Local efforts center on creating incubators for startups
Sunday, June 20, 2010
A group of business leaders in Clark County’s startup community want to revive plans for a small-business incubator to help nurture growing companies in Vancouver.
But a lack of public funding or cheap space available for the project means it will likely need much more private support to move beyond the idea stage, supporters say.
Following a traditional model, an incubator would provide work space with rents below market rate to qualifying businesses and pooled resources such as information technology, legal and accounting services. Such a space would bring like-minded entrepreneurs together to support each other and share ideas.
“You’re increasing the probability these companies will be successful and add jobs to the community,” said Kathy Sego, co-owner of Sego’s Herb Farm in La Center and a member of the Columbia River Economic Development Council’s advisory board.
Sego, who has been working closely with Vancouver start-ups offering business advice and access to her extensive network of contacts, says such resources are essential to businesses hoping to reach the next level. But Clark County suffers from a lack of institutional or other community-based help for startup businesses, especially in technology-related fields, at a time when the region desperately needs jobs, she says.
Rent relief key
The city of Vancouver is interested in the concept of an incubator focused on research and development in the manufacturing sector, said Alisa Pyszka, business development manager for the city. She envisions making 2,000- to 3,000-square-foot industrial spaces available at a reduced cost for startups to test their technologies before they hit the market, she said.
Government assistance has been available to small businesses in the form of tax breaks, but many companies aren’t generating enough revenue to benefit from that, she said. Instead, Pyszka has heard from local companies that rent relief would be much more beneficial in helping them stay afloat.
But the city doesn’t have much beyond anecdotal evidence to justify an incubator initiative, Pyszka added.
“We’d love to hear what the need is out there,” Pyszka said. “We’d (also) love to support exploring it, but unfortunately we have no money (for a feasibility study).”
The development council similarly supports the idea, but isn’t ready to throw its weight behind the effort.
Recurring attempts to build an incubator in Southwest Washington haven’t gotten results in recent years, said Bart Phillips, president of the council. He cites a proposal in 2008 by the Washington Technology Center in Seattle to build a $16 million Semiconductor Component Testing Laboratory at Washington State University Vancouver. The new building would have held a satellite office of the center, as well as research laboratories to serve as an incubator for new technology companies.
The project is now on the back burner after the WTC failed to secure enough funding for the project from the 2009 Washington Legislature.
Even in good times, incubator projects are hard to launch, largely because it’s not clear how to fund them and whether such investments would generate an adequate return for the community.
If they lease the space for less than it costs the incubator, there has to be some other source of revenue to fill the gap, Phillips said.
“Incubators are the costliest and riskiest way to get into entrepreneurial development,” he said.
WSUV a candidate?
That’s why Sego is hatching a less-costly plan for a nonprofit “accelerator” that would provide the shared services of an incubator without renting out below-market space. The incubator would consist of six to eight individual offices around a shared conference space. Attorneys, accountants and other service providers would get free or reduced-cost office space at the incubator in return for providing at least eight hours per week of free service to start-ups. Collecting them all in one place would be key to providing a one-stop shop for early-stage businesses that need guidance and support.
Companies that use the incubator’s services wouldn’t be charged initially, but instead would give up 1 to 2 percent equity that the incubator would redeem if the company is sold, attracts investors or goes public, Sego said.
The plan, however, still hinges on finding a suitable space for those service providers.
Sego hopes to land space at WSUV’s under-construction Applied Technology Classroom building, which was originally planned to adjoin the Washington Technology Center’s incubator. Part of the rationale for building the engineering classroom and office space was to provide additional support for the Vancouver tech community, Sego argues. Now that the WTC’s incubator project is on hold indefinitely, the university should consider moving ahead with a scaled-down incubator in a building that’s been funded.
When the WTC finds funding, the accelerator could then expand into a full-service incubator, she said.
An incubator is one possible use of a portion of the Applied Technology building, said Dave Smith, director of Capital Planning and Development at WSUV. But the university is under its own space constraints as it continues to expand enrollment without winning funding for additional capital projects.
“To the extent the university incurred cost, it would have to be in the budget and approved by the board of regents,” Smith said. “Honestly, at this point I don’t know where we’d find the room for something like that. We’re starting to feel the crunch already for classroom and office space.”
An incubator provides the most benefit to companies if it offers both services and space, said Tim Strege, executive director of the nonprofit William M. Factory Small Business Incubator in Tacoma. Companies that occupy the same building benefit from collaboration and support. But charging market-rate rent from tenant companies also ensures they’re serious and viable businesses that move there to grow.
“The only reason they go there is to use the services, because that’s what they’re most in need of,” Strege said. “There’s not a shortage of space; where there oftentimes is a need is to have on-site engineering, information technology, business law and administrative support services.”
Developing such a full-service incubator that provides both space and services will require a much larger private investment. And that also means mounting a broad-based community effort to ensure the project’s success, CREDC’s Phillips said.
“I don’t believe, stand-alone, it would have an impact,” Phillips said.
A successful incubator also needs support services like a robust Small Business Development Center, a public loan fund, venture capital and risk funds, space and a nexus to the university, he said.
Sego hopes to build on the momentum generated by the Southwest Washington Workforce Development Council’s PubTalk networking events to generate enthusiasm and support for the incubator. Under way since December, the bimonthly events draw about 100 entrepreneurs, investors and service providers interested in building Clark County’s startup community.
“If somebody with a lot of money wants to support an incubator, we can expand on this,” said Sego, who doesn’t want to wait for a public agency to pick up the cause. “Then the cost to the community is very low, and the benefit is very high.”