MargateNews.net - http://margatenews.net/margatenews/ Original Article URL: http://margatenews.net/margatenews/news/articles/article112.asp Business Incubator may fuel progress in Margate • MCRA considering new twist on old theme By Mitchell Pellecchia, Staff Writer Tuesday, June 23, 2009 Small business incubators have been around since the late 1970s. They sprouted up in the Northeast U.S. in response to job losses resulting from plant closures, downsizing and companies migrating overseas. By 1980, 12 small business incubators were in operation in areas of the nation hard hit by joblessness.   Back then, the main objective of the incubator was to attract select small business startups and ongoing concerns by publicly subsidizing bargain rents and by providing managerial and technical assistance, fully-equipped offices and vital access to venture capital and funding. In return, these businesses were expected to stimulate local economies by providing jobs and expanding the local tax base. __________________ Today, the Margate Community Redevelopment Agency (MCRA) is proposing something similar for Margate, but with an innovative twist: shared equity ownership Shared equity ownership would enable existing Margate businesses, like restaurants, retail, professional office and others, to buy in to publicly-subsidized space in designated areas of the newly-zoned City Center District. It would also encourage the new development of retail and services-based live-work units, prompting business men and women to relocate to Margate and live atop their business. At a recent MCRA meeting, Margate city commissioners shared mixed feelings as to whether a small business incubator would be suitable for Margate. Although all were in agreement that MCRA staff should further explore the incubator concept, Commissioner Pam Donovan expressed reservations as to whether spending taxpayer dollars in the form of public subsidies for small business is a good idea. Commissioner Frank Talerico said he supports the incubator program in the early stage, but says he needs more information on the shared equity concept before he can fully approve. Since their inception, small business incubators have been a means by which cities around the world have developed small business infrastructures. In Brazil – and in former Soviet bloc countries such as the Volga and Czech Republics, for example – information technology and biotech incubators continue to stimulate local economies and create jobs. Small business incubators in cities and villages across India and in the Philippines are responsible for restoring disaster-stricken economies and building businesses where once there were none. Similar to Margate, city officials in Carlsbad, CA have begun to explore the economic implications of a small business incubator in their city. They’ve proposed two separate incubators; one for arts and one to subsidize eco-friendly businesses. Like Margate, the City of Carlsbad owns empty lots and buildings and is searching for ways to stimulate their local economy. Macomb County Michigan – an economy devastated by the loss of auto manufacturing jobs in recent years – has erected an 80,000 square foot incubator focused on defense and homeland security related businesses. The Technology Advancement SmartZone incubator in Macomb is expected to service 40 companies, all offering diverse products and services. The SmartZone in Macomb is currently one of five incubators operating in the county. Two more incubators are planned for the area and earmarked specifically for startups. In the Albany New York region, nine small business incubators are in operation. Rents range from $5 to $13 a square foot. The objective here is to nurture participating businesses so as to show a profit within a three-year period, then move out and make room for a new set of startups. A main tenet to most incubator programs is for fledging companies to eventually support themselves without public assistance and / or help from the incubator. Although in large part, small business incubators in the U.S. are focused on attracting IT, engineering, medical and bioscience ventures, speakers at a recent incubator workshop in Thurmont, Maryland noted that the small business incubator model can be applied to almost any type of small business, including retail, office, agricultural, restaurant or light manufacturing. One major challenge, they agreed, was to ensure that an incubator targets the small business needs of the city or region it serves. According to the National Business Incubator Association (NBIA), there are more than 1,000 business incubators in North America and about 4,000 worldwide. Incubators in the U.S. have created an estimated 500,000 jobs since 1980, reports the NBIA. Do small business incubators work? There is little question that small business incubators create jobs and stimulate economies. But do small business incubators pay for themselves and, if they don’t, who does? In the United States, small business incubators are largely taxpayer supported – directly and indirectly. The financial rationale behind a small business incubator is that public moneys used to fund the incubator will be returned three-fold in job creation and economic growth to the community that supports it. A small business incubator in Margate, for example, might be funded by a number of sources, including but not limited to the MCRA, the City of Margate and availed federal, state and county agencies. Incubator assistance might also come through partnerships with educational institutions, corporate sponsors and business entities experienced in incubator creation. Problematic for incubators, as pointed out in the Milwaukee Journal Sentinel in “MATC weighs closing business incubators,” is that a majority of fledging startups participating in incubator programs never become profitable. In fact, seventy-five percent of participants at the two MATC incubators are behind in their rent. Although NBIA reports that 85 percent of companies associated with an incubator are still in business after five years, there is little evidence to indicate that these companies can otherwise survive on their own without continued public support and / or philanthropic funding. Pros and Cons Pro: Advocates of the small business incubator say incubators definitely improve the 50-50 odds of a small business staying open past five years, as well as to stimulate job growth and local economies. Con: Critics say incubators require regular injections of public cash and can’t justify their success in quantifiable terms. Pro: In Margate, incubator proponents say that with proper oversight, a shared equity ownership incubator could be a win-win, as it would stimulate the city’s small business economy while requiring participants to pay back, in whole or in part, the money that initially funded their business, which could soften the taxpayer burden considerably. Con: “…no one knows whether incubators are a good investment for the communities that support them. No study in over a decade has tracked incubated businesses and compared them with companies that manage on their own. The arguments for incubators are mostly anecdotal.” –Businessweek __________________________________________ Get MargateNews.net on your desktop, laptop or mobile Internet with customizable RSS (Real Simple Syndication) Feeds. Receive all the news, or just some of it, as soon as it’s published! Sign up now. 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