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Program innovations: Experienced managers talk about what’s new in incubation

by Corinne Colbert

February/March 2010

What is the future of business incubation? And how can incubator managers anywhere implement those innovations?

That was the question pondered by several dozen NBIA members who attended NBIA’s Fourth Summit for Advanced Incubation Professionals, held Jan. 31-Feb. 2 in Savannah, Ga. The event is open to those who have been NBIA members for five years or more.

In a sunlit conference room overlooking the Savannah River, attendees heard presentations on cutting-edge programs and services offered by their peers and then, in small groups, dissected those innovations to create a set of recommendations on how to put them into practice at any incubator, anywhere.

Read on to see what some of the industry’s most creative leaders are up to —and how you can make their ideas work for you, too.

Co-working

Co-working —the practice of sharing a common work area with others who are working on their own projects —is a growing trend that can be an asset to an incubation program, says Carol Lauffer. The principal with Business Cluster Development in Menlo Park, Calif., is working with NextSpace, a co-working firm in Santa Cruz, Calif., and the city of Santa Cruz to develop co-working space to spur economic development.

“Co-working is going mainstream,” Lauffer says. “It’s becoming a way for people to work together and collaborate —like social networking, but face to face.”

She points to the freelancers, sole proprietors and concept-stage entrepreneurs who can be found using the free Wi-Fi at Starbucks and similar venues. Those coffee shops and cafes are serving an unmet need for community and collaboration —needs incubation programs already know how to fill. “Add those people to your incubator,” Lauffer says. “Not all of them will become [traditional] clients, but some will.”

Another source of potential co-working clients is laid-off professionals. That’s a target market for Karl LaPan, president and CEO of Fort Wayne’s Northeast Indiana Innovation Center, which recently opened a co-working program called Destination: Your Future. He’s aiming at “displaced professionals” who have been laid off —sometimes multiple times —and are considering starting their own businesses. Such programs are likely to gain support from government grants to support laid-off workers, LaPan says; even the companies making the layoffs might fund it as a goodwill gesture to their former employees.

A co-working program has few requirements. First and foremost is space. Take a look at your facility; is there underused space, such as an informal meeting area near the building entrance? Put in a few library-type carrels and you have a co-working area. Or take cubicles (often unpopular with incubator clients) and designate them as co-working space. Make sure the area has Internet access, either hard-wired or wireless.

Physical separation from other incubation space is key. For one thing, discussions across cubicles or desks can disturb other incubator clients. But more importantly, a separate co-working area will help differentiate that program from the rest of your services.

That’s important, because the tricky part of integrating co-working into an incubator is preventing confusion about where co-working ends and incubation begins. In addition to physical separation, you should give the co-working program its own brand identity (such as LaPan’s Destination: Your Future) and set clear parameters for it. “Are they going to expect to knock on your door and ask for help developing a business plan? How are you going to deal with that?” asks Evan Jones, director of @Wales Digital Media Initiative in Cardiff, Wales, United Kingdom. You may choose to limit service only to space and Internet access, or you may allow a certain number of hours of business assistance per month. Either way, that policy must be clear and stated up-front.

Another issue is security. When will co-working clients have access to the facility? The easiest solution is to limit the program to regular business hours, when incubator staff can monitor comings and goings. Depending on your staffing and other capacity, you may want to set a few “night-owl” sessions a week for those who have day jobs. Or you might set up a tiered membership program (as NextSpace has) that increases access with increased fees.

The benefits of co-working are many, the group found. Co-working programs expand the client pipeline and can boost the bottom line through both client fees and grant funding. If the concept takes off, it’s easy to scale up to meet demand, since the only requirements are space, some furniture and Internet access. And co-working can be tailored to community needs. “Just be really clear about why you’re doing it and what it’s for,” Jones advises.

Student engagement

According to the Ewing Marion Kauffman Foundation, 70 percent of U.S. high school students want to own their own businesses someday. Yet only 10 percent of adults actually launch a start-up. That’s a huge gap.

Incubators can help keep students’ dreams alive and provide practical guidance in making them come true, LaPan says. His incubator offers a four-level student entrepreneurship program that leads students from high school through college through increasing levels of engagement.

Such programs are especially important in rural states like Indiana, where high school and college dropout rates are high and many of the brightest young people eventually leave the state. “We have to focus on getting kids connected to something that means something to them,” LaPan says. “We have to grow them here, inspire them here and keep them here.”

The first step in the program is the Youth Entrepreneurship Symposium, which brings high school students from across Indiana to the NIIC campus or to regional college campuses for a day. Working in teams, the students brainstorm new business ideas and develop them into concepts. Nearly 1,500 students have participated in 16 YES sessions since 2003.

Another high school program, EntrepreneurSHIP, offers in-school entrepreneurship training. Each academic year, four to six students are released from school for up to 10 hours a week to work on their businesses at NIIC. Participants are recruited by teachers and guidance counselors, then interviewed by NIIC business coaches. They work in the incubator’s learning lab, which includes laptop computers and telephones; NIIC staff provide coaching and business development advice. The first EntrepreneurSHIP program is running in two Fort Wayne-area high schools through July.

Both YES and EntrepreneurSHIP are feeders for BizWiz, a six-month program in which student entrepreneurs can hone their business concepts. Participants meet once a month as a group and at least as frequently one-on-one with an NIIC business coach. Over those six months, students flesh out their initial concepts, create business plans, set up corporate governance and financial systems, and develop their products or services for launch.

Since 2008, 80 students have completed the BizWiz program to create start-ups including a financial literacy program for middle-school students, a 3-D role-playing game creator, and a cell phone recycling program. “It has to be something they can operate from a dorm room,” LaPan says.

The most promising BizWiz companies are invited to join the Student Venture Lab program, which offers incubation services for student entrepreneurs. Students who meet defined milestones, stay within budget and meet regularly for coaching are eligible for a $2,500 accelerator grant, a 400-hour paid internship to work on their business, a chance to pitch their business for investment from NIIC’s in-house seed fund, and entry in the Northeast Indiana Innovative Business Concept competition. Students who are underage must have their parents cosign the memorandum of understanding to enter SVL. “That shows they’re serious,” LaPan says. In 2009, five SVL students created four ventures.

The student engagement program is funded by banks and a private foundation, although NIIC “heavily subsidizes” services, LaPan says. “We look at it as priming the pump,” he says. “They either come back here and start a business, or they start one elsewhere because of it.”

Summit attendees praised the program as a way to build interest in entrepreneurship among young people, as well as to showcase incubator resources in the community. And whether students actually start ventures because of the program or not, the skills they acquire through it —such as self-discipline and an understanding of the value of hard work —will pay off in any field.

The potential pitfall, they said, was finding financial and political support for such a program. It’s a long-term investment, and that can be a hard sell, the group noted. Getting schools on board can be tricky, especially since they may see it as an additional drain on limited resources. Clear metrics for success (and then actually reporting on those measurements) will help build support.

Economic gardening

When you plant a garden, you put all the seeds in the ground and wait for them to sprout. Then you weed out some of the sprouts —those that are weak or too close together —to ensure that you wind up with a consistent crop of healthy plants.

The same approach applies to economic development, says Tom O’Neal, director of the University of Central Florida Business Incubation Program, headquartered in Orlando. The idea behind economic gardening is that while it’s nice to want to provide support to every business, resources should be funneled to the most promising companies. For example, in Florida, less than 9 percent of small businesses account for more than one-third of employment. “We realize a disproportionate amount of value from [a handful of] companies,” he says.

Rather than spreading its economic development resources wide but shallow, Florida is casting those resources narrowly but deep. Through the Florida Economic Gardening Institute —a state-funded initiative based at UCF —Florida offers stage-specific assistance to the most promising businesses in specific industry clusters (financial services, tourism and real estate/construction).

The program offers a third level of support for emerging companies. The youngest firms already get support from venture labs, commercialization centers and offices of technology transfer. Stage 1 companies can access business incubators and entrepreneurship centers. EGI is aimed at growth-stage companies: those with between 10 and 50 employees and $1 million to $25 million in revenue. To get EGI assistance, those companies must have grown in jobs and revenue in at least three of the last five years and have been doing business in Florida for two years.

At no charge, EGI clients receive services including database research, search engine optimization, network mapping and social media strategies. They also can tap a team of experienced business experts —identified through local economic development organizations —who can help examine business strategies, test management team temperament or provide other focused assistance. (Although Florida’s EG initiative is state-funded and statewide, other communities could implement it locally and charge fees to support the program.)

The idea is to empower entrepreneurs to trust their instincts. “We don’t spend much time telling them what they don’t know,” O’Neal says. “We believe them when they tell us what their problems are and try to help them in real time.” If an EGI client needs an introduction to a marketing expert or an angel investor, the program tries to make that connection within 24 hours.

The program is also of short duration: “We cut them off at 30 to 40 hours” of assistance, O’Neal says.

Launched in fall 2009, EGI will help 300 companies in its pilot phase through a hub-and-spoke system comprising six regions in the state. As of late January 2010, 90 companies had applied and 12 had enrolled. Of those 12, half were UCF incubator graduates.

Economic gardening is a natural progression from business incubation, says O’Neal, whose own research has found that incubator companies grow faster than normal while in the incubator, but slow to standard growth after they graduate. “I want to give my incubator clients someplace to go,” O’Neal says. “I don’t want to just kick them out the door, but say, ‘Here’s the next step in your evolution.’”

Although economic gardening isn’t a new concept —it was pioneered in Colorado a decade ago —it’s the type of flashy idea that can catch politicians’ eyes at the expense of other programs. “You don’t want them saying, ‘Economic gardening is the new thing, don’t fund the SBDC’” [or incubators], O’Neal warns. The program’s leaders must serve as ambassadors to stakeholders, showing them that EG is just another step in a continuum of business support. “Without incubators, there are no second-stage companies to support,” O’Neal says. And of course, metrics that demonstrate not just the number of companies served, but outcomes as well, are vital to maintaining political and financial support.*

Entrepreneur coaching

David Terry has the same problem as most incubator managers —there just isn’t enough of him to go around —only more so. His program, the West Texas A&M University Enterprise Network, serves a 126,000-square-mile area of Texas and Oklahoma.

To better leverage his time and expertise, Terry has implemented a coaching model that emphasizes business incubation as a relationship, not a consulting gig. “As a consultant, you’re paid for a specific task for a specific period of time,” he says. “Coaching is more about you as an incubator manager wanting more for your clients, getting clear about what that is, and walking them through that process.”

In his case, Terry meets with each of his 18 clients once a month —in person or on the phone —for an hour. The client chooses what to talk about, because coaching requires a conversation in which the entrepreneur talks about his or her challenges and the coach listens carefully. “I find in my mind that I’m either talking or preparing to talk,” Terry says.

A coach has to tamp down personal agendas, reserve judgment and focus on what the client is saying. Then, based on what the entrepreneur has said, the coach asks questions that probe the client’s assumptions. Incubator managers often ask questions they already know the answers to because they’re trying to steer a client in a direction the manager thinks is best. In coaching, you have to ask true questions —the ones where you are really trying to learn more —so you are supporting the client’s search for answers, not your own.

“You’re not seeking information, you’re seeking transformation,” Terry says.

Coaching has made Terry’s life easier, he says, because it puts responsibility for a business where it belongs: with the client. “They know about their business,” Terry says. “It’s my job as coach to hold them accountable to where they want to go.”

It’s important to explain the coaching model to clients up front so they understand what is expected of them. That talk should be part of prospective client screening to weed out entrepreneurs who don’t want to take advice or fully engage in the process. “Clients have to be coachable,” Terry says. “If they’re not, they’re not a good fit for our incubator.”

Since implementing his coaching model in July 2009, Terry has noticed a higher level of client engagement, both in his sessions and in overall requests for services. “They look forward to coaching sessions,” he says. “It’s not, ‘I have to go see David and he’s going to come down on me because I haven’t done X.’”

And since he isn’t focused on putting out clients’ fires, he has more time for incubator management tasks such as community relations and building his service provider network. “I’ve been able to work on my business, not just in my business,” he says.

For more quantitative metrics, Summit attendees suggested implementing a client survey to measure how entrepreneurs value coaching, as well as tracking the number of client touches over time.

*Note: O’Neal will present a session on economic gardening at NBIA’s International Conference on Business Incubation in Orlando, Fla., May 16-19.

FEATURED SOURCES

Evan Jones, director, @Wales Digital Media Initiative, Cardiff, Wales, United Kingdom

Karl LaPan, president and CEO, Northeast Indiana Innovation Center, Fort Wayne, Ind.

Carol Lauffer, principal, Business Cluster Development, Menlo Park, Calif.

Tom O’Neal, director, University of Central Florida Business Incubation Program, Orlando, Fla.

David Terry, executive director, West Texas A&M University Enterprise Network, Amarillo, Texas

* All the sources featured in this story are members of the NBIA Board of Directors

Keywords: client services – general, coaching clients, economic development, idea generation and creativity, incubator management – general, NBIA programs, youth incubation

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