What's the Real Value of Business Incubators?

What's the Real Value of Business Incubators?
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Why you should care

Because this could be a model to help rebuild broken cities.

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Incubators and accelerators are companies that help startups and small businesses through their tumultuous first months and years. In New Orleans, they helped rebuild a city.

The creation of opportunity isn’t driven by a single sweeping action. It’s more often built over time, the accumulation of a huge number of small but essential efforts and institutions. In America’s inner cities, for example, research from the Initiative for a Competitive Inner City (ICIC) has shown that small businesses are the primary drivers of job creation. Given that the unemployment rate is typically higher in inner cities than the national average, job opportunities at these businesses are fundamental to urban livelihoods and economies.

New businesses are part of that equation too. While those first months of operation tend to be the most volatile, as the marketplace wipes out new firms that stumble from lack of experience or capital, nothing seems to help them like incubators.

Among incubation programs with an average age of nearly 10 years, 87 percent of graduate firms were still in business — nearly double the success rate of firms that had no such help, according to the National Business Incubation Association.

When access to networking, education and financial resources are in low supply, incubators and accelerators — which now sprinkle the country from Cambridge, Massachusetts, to Silicon Valley — provide would-be entrepreneurs with everything from no-cost or low-cost workspaces and strategic workshops to mentorship and business connections. The ICIC also found that, in most of its case-study cities, it would require only an 11 percent to 20 percent increase in small-business jobs to completely eradicate inner-city unemployment. Incubators and firms that facilitate networking have the potential to support that growth, as research has shown that networks of interconnected businesses operating in a local municipality or region report increases in revenue and employment higher than un-clustered small businesses. Initial pilot programs that fostered cluster networks found that participants grew their employment by as much as 18 percent.

One such organization helping to bring small ventures to life is Propeller: A Force for Social Innovation, a New Orleans–based nonprofit incubator and accelerator that promotes entrepreneurial solutions to the city’s social and environmental disparities, many of which were laid bare in the aftermath of Hurricane Katrina and the levee failure. It supports projects that include barbershops, vegetable markets, coding boot camps and the water-management sector with philanthropic support from JPMorgan Chase & Co. So far, Propeller has helped launch more than 100 ventures that have generated $62 million in revenue and financing and created more than 270 jobs since 2011. And though it’s hard to measure quantifiably, Propeller has helped to cultivate a local cluster that allows small businesses and ventures to connect and collaborate for greater change.

Among Propeller’s recruitment strategies for its entrepreneurs is a series of issue-specific pitch contests. Wetland Resources, one of Propeller’s competition recruits, was mentored by former Weather Channel CEO Michael Eckert; it’s now trying to reduce the time to plant hurricane-proof cypress seedlings from about seven minutes to 15 seconds. Meanwhile, the Urban Conservancy — another contest participant — is working with local homeowners to replace their paved lawns with natural grass, which will better absorb rainwater. “Over a 12-week period, we had weekly meetings with Eckert, and he would keep us on track of setting goals and thinking about our marketing and thinking about our target audience,” says Dana Eness, executive director of the Urban Conservancy.

These are only a few of the causes and startups that Propeller is seeing through to realization. Trees that help maintain a receding coastline, wetlands that can help rebuild Louisiana’s shrinking geography and lawns that help prevent flooding — all of these initiatives were made possible with Propeller’s resources, and they could help save New Orleans.

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