7. EDSR 06-12-2006 - Laserfiche WebLink

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Hatching Good Ideas? Characteristics of Minnesota's Business Incubators Introduction Despite Minnesota's booming economy, studies and academic and business leaders have suggested that the state's low new business start-up rate is a warning sign for future economic growth. Business incubators are frequently mentioned as a potentially important component of start-up success and integral to a growing economy. The term "business incubator" describes a variety of methods that are used in economic development to nurture new, small businesses. In general, incubators are intended to provide new firms with the supportive network necessary to increase their probability of survival during the crucial eazly years when they are most vulnerable. Some proponents of business incubators suggest that an organized system of incubators is necessary to jump-start economic activities. Other proponents suggest that there is a shortage of ideas rather than resources, and that incubators sponsored by local groups (whether non-profit or for-profit) can meet the needs of the state's budding entrepreneurs. Finally, there are those who believe that business incubators are a flawed approach to business development that add little value and divert resources from other economic development opportunities. This report describes business incubators as discussed in recent professional and academic literature, provides questions to consider when thinking about incubators, provides a description of business incubators in Minnesota, and includes a list of Minnesota business incubators. The discussion on the merits of business incubators' approach to business development is beyond the scope of this brief. There is also no discussion on the quality of incubator investments. The Minnesota Department of Trade and Economic Development (DYED) neither advocates nor opposes business incubators. The following list represents the key findings from the survey of 28 business incubators in Minnesota. These results aze discussed in the Survey of Minnesota's Business Incubators section of this report. • Minnesota business incubators are evenly split between non-profit and for-profit incubators. • Half of all surveyed incubators were established in 1997 or later. This result was the same for both non-profit incubators and for-profit incubators. • The median incubator had seven companies in residence, one company that had "graduated" from the incubator and one company that went out of business. Non-profit incubators tended to be slightly larger than the median, while for-profit incubators tended to be slightly smaller. Nearly 60 percent of all incubators surveyed were located in the Twin Cities. Non-profit incubators tended to be located in outstate regions, while for-profit incubators tended to be located in the Twin Cities. • Non-profit incubators tended to receive payment for services through fees. For-profit incubators surveyed tended to receive equity in incubated companies as either full or partial payment for incubator services. • Mixed-use incubators that do not focus on a particular sector were more prevalent than technology-focused incubators. There was little difference in the focus ofnon-profit incubators and for-profit incubators. • Nearly 65 percent of all incubators surveyed indicated one or more affiliations with outside organizations. Non-profit incubators tended to be affiliated, while for-profit incubators were more likely to be stand-alone (i.e., no affiliations). The most important characteristic of Minnesota business incubators surveyed is whether the incubator is non-profit or for- profit. Minnesota Department of Trade and Economic Development