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Teaming up: Incubators, research parks partner to form innovation chain

by Linda Knopp

October 2006

Charlie D’Agostino considers himself a bit of a baseball aficionado. That’s why the executive director of the Louisiana Business & Technology Center in Baton Rouge uses a sports analogy to describe the relationship between business incubators and research parks. He likens incubation programs to baseball’s farm clubs, which nurture young, inexperienced players and give them an opportunity to hone their skills and develop their confidence in preparation for a move to the big leagues.

“Everyone would love to attract that large company into their community, but sometimes in economic development, you have to bunt to get that runner into scoring position before you can score a run in the game,” D’Agostino says. “The incubator clients are the ones that get you into position to score. They become the home runs later on, as the research park helps them grow into their abilities.”

Because they share similar missions of promoting business development and employment, many incubators and research parks work together to provide a continuum of economic development opportunities for their regions. Incubators provide the testing ground for new businesses and new technologies. And as incubator clients graduate, they move into other facilities within the research park. But like the relationship between baseball’s farm clubs and their major league counterparts, partnerships between incubators and research parks must be nurtured so firms can make a seamless transition between the two.

To learn more about how incubators work with research parks, NBIA interviewed several members about their experiences. Some of these incubators are located within research parks, with both programs operating under the same parent organization with a joint staff. Others are located miles apart, with each program maintaining its own staff and operating structure. Regardless of the structure of the relationship, incubator managers say the key to ensuring a successful partnership is drawing on each program’s strengths and focusing on their synergies. Read on for more do’s and don’ts of creating productive relationships between incubators and research parks.

Do …
Collaborate during all stages of a company’s development

Incubator managers and research park executives alike agree there’s value in supporting companies in all stages of development. Start-up companies that have access to the resources and guidance they need early on have the greatest chances of staying in business long enough to become research park tenants. And incubator graduates that have access to suitable space in a nearby research park won’t have to leave town to continue to grow. So, if you can connect companies to the resources they need while they’re incubator clients, they’re going to want to stay associated with the research park after they graduate in order to continue to reap the rewards of being affiliated with the program.

That’s the way it works at the Delaware Technology Park, a 40-acre park on the edge of the University of Delaware campus in Newark. The park features facilities suitable for both early-stage companies and more developed ones. And it relies on a large network of private-sector service providers, university resources and government programs to provide training to businesses within the park, whatever their stage of development.

“What makes the relationship work well here is the continuum of services and facilities we can offer businesses,” says J. Michael Bowman, chairman and president of the Delaware Technology Park. “A start-up can come in knowing that it can access the resources it needs to nurture it in the early stages, and then it can grow into other sections of the park as it matures. It doesn’t have to leave.”

Quest Pharmaceutical Services, a biotech firm that started in one of the smallest incubator spaces at Delaware, is one firm that has grown with the park. The tech park helped the company secure grant money from the state of Delaware to build out its lab and has accommodated its rapid growth. Now, the company has grown to 160 employees within three facilities at the tech park. It also has offices in Beijing, Taiwan and California. “That’s how the model works when you follow the ‘farm team’ concept all of the way through,” Bowman says.

Don’t …
Be unprepared for companies’ growth

Having a system that allows companies to easily transition from the incubator to the research park requires some planning and foresight, as the University of Maryland, College Park knows. The university’s incubator, the Technology Advancement Program, has been in operation since the 1980s, but its research park is just coming online. Because of this time lag, the university hasn’t always had the luxury of making purely strategic decisions, says Brian Darmody, assistant vice president for research and economic development at the university.

He cites the case of Innovative Biosensors, an incubator client that has developed sensors for food technologies, as an example of what happens when the incubator and the research park are at different stages of development. The U.S. Food and Drug Administration’s Center for Food Safety and Applied Nutrition, the federal government’s leading center for food safety, is an anchor tenant in the university’s research park. And right next door is a facility that incubator officials had hoped Innovative Biosensors would move into after graduation. “But by the time the company gets large enough to graduate from the incubator, this building will not be available,” Darmody says. “It will be full. Just two months after this 40,000-square-foot facility came online, it was pretty much filled.”

This story isn’t uncommon. Because research parks can take 20 years or more to fully develop, many new parks have only a facility or two online in their earliest years. And because those first few years are lean times for the sponsoring organization, most won’t – or can’t – hold a space until an incubator client is ready to move in. They need the revenue now.

The Colorado Bioscience Park Aurora at Fitzsimons, operated by the Fitzsimons Redevelopment Authority, has found what it hopes is a solution to the problem of finding suitable space for incubator graduates. “We had an incubator client go through an IPO and grow too large for the incubator,” says Vicki Jenings, director of research park operations for the Fitzsimons Redevelopment Authority in Aurora, Colo. “They wanted to stay in the park, but we didn’t have the buildings available for them to move into, so we lost them.”

The bioscience firms at the park and its affiliated incubator, the Fitzsimons BioBusiness Incubator, typically won’t record significant revenue figures for 10 to 12 years, making the firms less creditworthy to banks. “They don’t have the money to build their own facilities,” Jenings says. “But as a governmental organization, we don’t have the money to invest in building a lot of spec space, particularly expensive wet lab spec space.”

In such instances, some research parks turn to private developers to build out facilities for mid-stage companies. And that’s what the Fitzsimons Redevelopment Authority is doing, too. The organization is finalizing plans with a private development group that will build multitenant spec facilities within the research park. Under the plan, the private developer will own the buildings, the Fitzsimons Redevelopment Authority will retain ownership of the land and oversee the park’s operations, and the two will partner on joint marketing efforts to promote the new facilities, Jenings says. Each organization would be responsible for managing and maintaining the facilities it owns.

Do …
Remember it’s a balancing act

While many research parks struggle to find suitable space for incubator graduates, the Delaware Technology Park had a different challenge: placing early-stage companies. The park initially didn’t include an incubator, but officials soon discovered a need for space and services targeted to start-ups.

Now, the Delaware Technology Park’s five buildings include about 20 percent anchor tenant space, 20 percent incubator space and 60 percent emerging technology company space for mid-stage firms. It’s a mix that works well for the program, Bowman says. Anchor tenants pay market rates under long-term leases, providing a stable source of revenue for the park. Incubator space allows the park to assist early-stage companies that will later grow into the park itself. And the bulk of the space goes to more established – and less risky – companies that could grow into big-league employers in time.

Don’t …
Forget that balance takes time and money

The University of Wisconsin-Madison’s University Research Park also has struggled to achieve the right mix of facilities for early- and late-stage companies. But over time, the park and its incubator, the MGE Innovation Center, have developed a reputation for creating successful companies, which has helped it secure funding to expand facilities at the park for companies at all stages of development.

“It’s a constant balancing act to create the capacity we need to service companies without getting too much unused space online or spending too much money,” says Greg Hyer, associate director of the research park. “In the early years, we relied on creative guarantees to build more speculative multitenant space.”

For example, Madison Gas & Electric, a local utility company, provided a guarantee to lease 5,000 square feet for one year – about half of the space in a multitenant facility under development – to help the park secure a construction loan. “Our understanding with MGE was that the guarantee would be used only if we did not obtain 5,000 square feet of leases during the construction phase,” Hyer says. “The guarantee was used to build several buildings and never exercised. We never relied on these guarantees for operation, but used them to obtain bank support and financing.”

Now, the university foundation owns about one-third of the facilities within the research park, and rental fees help to support incubator and park operations. With a track record of more than 20 years, the research park also is able to borrow money and work with construction companies to build new facilities, as needed. “But still, there’s always some risk involved in developing spec buildings, so you have to have a board or operating organization that is willing to take on some risk to make it work,” Hyer says.

Do …
Consider co-marketing opportunities

The Rensselaer Polytechnic Institute Incubator Program and the Rensselaer Technology Park operate as separate entities four miles apart in Troy, N.Y., but the two programs often work collaboratively, with one organization marketing on behalf of the other when it makes sense. “We have similar goals, so there are synergies and benefits of co-prospecting for clients,” says incubator Director Michael Tentnowski. “We don’t see ourselves as competitive. When we’re marketing to prospective clients, it just depends on the stage of the company. If it’s an early-stage company, it needs the incubator. More developed companies need the tech park.”

Because the incubator and the tech park are both programs of the university, the incubator has some flexibility is setting graduation dates when a company needs a few extra months before suitable space opens up in the park. “It’s set up to be a natural progression to move into the tech park after graduating from the incubator,” Tentnowski says. “And having the tech park in our portfolio has proven to be a great recruiting tool for the incubator.”

Don’t …
Forget that each program has a unique mission and goals

Although incubators and research parks share common economic development goals, each still has its own unique mission and responsibilities. For example, some incubators aren’t going to want to give up a client to a nearby research park unless they have someone else ready to move in, says Ellen Hemmerly, executive director of the University of Maryland, Baltimore County Research Park Corp., which operates both the research park and its incubator.

Especially when an incubator and a research park operate under separate management teams, there can sometimes be tension between the two regarding when companies graduate from the incubator into the park. In those instances, Hemmerly says, the research park might consider paying a fee to the incubator when clients graduate into the park to help boost the incubator’s finances until it finds another client to fill the space.

She also recommends that incubators price their space and services competitively to ensure a smooth transition – a lesson she learned the hard way. “The idea is that as incubator clients grow, they will move into the research park,” Hemmerly says. “But if you price your leases too low, they won’t want to leave. The techcenter@UMBC [the university’s incubator] had a couple of biotech companies that didn’t even want to have a conversation about moving into the research park because they were getting very competitive lease rates at the incubator.” When

their leases came up for renewal, the incubator raised their rents to prices that are more in line with the market. But Hemmerly says she’s determined not to get into the same position again. “We also are moving biotech rents up faster for new tenants, so that after they graduate from the incubator, they are used to rents that are not dramatically different from the research park.”

Do …
Take a regional approach

The sum really is greater than its parts. That’s why universities, government agencies and business development organizations should pool their resources regionally and build companies around them rather than trying to lure companies from other areas, Hemmerly says.

“There may be some competitiveness issues initially, but over time, everyone will realize that the stronger the region and the more resources you have focused on a particular niche or area of expertise, the better it is for the state and the region,” Hemmerly says. Additionally, partnering with other groups on a regional basis can open up more business and funding opportunities, as the Delaware Technology Park has discovered.

As a relatively new park lacking the collateral and the track record to secure bank loans to build additional facilities, the Delaware group partnered with University City Science Center in Philadelphia, a long-standing research program with experience and expertise in helping tech-based businesses, to secure the capital it needed.

“We needed the collateral to borrow money from the bank, and we needed to locate a partner that shared our mission,” Bowman says. “The Science Center provided both.” The two groups have gone on to build three buildings together within the Delaware Technology Park in a relationship that has benefited both groups.

The partnership has allowed the tech park to grow and has given the Science Center – a collaborative project formed by more than 20 universities and research organizations – an opportunity to extend its reach among its regional stakeholders. “The University of Delaware is the second largest stakeholder in the Science Center, so this partnership was a way to allow [UCSC] to grow outside of Philadelphia but to stay in the region,” Bowman says. “It’s a win-win for everyone.”

Portions of this article are based on a session that took place during NBIA’s 19th International Conference on Business Incubation in Baltimore, “Importance of Incubators to Successful Research Park Growth,” presented by J. Michael Bowman, Brian Darmody, Ellen Hemmerly and Charles D’Agostino.

Profile of a research park

Earlier this year, the Association of University Research Parks completed a survey of its membership to learn more about the size and scope of the research park industry. Following are some highlights of their findings.

  • Sixty percent of respondents operated both a research park and a technology incubator
  • Seven in 10 research parks had staff who facilitated technology commercialization activities with affiliated universities
  • Nearly one-half of respondents (48 percent) were nonprofit university entities
  • More than half (55 percent) of the land in the research parks was at least partially owned by a university
  • More than half (57 percent) of the buildings within the research parks were at least partially owned by a private, for-profit entity
  • Nearly three-quarters (73 percent) of research parks were built in the 1980s or 1990s
  • Average research park acreage: 505
  • Average number of buildings within research parks: 20
  • Average square footage within research park buildings: 1.1 million
  • Average number of organizations within research parks: 51
  • Average research park employment: 2,291 FTE

Source: AURP Park Profile & Membership Directory/Buyers Guide, Association of University Research Parks, 2006. For more information, visit www.aurp.net.

Tips for creating partnerships with research parks

Although most incubator-research park relationships come about because both programs are affiliated with the same college or university, even stand-alone incubation programs can benefit from working closely with nearby research parks. “Research parks should be very receptive to incubators that are growing strong companies,” says Ellen Hemmerly, executive director of the University of Maryland, Baltimore County Research Park Corp. She notes that incubators can help feed tenants to the research park, can offer services not otherwise available to research park companies, and can charge referral fees for steering graduates to a research park.

But just because your program isn’t already affiliated with a research park doesn’t mean you can’t reap the rewards of such a relationship. “There’s an opportunity there for those incubators that don’t have the land or the sponsor to develop their own research park to broker some kind of business relationship with a research park in their region or state,” Hemmerly says.

That’s just what the Emerging Technology Centers in Baltimore have done. The University of Maryland, Baltimore invites ETC staff to meet with prospects for its BioPark when it believes the company would benefit from the incubator’s assistance or if the prospect wants research park space that will not be ready for awhile. “If the prospect meets our criteria, we will accept them into the ETC incubator on a flexible lease arrangement that will terminate the day they move from the incubator into the research park,” says ETC Executive Director Ann Lansinger. “If a UMB prospect moves directly into the research park and desires incubator services, ETC will provide those services on an affiliate arrangement.”

It’s a relationship that has worked well for both sides, Lansinger says. UMB operates a life science research park, providing much-needed wet lab space for graduates of ETC’s incubation program, while ETC provides business assistance to biotech firms that need a helping hand. “The university saw this as a way to attract solid tenants to their new research park, and we saw this as a way to assist biotech companies.”—LK

NBIA members rank at the top

Each year, the Association for University Research Parks honors one of its members with the Outstanding Research/Science Park Achievement Award. This award recognizes research parks that excel in moving technology from the laboratory into the marketplace by creating economically viable businesses, jobs and revenue.

In recent years, several AURP award winners have been NBIA members or affiliated with NBIA members. Recent winners include:

2005 Delaware Technology Park, Newark, Del.

2004 Purdue Research Park, West Lafayette, Ind.

2003 University of New Orleans Research & Technology Park, New Orleans, La.

2002 Discovery Parks, Vancouver, Canada

2001 University of Arizona Science and Technology Park, Tucson, Ariz.

2000 Rensselaer Technology Park, Troy, N.Y.

1999 Research Triangle Foundation of North Carolina, Research Triangle Park, N.C.

1998 Massachusetts Biotechnology Research Park, Worcester, Mass.

1997 Cummings Research Park, Huntsville, Ala.

1996 Wisconsin Alumni Research Foundation, Madison, Wis.

Keywords: partnerships -- organizational/corporate, research park, strategic partnerships, technology incubator

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