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By Anne Field, CFOZone.com Contributing writer
Can small-business incubators help boost employment?
Incubators
mostly are run by nonprofits, often out of universities, and provide
startup founders inexpensive office space and access to advice. They're
somewhat different from a newer type of incubator, discussed by my
colleague Denise Bedell in a recent post.
Often called "venture accelerators," these newer entrants usually
gather a group of tech-entrepreneurs for an intense three-month program,
in which founders share ideas, attend workshops, meet with experts, and
have a chance to present to potential investors.
Traditional
incubators really started growing in the 1980s, then fell out of favor
after the dot-com bubble imploded. But now according to BloombergBusinessweek , they're back and at record levels.
Proponents
of the model say that the survival rate for startups that use
incubators is considerably better than it is for other new-business
endeavors: 87 percent for those hatched in incubators vs. 44 percent for
other startups, according to the National Business Incubation
Association.
What's more, they might be effective producers of
jobs. A recent study by the Commerce Department found that investments
in incubators are more efficient at creating jobs than public-works
projects.
For that reason, two Congresspeople recently introduced
bills to boost government support of incubators. One would extend the
mandate of the Economic Development Administration, part of Commerce, to
fund operations and support services, in addition to construction and
renovation. Another would start a $250 million program for business
incubators aimed at high-growth industries.
However, there's been
a long-standing debate for about as long as incubators have been around
about just how effective they are. For example, preliminary findings
of a study being conducted by researchers at Syracuse University have
found that startups using incubators fail at about the same rate as
everyone else. Other observers have said the same thing over the years.
In fact, that's one of the criticisms venture accelerator proponents
make of the traditional incubator model.
Many of the newest
incubators focus on one or two industries; that's different from the
traditional approach allowing any startup with potential to take
advantage of the resources. It's a tack that could encourage
more-efficient sharing of ideas and allow incubators to provide advice
and equipment tailored to those industries. Perhaps that's the way to
go.
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