and strategies with professional staff and also fellow member companies.” Sanders’ company, Sure To Grow, provides plant growth products that are primarily used in hydroponic cultivation for both commercial and hobby farmers.

Some incubators provide expensive or hard-to-find laboratory equipment that can be shared by client companies. Some, primarily those associated with educational institutions, provide a ready source of inexpensive, and often highly-skilled, labor. Ford Motor Company opened what amounted to an internal start-up company in the MTEC SmartZone with only two full-time employees and a host of part-time engineering students, some of whom come to work both before class and afterwards. This kind of advanced, real-world training provides the universities involved with a hard-to-match recruiting tool while it allows companies such as Ford to assess the abilities of potential full-time employees.

Other Resources
Other resources provided by incubators can be invaluable to fledgling entrepreneurs, even those who’ve been in the business world for most of their careers. Mentoring is a prime example. Indiana’s Flagship works closely with SCORE, the Service Corps Of Retired Executives, to guide would-be business owners who have previously been employees of larger organizations in the basics of small business management. Other resources can include legal, financial and marketing expertise, usually provided at reduced rates to allow the incubator clients to focus more on their core business while at the same time learning the basics that they will need once they graduate.

Often peer-to-peer relationships develop within the incubator, as one company which has had some experience under their belt provides advice -“ or even services -“ to a newer member of the incubator organization. The flip-side of that type of relationship results when there are competing companies housed within the same incubator facility. Often the incubator is forced to institute security measures to maintain intellectual property rights and create virtual ‘walls’ around lab projects or prototype tests.

How long can companies expect to stay in an incubator?
That can vary widely, depending on the incubator and the client company. Flagship has one company that entered as a typical start-up and, as executive director Landwehr says, “They were housed in the incubator as the technology was finalized, prototypes built and initial testing was conducted. As they neared commercialization, they were also growing in size, to the point where we had to provide more space for them. We decided to build the accelerator [a separate facility] and sized it based on seven businesses at 10,000 square-feet each. However, by the time the building was completed the client had grown to the point that they needed the entire building.”

Lakeland Boatworks started in the Hasting Industrial Incubator.

One West Michigan incubator, the Hastings Industrial Incubator, graduated a client company called Lakeland Boatworks. Lakeland observed a small but potentially profitable need for semi-custom pleasure boats. They had started in the incubator with a space of 150 square feet and grew to require three similar-sized spaces -“ but they weren’t contiguous, so the company staff got a lot of exercise walking between units.

Three years after graduation they have a space in Middleville, Mich., that covers 7,200 square-feet of design and manufacturing area plus storage and a showroom inside and additional storage outside. Even in today’s economy there is a market for their classic-styled craft. Additionally, they repair and refurbish existing boats -“ most notably a 32-foot performance boat that had been a victim of Hurricane Andrew in 1992. According to founder Joe Rahn (who also ran the Hastings incubator for ten years) “We recently opened our flagship showroom in Syracuse, N.Y, which occupies a 4,000 square-foot former bank lobby in a building in downtown that had been vacated for nine years.”

Sure to Grow® is a high performance growing medium designed by growers for growers.

With his experience both as an incubator manager and alumnus, Rahn also oversees a consulting practice that provides “feasibility analysis and consulting to incubator projects for the U.S. Departments of Agriculture and Commerce” as well as working with other incubators in this country and abroad. Rahn says he “was involved with the business incubator movement when it was a new idea. I believe that they can be successful in stimulating a local business climate in a non-competing way and are probably as relevant in hard times as in good ones.”

Beachwood’s client Senders of Sure To Grow concurs, “I would without hesitation recommend that a serious start-up company look into the advantages of working with an incubator. The environment is unique and can lead to other opportunities as relationships are built with the professional staff and fellow member companies.”

Rahn has some final cautionary words to prospective incubators clients. He says. with a slight chuckle, “incubators are not for chickens.”