Incubators breed own success

Offering low rents and helpful amenities, business incubators have experienced explosive growth in North America, mushrooming to 950 from 587 five years ago and only 12 in 1980

By Dan Rafter
Special to the Chicago Tribune

The thick, brick building at 2011 W. Fulton St. looks like a warehouse or a manufacturing plant.

But the aroma seeping from its heavy front door gives away its secret even before passersby notice the Fulton Street Baking Co. sign, confirming that it holds no typical manufacturer.

Inside, Heath Wendell, one of the bakery’s founders and its midnight baker, has presided over the rising of countless loafs of sour dough, pumpernickel, rye, ciabatta and focaccia, all of which are stacked on dozens of wheeled racks filling the bakery’s 14,000 square feet.

Workers from Windy City Baking, which rents space from Wendell and his partner, Marty Vanderkarr, are busy here, too, mixing the dough that soon will become their Newberry muffins–large, crumbly treats that fit in the hand like a mushy softball.

The bakers are one of the success stories housed inside the Fulton Carroll Center, a busy business incubator at 2023 W. Carroll Ave. in Chicago’s West Loop.

When former roommates Vanderkarr and Wendell founded the business last year, they had no clients. Today, they have 50.

In their search for a headquarters for their new business, the two partners chose the industrial-looking incubator in the West Loop for one reason: They could afford the forgiving rents.

The traditionally lower rents may explain why the business incubators in Chicago and across the nation are thriving, with many reporting that all available space is filled even as the country’s sluggish economy has stifled the progress of other businesses.

In fact, those running local incubators say they feel needed now more than ever. The economy has forced many talented people out of their 9-to-5 jobs, and instead of returning, many are taking a chance and starting their own businesses.

And they’re increasingly turning to incubators for affordable rents, sense of community and office equipment–all provided to help businesses grow, thrive and eventually leave to operate on their own.

"We find that there is a lot more interest now in incubators than there is when the economy is doing great," said Joyce Shanahan, executive director of the Industrial Council of Nearwest Chicago, which operates the 410,000-square-foot Fulton Carroll Center.

The Fulton Carroll Center houses more than 90 businesses–an eclectic mix of artists, piano repairmen, technology firms, inventors and metal workers paying monthly rents that range from $600 to $800. It also provides phone service, conference rooms and access to city business grants.

The center offers a wide range of spaces. Some businesses occupy 20,000-square-foot spaces, but the center also offers tiny areas, measuring anywhere from 8 by 10 feet to 14 by 16 feet, for entrepreneurs who simply want a small office. These spaces, which cost $200 to $400 a month, house several public relations entrepreneurs and consultants.

"For a very small investment, they can plug in a computer, get a phone and they have their own business," Shanahan said. "They have an address. They have air conditioning. They’re in business, and it’s all for a very small investment."

National Business Incubation Association officials say that North American business incubators in 2001 provided assistance to more than 35,000 start-ups. These businesses created 82,000 full-time jobs and generated earnings of more than $7 billion. Since 1980, association officials say, business incubator clients and graduates have created 500,000 full-time jobs.

84% are non-profit

All of which has led to the growth of incubators themselves. The incubation association reports that North America now features 950 business incubators, a boost from the 587 that were operating in 1998 and the mere 12 that did business in 1980. About 84 percent are non-profit, and 16 percent are for-profit enterprises, according to the National Business Incubation Association.

"What we’ve seen in the last couple of years is that as the economy hit the skids, there’s been a slowdown in economic development, but we haven’t lost many incubators," said Dinah Adkins, president and CEO of the incubation association. "I’m amazed that we haven’t lost more, with all the budget cuts that have occurred."

Local incubators are enjoying the same good health as their national counterparts.

Jim Peters, director of the Chicago Technology Park, a 56-acre slice of land at 2201 W. Campbell Dr. in Chicago that is home to 30 medical high-tech firms, reports that his incubator is full. Last year, the park opened a new building, and nine new companies filled it. The park has boasted full occupancy for the last six years.

John Furton, founder of Sourcelight Technologies Inc., has benefited from and praises incubators. In 1999, he moved his 10-year-old technology firm to the Technology Innovations Center of Northwestern University in the Evanston Research Park, a business incubator based in Evanston. Today, his business fills 2,500 square feet and employs nearly 20 workers.

Furton is nurturing his Sourcelight Discovery Engine–software that provides customers searching for a movie rentals a list of additional titles that they may enjoy. Blockbuster and an additional 1,200 independent video retailers are using it in store kiosks.

Furton, who expects to move out of his space at the innovations center as soon as business allows, said the early boost was essential.

Furton also credits the incubator with helping him find good help. He once hired a creative director for his business who originally was another incubator tenant.

Tim Lavengood, executive director of the innovations center, said it is home to 40 businesses. He, too, isn’t surprised that the economy has had little negative impact on his incubator.

"The risk of starting a new business is always high enough that the difference between a recessionary and a somewhat stronger economic environment is somewhat modest," he said. "These people are risk-takers in any case. Most of the people who come here do have other choices, even in today’s economy."

Staying longer

That isn’t to say that incubators haven’t experienced some effects from the economy. It’s harder for start-ups to obtain financing, Lavengood said. And many businesses are staying longer in incubators than they would have in a healthy economy. Lavengood estimates that companies that would have stayed in his incubator for 18 months might now stay for more than two years.

To fill the steady demand, more incubators are springing up across the country. William Bailey, William Hartzell and Mel Janczak, founders of Elk Grove Village-based Facilities Solutions Group, are betting on that growth.

The men, who come armed with experience in the engineering and architecture fields, helped open a business incubator in Kalamazoo, Mich., about a month ago. Today, it is nearly 50 percent full. The partners are working with officials in Peoria and in Ft. Wayne, Ind., to help develop incubators in those two Midwestern cities.

"I think incubators are a necessity," Bailey said. "As much as I know about business, there is still a lot that I don’t know. It’s nice to have others around to bounce ideas off of.

"A scientist might not know how to market his product. If he’s around others who do know how to market, he might walk across the hall and say, `Can you help me?’ That’s invaluable. It’s the difference between having a great idea and knowing what to do with it."

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