Entrepreneurs
advised to practice due diligence in incubation selection
August 22, 2000
Contact:
Dinah Adkins, Executive Director
National Business Incubation Association
(740) 593-4230; dadkins@nbia.org
ATHENS, Ohio - In response to the rapidly
growing number of incubators open for business and recent reports
of incubator closings in the for-profit sector, the National Business
Incubation Association today released guidelines to assist entrepreneurs
in selecting a quality business incubation program.
"Incubators are like any product
or service on the market. They come in a wide range of shapes and
sizes," said Dinah Adkins, executive
director of the National Business Incubation Association, the world's
leading organization advancing business incubation and entrepreneurship.
Adkins advises entrepreneurs in the market
for a business incubator to scrutinize prospects carefully. "We
tell entrepreneurs, caveat emptor. Before giving up equity or scarce
cash, do a scratch test to make sure the program is a real diamond
and not just a cheap imitation," she said. "And even if
the program is a quality one, incubators are not one size fits all,
so entrepreneurs need to make sure the program is going to meet
their specific and unique needs."
Business incubation programs catalyze
the process of starting and growing companies by providing entrepreneurs
with the expertise, networks and tools they need to make their ventures
successful. There are more than 900 incubation programs in the United
States, compared with only 12 in 1980.
Recent media attention has focused on
for-profit incubator programs, which have been opening at a rate
of four to six per week. However, for-profit incubators are only
one variation of the incubation model, making up approximately a
third of all incubation programs, Adkins said.
Whereas most for-profit incubators are
set up as investment vehicles for investors, other types of incubation
programs achieve different goals, such as commercializing new technologies
from universities, diversifying local economies, servicing minority
entrepreneurs and creating jobs. And increasingly, incubators are
being established to grow companies for a particular market niche,
such as gourmet foods, biotechnology or the arts.
"The bottom line for entrepreneurs
is whether their goals are compatible with a prospective incubator's
mission and whether a particular incubator is the right tool for
helping them achieve success," Adkins said.
Incubators also differ in compensation
structures. Whereas most for-profits take an equity stake, the vast
majority of incubation programs still only charge fees for space
and services. Both types of incubators offer assistance with financing,
but for-profits are more likely to have access to in house investment
funds.
"There are highly successful models
of all types of incubators, both for-profits and non-profits, mixed-use
and niche market, and everything in between," Adkins said.
"If the business incubation model is appropriately adapted
and utilized, it works."
Not all startup assistance programs calling
themselves incubators meet the criteria studies have found key to
successful incubation, such as customizing business assistance services
to meet a client's particular needs; offering flexible space and
leases to meet changing needs; and facilitating networking among
colleagues and mentors, Adkins said.
Another factor contributing to success
appears to be whether incubation managers and staff avail themselves
of professional development opportunities. A recent study found
that NBIA members served twice as many client companies and graduated
twice as many successful startups as non-members.
"The fact that incubators that are
members of a professional and trade association outperform those
that are not demonstrates that there is an art and expertise to
successfully incubating startups," Adkins said. "Lots
of people like to play golf, but few will become a Tiger Woods.
Right now there are lots of entrepreneurs wanting to get into the
incubation market, but only some of them will have the skills and
talent to be successful incubation managers."
For more information, contact the NBIA
at (740) 593-4331, or visit the organization's Web site at www.nbia.org.
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