Fayetteville Business Center, Fayetteville
Set up: Operated by a non-profit. Located in building constructed for purpose of incubator. 7,500 square feet. Houses nine businesses. Four years old.
Pitch: The incubator was a joint mission by the city of Fayetteville and Fayetteville State University as an economic development tool. It houses a mix of businesses, from a home-health care company to an education consulting firm. There is a maximum stay of three years.
Advice: An incubator is not an incubator if it does not rotate businesses through.
“An incubator is for someone to get on stable ground. They should be able to go by themselves after that,” said Floyd Shorter, incubator director. “We are not just a lease unit or property managers. We are here to start up new businesses. There needs to be space for others who want to do the same thing.”
Technology Enterprise Center of Eastern North Carolina, Greenville
Set up: Operated by Pitt County Economic Development Commission. Located in a former manufacturing plant with 60,000 square feet on 15 acres. Currently houses eight companies. Six years old.
Pitch: Unable to market a closed-down factory and tired of watching it crumble, the county bought the plant and turned it into an incubator. Capitalizing on the nearby medical school at ECU, the incubator was outfitted with lab equipment like autoclaves and centrifuges.
“A good number of our companies are small start-up bio-tech,” said John Chaffee, director of the Pitt County EDC. The incubator also houses a bio-tech training lab used by Pitt Community College bio-tech students.
Chaffee said the limit on how long a company can stay is more liberal given the nature of research and development.
“If it is an R&D bio-tech start-up company, it can take seven years before they get a product developed and through the FDA approval,” Chaffee said. But not everyone gets leeway.
“We’ve tried to push others out within three to five years,” Chaffee said.
Advice: Chaffee said you can’t run an incubator by offering rock-bottom rent with an indefinite lease.
“If people get too good a rent, they’ll stay forever,” Chaffee said. “We ratchet them up over a period of years and move them up to market rates.”
Chaffee understands wanting to hang on to paying tenants, however.
“The incubator is not a money-making venture, it is supposed to generate jobs, but you have to have it break even,” Chaffee said.
Chafee said the incubator can be run by existing EDC staff, but admitted it can be a “pain in the neck.” Tired of getting called in the middle of the night when a lab student accidentally set-off the security alarm, Chaffee offered free rent in exchange for a tenant to be the property manager.
Nussbaum Center for Entrepreneurship, Greensboro
Set up: Operated by non-profit. 82,000 square feet. Houses 65 companies. 18 years old.
Pitch: Incubator offers business counseling and support service like shared receptionist, copier, fax and mail boxes. Rent starts at about 80 percent of market and is increased 5 to 10 percent each year to move the company closer to market rates. There’s no maximum stay, but rent will be above going market prices within five years, naturally pushing businesses out.
Advice: “You are not running an incubator, you are just giving people cheap rent,” said Tom May, executive director. “I question giving it away that cheap.”
May said it is harder to run a good incubator in small towns, though.
“In a rural area it is hard to have that many entrepreneurs to draw from,” May said. May recommends conducting a feasibility study before embarking on a new mission for the incubator.
Babcock Demon Incubator, Wake Forest
Set up: Operated as a joint venture with the Wake Forest University Business School. Located in a former residential home with approximately 2,500 square feet. Houses five companies. Four years old.
Pitch: The incubator revolves around start-ups that need office space and consulting.
“We pursue very early patient companies who are in the stages of building their business plan or finalizing their marketing plans,” said Paul Briggs, executive director. “There is no manufacturing. It is strictly design.”
The staff offers coaching, with extra support from student interns and professors in the business school. Fax machines, Internet connection, office furniture, laptop computers and printers are provided. The limit is typically one year, but the business support in long-term.
“We spend as much time with the companies that have graduated as those in the incubator,” Briggs said. “They call us all the time with questions: Can you help me get capital? Can you help me evaluate where we are? We are getting ready to do this, what do we need to look out for?” Briggs said.
Advice: “It doesn’t sound like you have an incubator,” Briggs said. “If I was running a business in there, I wouldn’t leave either.”
In addition to turning companies over, an incubator should have a director that does more than collect rent.
“One of the definitions clearly states you have to have an on-site director who works with companies and has a program,” Briggs said, citing the National Incubator Association.
Briggs said the interest from the county economic development commission in supporting small business should be capitalized on.
“If you can get the EDC involved, that’s unusual because they do not usually focus on small business,” Briggs said.
Briggs recommended a strategy that targets a certain type of start-up for the incubator and establishing rules up front for how long they can stay.
Gateway Center, Henderson
Set-up: Operated by a non-profit certified development corporation. 6,000 square feet. Three businesses. 18 years old.
Pitch: Established around the same time as the incubator in Waynesville during a push to open incubators across the state. It, too, was operated by a newly-created certified development corporation with the joint mission of being an SBA loan liaison.
But the incubator part never really worked out, according to Margaret Ellis, director of Gateway Community Development Corporation.
“We don’t keep them moving so I don’t think we would qualify as an incubator,” Ellis said of her tenants.
Advice: None. Gateway is in the same boat as Smoky Mountain Development Corporation.
“We just basically rent space below market rate,” Ellis said. “Tenants are supposed to stay until they get themselves on their feet, but we have some that have been here for the past 10 years. They enjoy being here so we let them stay.”