The Changing Ways of Incubation

An abandoned manufacturing plant in upstate New York was home to the first business incubator in the United States. The building’s owners couldn’t find any single tenant for its 850,000 square feet, so in 1959 they decided to rent it to a bunch of little companies, hoping that a sense of community would grow among them.

By:
Ellen McCarthy
Washington Post

The Batavia Industrial Center has survived, and it continues to graduate new companies because it has continued meeting the needs of its residents, says "A Brief History of Business Incubation in the United States," a book by Dinah Adkins. And that’s a lesson that incubators in the mid-Atlantic region have taken to heart.

The technologies developed in incubators have evolved a great deal over the past four decades, requiring the institutions to do a bit of evolving themselves. Cheap rent will not keep any incubator afloat for long.

"An incubator has to reflect the trends in the market," said Duc Dong, program director of the Maryland Technology Development Center, one of several local incubators that have stepped up efforts to adapt their programs and practices to suit today’s start-ups.

The Bioprocess Scale-Up Facility, a lab tucked away among the academic buildings at the University of Maryland’s College Park campus, looks like little more than a science enthusiast’s garage at first glance. But the gleaming silver tanks surrounding the lab’s main room have aided more than 300 local biotech companies.

The lab was established in 1985 as part of an effort to create stronger bonds between Maryland’s business and academic institutions. Many small biotech firms could not afford to purchase the expensive equipment necessary to grow the large, standardized batches of cells necessary for experiments, so they came to rely on the resources at the university’s lab. Even some of the area’s most successful biotechs, including MedImmune Inc., Martek Biosciences Corp. and Digene Corp., got some crucial help from the unassuming lab.

The lab recently landed a $775,000 grant from the state to update its equipment in order to break cells down to their components for client companies. . The Maryland lab has also begun holding training sessions to teach new employees of local companies how to use the technology.

"As a state university, we have three missions — education, pursuit of knowledge and community support," said Edward Sybert, co-director of the facility. "Whatever we can find that will be useful to industry, if it’s in our means, we will do it."

Firms with actual products used to be the only ones allowed in the Maryland center. But product innovation has dropped off considerably, Dong said. As a result, service companies are being considered for spots in the Rockville center.

The Maryland Technology Development Center also established a partnership with the university’s law school to help firms sort through intellectual-property laws. In the past, Dong said, incubator companies would often take the advice of the first law firm they approached, a practice that sometimes resulted in large fees and subpar advice. Now, without losing any of their limited cash, they can ask Maryland law students and professors to review patents and intellectual property regulations.

Three years ago, the companies housed in Howard County’s NeoTech Incubator were still chasing venture dollars. The money has all but vanished now. Rather than planning pitches for $20 million, the NeoTech companies are focused on getting to know the angel investors who might help them survive through the next month. The incubator launched a networking forum called Angels and Eggs to help entrepreneurs do just that.

"Incubator companies are just looking for the next $100,000 or $150,000 to get them to the next stage," said Michael Hains, senior vice president of entrepreneurial and small-business development for the Howard County Economic Development Authority. "And they are looking for a lot more help in terms of support that we have."

Hains also said that NeoTech is receiving only about a third of the applications it got at this time last year. Companies often want to stay in the incubator longer now, he said, because the same resources would be so expensive elsewhere.

"Entrepreneurs were more likely to take a risk two years ago," Hains said. "The ones that are applying these days are entrepreneurs who know more about business. We never had a lot, and we’re still not getting the students who just came out of university."

NeoTech has created a program called Sustainable Business Excellence, which aims to put companies through rigorous training and help at least 50 percent of them land funding.

The Greater Reston Chamber of Commerce Incubator lately has seen more applications from companies interested in selling services to the government. The Reston incubator, run mostly by volunteers, has brought in more consultants who can teach entrepreneurs how to navigate General Service Administration schedules and get the attention of agencies.

The incubators’ directors have also begun spending more time talking with entrepreneurs about how to get their firms off the ground before they even think about seeking venture funding.

"We are trying to refocus them on their business plans. [Venture capitalists] are looking for companies that have some sales under their belt," said Tracey White, president of the Greater Reston Chamber of Commerce. "It’s not just the concept anymore. It’s ‘Did you have a great concept, and were you able to put it to practice?’ "