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Incubator redux: The Enterprise Center becomes a national supermodel through a stem-to-stern makeover

by Sally Hayhow

December 1999

Della Clark is in a bit of a hurry, as usual. She has only a few minutes to set up a meeting with me to talk about The Enterprise Center in Philadelphia, over which she presides as president. A few minutes is plenty of time, however, for one of her signature zingers.

"We're no longer in the incubator business," she says.

Experience guarantees there will be a follow-up, and there is: "We've changed our direction. We're no longer in the incubator business because we're in the talent business. We are the CEO generator for the region," Clark adds with a hint of menace, and that's all she'll say for now.

Later I will talk to Lee Huang, vice president of new ventures, and Matt Bergheiser, vice president of entrepreneurial programs, who may not spin doctor it, but the gist of what they tell me about their work also equals "We are no longer in the incubator business." Instead, the program has shifted to molding competent, new business leaders. "If we focus on talent, we will create more businesses than we ever imagined," Clark says. Every last staff person also believes those leaders will transform the community and that The Enterprise Center will have created a model it can franchise to other urban communities.

Having the courage to completely change strategy is actually third in a trio of characteristics that have made The Enterprise Center a 1999 NBIA Incubator of the Year Award winner. The other two are setting aggressive goals and continually assessing effectiveness. Those tenets have brought in millions of dollars, attracted prestigious partners, stacked up a pile of "firsts," helped create a business assistance model, put teens to work and begun an urban renewal in West Philadelphia. All this has happened in what many were ready to call a failed incubator.

A difficult task

In 1989, The Wharton School at the University of Pennsylvania set up the incubator as a program of its SBDC, known at first as the Wharton West Philadelphia Enterprise Center. It would be the business school's attempt to reach out to the African-American community, which was in a state of urban decline right outside its gates. The founders' intentions were good, but they were not quite prepared for the depth of the task. "When they started to see how hard this was, the future of it became questionable," says Clark, diplomatically.

Entrepreneurship was hardly the thing West Philadelphia's struggling families talked about around their dinner tables, and businesses were fleeing, not forming, in the neighborhood. In 1991, the SBDC hired Clark to fill the incubator's one staff position and to bring it fresh purpose.

Clark, a former top salesperson for Martin-Marietta, approached the job with missionary zeal. "I consider my role as a minister of entrepreneurship. My African-American people need someone like me," she told NBIA in 1996. As practical as she is visionary, Clark saw the potential in the incubator. "I wanted to move it from an organization with a mission to one with ambition. I gave it far more goals." An understatement, to say the least.

A New Home

Goal No. 1 was to create a home of its own for the incubator, one that commanded attention. "This community needed a visual symbol and hub of entrepreneurship activity," she said. It also became a symbol for just how serious and effective Clark's plan could be. "We were on the fourth floor of the building across the street from the present location, and no one knew we were there."

Clark set her sights on the former 35,000 square foot WFIL-TV station and broadcasting studio building. One of the first television broadcasting studios in the nation and birthplace of Dick Clark's American Bandstand, it had latent public relations value that Clark (Della, not Dick) could recycle. She liked the subtle statement it made. "The building represented the hopes and dreams of music and television and now all of a sudden it represented the dreams of entrepreneurs." But more importantly, it was in exactly the right place, the right size and of sound structure. The whole project would cost about $4.5 million, including considerable environmental cleanup, and there was no shortage of people who thought she was daft, considering the program's tenuous state at the time.

Funders fell under the spell of Clark's message, or more likely her persistence. She sought some tried-and-true incubator funders but mostly went after a spate of nonconventional sources, many of which had never heard of an incubator. "I still read a newspaper like Peter Falk looking for a clue," she says of her constant quest for leads. Seeking funders who hadn't been overworked by other community agencies and perfecting a pitch that boiled down her message into simple analogies worked well in "Quaker Philadelphia," she says. "My pitch would be different in Silicon Valley or manufacturing Detroit."

If a funder couldn't see clear to a monetary donation, Clark applied the flexibility principle, finding ways it could donate equipment, paint, anything. Clark brought in Meridian Bank, PNC Bank, DVCRF Ventures, the Department of Health and Human Services Administration for Children and Families' Office of Community Services (HHS-OCS) and the city of Philadelphia, to name literally only a few. The Economic Development Administration (EDA) of the Department of Commerce gave its first direct grant to a program since the 1970s.

After extended courting, Microsoft came on board and felt so good about the opportunity it persuaded Compaq to help outfit a computer center. Safeguard Scientifics, a venture capital and holding company, donated the money to restore the American Bandstand studio for use as an event center. PECO Energy, The Trane Co. and the Geothermal Heat Pump Consortium outfitted the building with a state-of-the-art geothermal energy system. "I must admit that the building is more of a phenomenon than we anticipated it to be," Clark says. For instance, the Safeguard Scientifics Business Events Center draws an average of 1,000 visitors a week – quite a few more than the projected average of 3,000 per year.

Operating money came from HHS-OCS and a few unlikely sources, such as Pew Charitable Trusts and the Prudential Foundation. In the end, all costs of the site acquisition, cleanup, exterior renovation, interior renovation and special features, were covered without a debt load. "We have a line of credit on the building, that's all," Clark says.

Clark timed the official opening to take advantage of a superb public-relations opportunity. American Bandstand was having its 40th anniversary and the incubator was able to tack its opening on to the celebration. Dick Clark, Connie Francis, Chubby Checker and a host of other greats were there to pass the torch, and sponsors couldn't have been happier.

Each component of the building had goals linked to it. For instance, in keeping with the overriding goal of making the incubator a progenitor for entrepreneurship and community renewal, staff set sights on bringing 200,000 users into the computer center during its first 10 years of existence. They are already exceeding the goal. "It's the most [consistently] used center in the building," says Clark. The geothermal system inspired a goal of creating five minority-run businesses in the energy industry within 10 years. In just three years there is one established and one ready for admittance.

Incubating bigger, better

If the building was undergoing renovation, the incubation program was being re-built from the ground up. Clark's second goal was to amass a staff – or as they became better known, a team of coaches – and a detailed, benchmarked system of incubation. The SBDC welcomed the incubator's increased independence, yet still gave financial and functional support during the program's meteoric growth, and still does so today.

The basic incubation program got the first overhaul, taking on the name THRIVE (To Help Realize Independence Via Entprepreneurship), and Clark began hiring a staff under Bergheiser's oversight. Where once there was only Clark, now there are 17 staff members and four consultants, most of whom work with companies in some way and also take on administrative functions in the incubator. They range in experience from accountants to librarians to software marketing specialists and are clustered in teams (see "A Sea of Staff" below). "This year we're moving away from a founder-leader institution to a more fully sustainable institution with lots of leaders," Clark says of the incubator's swelling and capable ranks.

"The SBDC kind of ran clients through the traditional SBDC process. They assigned a consultant who would work with the company's specific business issue," Bergheiser says. The SBDC still is involved with incubator clients, but usually on one-time special projects. "Ninety-eight percent of work is done in-house with staff," Bergheiser says.

Through THRIVE, Bergheiser and much of the remaining staff take a holistic approach to helping client companies, addressing all aspects of their development in a logical sequence. "We have a coaching system. It's not just one person working with a business. Our entrepreneurs go to different staff members depending on their needs," Bergheiser says. "For instance, if their big issue is hiring new staff members, they will work with our human resources coach. She will help them write descriptions, get out an ad, set up a compensation package or whatever they need." To get their data bases set up they go to the technology coach; to perfect a marketing plan, it's to the marketing coach.

The backbone of THRIVE is a league system. Depending on a company's level of development, they will be classified Single A, Double A or Triple A. "As we are working with them they are working up a scale and we're evaluating where they stand, their progress in different areas," Bergheiser says. There are about 12 areas that staff evaluates to determine in which league a company belongs, and each level has specific training associated with it and benchmarks to reach. When a company meets the benchmarks, it moves to the next level, usually with the fanfare of public recognition. "We've identified all the needs and all the bad habits of every level," he says. For instance a Single A might not be able to read a financial statement or simply be bad about turning them in to staff (a requirement).

Staff holds quarterly meetings with the companies, and those give direction to their ongoing coaching. "Typically companies meet [less formally] with staff members once or twice a week," he says. Sometimes the work is very hands on. Staff may go out on a business call with a company or help them interview an employee. The resource coach may help track down information for a marketing plan.

"It is a talent development process. Our entrepreneurs can come with barriers – resource barriers, educational barriers and the like. [The vast majority are not college educated]. They come with all these issues but also with all this innate talent," Bergheiser says.

That was true of Joe Boyd and his building supply and energy conservation products firm Black Star. The company entered the incubator in April, and the coaches went to work helping him with leads for clients, marketing, accounting and legal issues. In just one month sales doubled. Black gives lavish praise to the staff. "We couldn't make it without them. It would be very difficult," he says. "The Enterprise Center is a business utopia."

The Enterprise Center already counts some significant major leaguers among its graduates and clients. In 1998 FutureNET was named a "Philadelphia 100" company. Providing network integration and computer maintenance services, it has the Nuclear Regulatory Commission, the Southeastern Pennsylvania Transit authority and Unisys as clients. Noel Lowe, founder and CEO, says the incubator helped tremendously. He received help with everything from business plans to office services. Lowe especially appreciates the contacts and help with marketing that Clark and the staff provided. The incubator's community stature also helped. "When you go to the bank and ask for a loan, you get it," Lowe says.

THRIVE is only one piece of the incubation program. Bergheiser now oversees the new StartUp! Program, begun in 1997, which already has drawn 300 people for the six-week program that introduces entrepreneurs to the cardinal concepts of starting a business. At the end, participants get one-on-one assistance writing a business plan.

By 2000, Launchpad, a whole new facility, will be in place. Clark is devoting almost all her time to this $5.5-plus million project, which is slated to break ground in 2000. "It's a 50,000 square foot flex space building with technology portals and all the innovations necessary for entrepreneurship," Clark says. Although primarily a multitenant facility aimed at attracting businesses to relocate in West Philly, it will house graduates who will receive limited services as they wean from the incubator. Fanny Mae is the identified funding partner. This is the second of many projects the incubator hopes to develop as part of the Experimental Prototype Community of Tomorrow, The Enterprise Center's urban renewal plan for the 10-block neighborhood.

The incubation programs all are evolving to reflect the new focus away from incubating companies and toward incubating people, referring to Clark's opening zinger – which really means that incubation at The Enterprise Center involves incubating people first, companies second. The conversation about the program's direction leads to a second Clark zinger: "We have to increase our failure rate to increase our success rate."

Clark is stressing the need to worry less about whether an entrepreneur's first business succeeds and more about whether the entrepreneur succeeds. "The likelihood that a first business will fail is high. If we've put our resources into a company and it fails, you have a disgruntled entrepreneur. But if we put it into the entrepreneur, we have an entrepreneur that has skills and talents they [can use] to start another business." Clark says, adding, "I realized we weren't helping the entrepreneur."

Not for adults only

Inherent in the staff's philosophy is the theory that the earlier you start, the better chance you have of developing a community with an entrepreneurial culture. So the incubator increasingly is placing emphasis on younger and younger clients.

Lee Huang is in charge of the youth programs, and according to Clark, "They've taken on a life of their own. The youth program is itself going to be an institution." Through the YES (Youth + Entrepreneurship = Success) program, Huang offers an intensive boot camp for youth ages 12 to 17. More than 900 have attended the sessions that run all day for five days. Activities include guest speakers, business simulations, workshops, case studies, contests and more. Feeding that program is the school-based Youth Enterprise Education Project, in which The Enterprise Center is a partner. "We're in seven schools, so that encompasses another 1,200 or 1,300 students we have contact with," Huang says. He encounters another 2,000 at other speaking and publicity functions and regularly keeps in contact with about 100 youth organizations in the Philadelphia area.

Huang is adding other components to the youth program, such as an after-school drop-in clubhouse for kids. Not only does it offer alternatives to the street life, it's a way to continue helping students network, learn business skills and, most importantly, develop their leadership potential.

"Yes, we are about entrepreneurs and, yes, we hope the youth will end up in the incubator and start businesses. But we are also instilling in them a social conscience. We want them to have a category for doing right by doing well," says Huang. So accordingly, the goal for the YES program is 25 community leaders by 2006. Huang believes they are right on track to meet it.

Meanwhile, a few YES participants already have formed "bangin'" businesses, like 15-year-old Steward Coles of L'egion Design, who was responsible for the incubator's first Web redesign.

After YES, promising young entrepreneurs can become part of the Young Entrepreneurs Program (YEP), developed from an existing relationship with the Prudential Foundation. "We're one of two pilot sites for this curriculum, which Prudential developed. For us it's perfect because we had the YES and the adult programs, but it was a pretty big leap [from one to the other]," Huang says. YEP works with 15 to 20 young adults between the ages of 18 and 30 who are nearly ready to start a business. "And at the end you can apply for a zero-interest loan of up to $15,000," he adds.

YES entrepreneurs already are graduating into YEP. Huang cites the example of Jameil Harrison, 19, a promoter who founded Coco Entertainment. He had been in a Philadelphia youth entrepreneurship program affiliated with Wharton, came to the YES camp and then YEP. "Pretty soon he'll be able to come into the incubator. He has all the trappings of a leader. As we say here, 'he gets it'," says Huang. "He is able to bring things to us that are important (contacts in the music business) and we are there for him." Recently, through YEP, Harrison gained introduction to the Timberland Co., which is exploring ways Coco Entertainment can promote Timberland products among young, inner-city clientele.

Sustaining it all

Just like incubating, fundraising is a team sport at The Enterprise Center. Although the Fundraising and Communications Team now bears responsibility for bringing a sustainable stream of outside support into the program, each staff team bears responsibility for the incubator's income. This augments the usual incubator rental fees, which run from $200 to $1,000 a month, depending on type of space and other factors. Training programs such as StartUp offer another substantial revenue stream. The incubator also sells select educational products and rents its Event Center for a modest profit. The center would not go under without outside help, but Bergheiser says frankly, "The incubator is supported and will always be supported," and exploring for new revenue sources is a constant.

Arguably the most unconventional profit center is coming from the New Ventures Team, which will run businesses and turn the profit back to the incubator. For its first venture out, the incubator acquired a Ben and Jerry's Scoop Shop franchise, which will open in the spring. Not merely a revenue generator, the venture will have young adult management and entrepreneurship-training components. The process has been complicated, involving everything from negotiations with investors to sharpening staff's business skills to changes in policy so the board remains comfortable with "the four-letter word, risk," says Huang. "We've had to set some parameters to have a protocol for new ventures," he says, referring to things like setting appropriate levels for debt and collateral, adjusting liability insurance and deciding how much time staff can devote before they "dilute what else we are doing here."

Through the efforts of staffer Kim Miller, the center just landed a $600,000 grant from the Department of Commerce's Telecommunications and Information Infrastructure Assistance Program (TIIAP). Over the next three years, it will enable The Enterprise Center to help close the digital divide in its neighborhood through a combination of training, mentoring, placing computer labs in housing projects, equipping key companies with computers and Internet connections, providing virtual incubation and finding ways West Philly companies can boost profits through the Internet. This grant will help the incubator reach its goal of making 12,000 community residents Internet literate and getting them online.

Half of the benefit of fundraising is relationship-building. The TIIAP grant cemented alliances among the incubator, the Ben Franklin Technology Partners of Southeastern Pennsylvania, the city's Housing Authority and the West Philadelphia Partnership, a consortium of community organizations working to improve the neighborhood's quality of life. A $300,000 grant from the Prudential Foundation was welcome money, but the programming partnerships, such as the YEP program, are equally valuable. Yes, Ben and Jerry's will bring cash to the incubator but the intangibles keep stacking up. "We learned about real estate, retail, capital financing," says Huang of the lessons they can now pass on to companies. "It's also socially responsible, so our kids learn that value," he adds.

If Della Clark has her way – and few doubt it could be otherwise – every last staff person will track down program resources as easily as they breathe or eat. Miller found that out Day One. After 20 years working as a marketer for software companies she wanted to come home to Philly, and liked what she heard about The Enterprise Center. She offered to come to work. "'Fine,' Clark told me. 'Here's a desk.'" That seemed too easy until Miller asked about her marketing budget. "She gave it to me and said, 'Now go and raise the money.'" And of course, she did.

A Sea of Staff

The Enterprise Center's 17 staff and four consultants are divided into teams that have distinct missions and strategies. Many staff members work across more than one team.

Entrepreneurial Programs Team

Mission: Lead the nation in the creation of model enterprise development programs in order to stimulate economic growth in urban communities.

Scope: provide business assistance within incubator and through community-based education

Staff: most contribute to this team

Fundraising & Communications Team

Mission: Lead the nation in funding, supporting and promoting The Enterprise Center as the model of enterprise development.

Scope: public awareness, creation of revenue streams, major gifts campaign

Staff: director of revenue development, project director, executive assistant, program assistant

New Ventures Team

Mission:Evaluate and support in-house ventures that will provide funding for the incubator initiatives

Scope: build incubator-run businesses and create products

Staff: director of revenue development, project director, legal coach, finance and building manager, vice president of operations, youth entrepreneurship coach

Operations Team

Mission:Support the missions of all the incubator's teams with the most innovative, high-quality and value-added services possible

Scope: incubator support services, financial management, human resources

Staff: all are involved

Vital Statistics

Year opened: 1989

Square feet: 35,000

Focus: Mixed-use, urban incubator

Current on-site incubator clients: 19

Current off-site incubator clients: 9

Total number of graduates: 6

Total number of StartUp! attendees since inception (1997): 259

Total number of youth participants since inception: 2,200

Jobs created by client and graduate companies: 238

Total 1998 client company revenues: $3,912,031

Tax status: 501(c) (3)

Mission: The Enterprise Center recruits and nurtures entrepreneurial talent to transform communities into hubs of growth and innovation.

Dick Clark, left, and Chubby Checker, at the podium, brought national attention to The Enterprise Center's opening, which occurred in conjunction with American Bandstand's 40th anniversary. Since then, staff has kept the incubator in the limelight whenever possible, and the exposure has resulted in an uncommon level of stakeholder support and community participation.

The extensive youth programs at the incubator include five-day intensive entrepreneurship Boot Camps; three-day Basic Training in retail operations, social entrepreneurship and customer service; an after-school Clubhouse with a tech focus; a range of in-school programs and participation in the for-profit ventures of the incubator, such as the Ben and Jerry's Scoop Shop.

Keywords: facility selection/construction/renovation, funding sources/fundraising -- incubator, social entrepreneurship, youth incubation

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