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Metro and Non-Metro Business Incubators: Similarities and Critical Differences

This research was supported by USDA/CSREES, National Research Initiative Competitive Grant #2008-55401-04487. Metro and Non-Metro Business Incubators: Similarities and Critical Differences. Peter Schaeffer, WVU Randall Jackson, WVU Mark Middleton, WVU Shaoming Cheng, FIU

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Metro and Non-Metro Business Incubators: Similarities and Critical Differences

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  1. This research was supported by USDA/CSREES, National Research Initiative Competitive Grant #2008-55401-04487 Metro and Non-Metro Business Incubators: Similarities and Critical Differences Peter Schaeffer, WVU Randall Jackson, WVU Mark Middleton, WVU Shaoming Cheng, FIU Kingsley Haynes, GMU James Riggle, GMU

  2. Business incubators Facilities & equipment Access to capital Access to business network(s) Business services & support Management consulting & training Know-how & technology

  3. Why rural incubators? • Rural economies differ significantly from urban economies (scale, market access,…) • Starting new business in rural environment may pose a bigger challenge • Hence, to assess the efficacy of rural vs. urban incubators, we need different standards and criteria* * This was one of our hypotheses and is partly a conclusion we reached based on our research

  4. The data: survey • Metro vs. micropolitan distinctions • Metropolitan counties (1089 in US – 35%) • Urban core > 50,000 population • Micropolitan counties (674 in US – 21%) • 10,000 < urban core < 50,000 • OCBSA counties (1378 in US – 44%) • Outside Core Basic Statistical Areas

  5. 29% Response rate • Sample universe: 719 identified from an initial list of 1,100+ • Respondents: 209 (156 Metro, 37 Micro, 16 OCBSA)

  6. Business incubator locations 719 from over 1,100 in initial database could be verified All 48 lower states were home to at least one incubator We did not find a rural incubator in 9 of 48 states

  7. 15 Clusters at 1.5 standard deviation. These clusters span 17 states and represent 33.6% of 716 incubators included in study

  8. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  9. 1. Organization Co-located with college/university (percentage of incubators) Legal organization

  10. Presentation outline* • Organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  11. 2.a Income: service fees and rent

  12. 2.b Government financial support Financial support from any level of government Government financial support during last 12 months (percent of responses)

  13. 2.c Financial support by government(s)

  14. 2.d Lenders

  15. 2.d Assistance from university/college Assisted by university, college or technical school Rely on university knowledge, skill, physical facility and human resources

  16. 2.e Financial support from venture capital firm or angel fund(angel fund refers to individual venture capitalist)

  17. Presentation outline* • Organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” (National Business Incubation Association, NBIA)

  18. 3.a Annual operating budget (in $1,000) Budget Budget trend (156) (37) (16) (Total no. of incubators)

  19. 3.b Regular contact with venture capitalists (156) (37) (16) (Total no. of incubators)

  20. 3.c Years of operation (37) (156) (16) (Total no. of incubators)

  21. 3.d Full-time employees or positions (numbers)

  22. 3.e Waiting list of prospective tenants?(in percent) Ever had a waiting list? Currently (2010) have a waiting list?

  23. 3.f Tenants at full capacity and leasable area Number of tenants at full capacity Leasable area

  24. 3.g Services offered(in percent) Basic services (Receptionist, copier, meeting space, etc.) Advanced services (Access to equipment, teleconferencing, management consulting, etc.)

  25. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  26. 4.a Existing strategic plan Has strategic plan Principal mission JC = job creation, FC = firm creation (%) (%)

  27. 4.b Self-evaluation? Regular Self-Evaluation Annual Self-Evaluation (%) (%)

  28. 4.c Annual evaluation* Assessment of current and future finances Assessment of client feedback * of incubator

  29. 4.d Evaluation of process, learning capacity Incubator evaluates internal business process Incubator evaluates its ability to learn

  30. 4.e Incubator evaluation conforms to BSC standards(BSC: balanced scorecard [method])

  31. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  32. 5. Incubator’s foci Industry or sector focus Other foci

  33. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  34. 6.a Admission requirement? No formal admission requirements Formal business plan required

  35. 6.b Client screening Admission depends on review of business plan Business plan must meet specific requirements

  36. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  37. 7.a Graduation requirements? Graduation standards Specific graduation standards?

  38. 7.b Graduation and graduates Who is counted? Must graduate upon reaching graduation standards

  39. 7.c Tenants and graduates Survival rate of graduates Average length of stay

  40. Presentation outline* • Legal organization • Revenues and funding sources • Size and capacity • Strategy and mission • Industry or sector focus • Admission requirements • Graduation requirements • Reporting and tracking *Based on “best practices” National Business Incubation Association (NBIA)

  41. 8.a Incubator tracks tenant‘s performance

  42. 8.b Tenant achievements: patents Total number of patents, 2010 Firms receiving patents 60 1 7 All firms

  43. 8.c Tenant achievements: licenses sold Number of licenses sold Value of licenses

  44. 8.d Tenant achievements: sales Tenants reporting sales last Year Dollar value of the sales

  45. 8.e Full-time employees hired Tenants hired new full time employee last year Number of employees hired

  46. 8.f Loans Loans awarded to tenants last year (2010) Loan amount in $1,000 (percent of tenants)

  47. 8.g Investment capital received Percent of tenants receiving investment capital last year (2010) Investment amount (in $)

  48. 9. Summary, findings, and conclusions

  49. 9.a Findings (selected) • Systematic differences by location • Only a small number of, mostly metro, incubators are private • No “official” standard for data collection [challenge for evaluation, which usually involves comparison] • Self-evaluation by incubators is frequently deficient • Reliance on local/regional resources looks promising [e.g., Energy Xchange, Burnsville, NC] • Universities, colleges and/or professional/ technical schools provide a home for and support many incubators, particularly in rural areas

  50. 9.b Commonalities and implications • Rental income is important source of revenue • Leaving at graduation vs. rental income trade-off • Existing buildings constrain incubator to activities that can be accommodated within the building’s capacity • Serve as centers for business/entrepreneurship education • Specialized building capacities may keep tenants from leaving incubator or from staying in the region • Many executive directors are part-timers (funding?) • Incubators, particularly rural incubators, serve multiple needs and/or have several “sponsors”

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