How many business incubators does it take to spur a thriving startup industry in a state? That’s the question, and it’s open to ample discussion.
Today, the Maryland Business Incubation Association (MBIA) reports that more than 30 incubators are operating across Maryland, making it somewhat of a hotbed for startups that are in various levels of progress.
To hear some of the players involved discuss the topic, there could never be enough incubators. Others feel that, while Maryland’s scene is already thriving — despite the pending closure of one notable player in the game, Anne Arundel County’s Chesapeake Innovation Center (CIC), in Odenton — there are enough now, but any new such entries should be keenly targeted to certain industries, as opposed to geographic bounds.
If new incubators that are targeted to a certain area or region appear, know that they are notorious for losing graduating tenants to other jurisdictions. In fact, one reason the money to keep the CIC functioning (as of press time) is absent in Anne Arundel County’s proposed fiscal 2018 budget is that few of the companies that were tenants in the CIC stayed in the county after they left.
End of the Month
As for the CIC, there are several startups still in the center that are hoping for the best before the end of June, which is when the space has to be vacant.
Founded in the early 2000s in Annapolis, the CIC offices were relocated in summer 2014 to its current location, an 8,000-square-foot office (that came complete with a collaboration space and a moveable wall) in the Seven Oaks section of Odenton. The move was made from Annapolis due to the location, which is almost directly across Route 175 from Fort Meade.
While the CIC was much ballyhooed when it opened, the word from County Executive Steve Schuh’s office was that the numbers generated by the investment in the CIC have not been up to scratch: According to Schuh spokesperson Owen McEvoy, only seven of the 62 companies that used it stayed in the county, and its return was only $130,000 — after a more than $11 million had been invested.
Still, McEvoy said the county is going to try to stay engaged with CIC businesses.
“While we won’t be renewing the lease where the CIC is located, we’ve recently met with several cyber and tech startups to determine their needs,” he said. “All of the programs utilized by companies in the CIC will remain … at their disposal. We’re also looking for ways to further incentivize these businesses that don’t involve below-market office space at taxpayer cost.”
“The latest is that Anne Arundel County is still planning to shut it down, but the occupants are still hoping to find someone else to keep it going,” said Tim Lorello, president and CEO of SecuLore Solutions, a cybersecurity startup and tenant. “I’m looking for space on the second floor of the building, but have not yet finalized a deal. Some other members have found other spaces.”
Tracy Turner, director of the Howard Tech Council, which oversees the Maryland Center for Entrepreneurship (MCE), said she was “Sad to hear about the demise of the CIC,” adding that she and other MCE insiders “have had some conversations about accommodating some of its companies.”
Obviously, companies in the CIC might — or might not — have been from Howard County. But notice the names of incubators can have a regional or statewide theme, like Chesapeake Innovation Center and Maryland Center for Entrepreneurship? That’s often part of the rub.
Turner’s take is that, “You can’t do enough to assist other startups, no matter where they’re located in Maryland, because we’re all part of the same infrastructure and we need to work together.
“All incubators have their own ‘secret sauce,’” she said. “In our case, that’s due to our relationship with the Howard County Economic Development Authority, which helps us offer more of a lifecycle than some incubators do. The MCE, for instance, hopes to launch companies in three years, but some become anchor companies in the MCE, while others move forward with the assistance of the EDA. So we offer a one-stop shop.”
But what if, after the large investment of money and time, they don’t stay in Howard County?
“We hope to keep them in here and, in this case, it’s almost a game changer, due to Howard’s attributes and its quality of life,” Turner said. “The goal is to get them to live and raise their families here.”
Fillin’ Up Quick
The HCEDA has really embraced this concept,” said Neil Davis, director of entrepreneurial development with the Maryland Technology Development Corp. (TEDCO), in Columbia, noting that the MCE is moving to the Columbia Gateway Business Park project in less than a year.
Davis also has high hopes of a happy resolution at the CIC, which he deemed “one of the more vibrant areas we have in Maryland. My guess is that something will pop up to take its place,” such as a private company, a small venture firm, a nonprofit, etc. “An incubator, or something that looks like one, will figure out that being near Fort Meade makes great sense.”
Noting that Department of Commerce Secretary Mike Gill likes the concept of incubators, Davis pointed out that most are funded by local and state governments, privately or by colleges. Even organizations like The Cordish Co., the commercial real estate and entertainment developer, are behind Spark, for instance, which is located at Cordish’s Power Plant Live! in Downtown Baltimore.
“Such ventures are a huge part of the larger ecosystem,” he said, noting Under Armour/Sagamore’s similar Betamore venture at City Garage, in South Baltimore. “Various people along the firing line are supportive of this concept, so even large businesses are getting on the bandwagon.”
But how many incubators are really needed? And how many can survive?
“There are 32 members of the Maryland Business Incubation Association, with 30–50 more entities that do some element of what incubators do, such as the Impact Hub at the Center Theater on North Avenue in Baltimore City,” he said. “Clearly, someday, there could be too many.”
Still, four or five years ago, he thought that needle on Maryland’s gauge was pointing on full. “But then, every one that opens is full within a few months. Spark (which encompasses about 25,000 square feet and hosts about 80 companies) opened about 18 months ago and has already decided to double capacity after the waiting list hit 20 companies.”
And upon further review, it gets easier to see what the attraction is. “People who work there are not only already working in a mixed-use project, they can walk to the Inner Harbor, Harbor East and the banking district; and it’s 12 minutes off of I-95 and next to I-83,” he said.
There’s that quality of life issue again. As for the CIC, Davis recalls when it was the hottest thing going.
“We perceived them as a threat [when he worked at the] Emerging Technology Center, in Baltimore, because they got so much press and had so much buzz. The challenge,” he said, “is as these programs grow, the bar is [constantly] raised for startups and incubators, so the companies can get up and running faster than ever. So incubators have to keep innovating, so they can be of more and more service.”
Buzz can be a great thing when building the roster for an incubator, but what is really required to achieve success, said Mike Binko, founder and CEO of Startup Maryland, is a solid ecosystem, with components that include talent, innovative service providers, mentors, champions and investors.
“With a rich landscape of incubators per capita, entrepreneurs anywhere in Maryland are probably no more than 20-to-30 minutes from an incubator or co-working hub. Can we sustain more? Probably,” said Binko, “but particularly if incubators and co-working spaces are innovation focused, and not marketed so much by geography or politics. They can then align support around critical venture growth, regardless of jurisdictional boundaries.”
And Binko added another caveat.
“Having been personally involved in tech incubation, acceleration and venture development for 20-plus years, I have noticed that, when organizations don’t work at entrepreneur-speed,” he said, “they run the risk of becoming irrelevant to ecosystem venture building.”
There is also a gray area, he said, with the emerging co-working trend, which offers concierge and space support, with third-party mentorship and venture development services. Examples of area co-working spaces are Spark, Betamore, 1776 and WeWork. “These alternatives to traditional commercial real estate are becoming the go-to option for entrepreneurs and their startups,” he said.
Binko also stressed that incubators often thrive when their efforts align with those of academia, due to heightened access to active research/intellectual property pipelines and to top talent.
Daraius Irani agreed. The vice president of innovation and applied research at Towson University said that incubators are “much more than a commercial real estate deal. They’re places built on a mentored network. They build whole ecosystems. There are many models, but they’re driven by density, which is why you see so many in Baltimore City; a [lack of density] can be troublesome in other more rural or less dense places.”
Irani also discussed what types of graduates come from incubators. “We usually get singles and bunts, but not home runs, like MedImmune,” a biotech success story from Montgomery County, he said. “But many of the companies involved tend to be more deliberate, and eventually more successful, than those that are not involved. That good ecosystem forces accountability.”
And Irani is with Binko about dissolving jurisdictional boundaries.
“At Towson University, we host companies here at our TU Incubator from out of state. Given the city’s history of higher education, they’re a natural fit,” he said. “But [their success] depends more on industry niche. The money [from out-of-state companies] is as green as anybody else’s. They have to open to anybody.”
These days, those thoughts are coming more often from the chorus. “I’m a big believer in this newer approach,” said Ellen Hemmerly, executive director with bwtech@UMBC. “An industry-focused incubator can bringing more value and bring more specialized services to incubator companies in [a] particular industry. We have found success in being industry-focused, in our case cyber, clean tech and life sciences, and tenants can come here from whatever locations.”
But will the old types of incubators stick around?
“I think there is increasing competition to bring in entrepreneurs to projects, whether they work from incubators, co-working spaces, accelerators or innovation districts, like City Garage and Spark. Each project has its own way of going about its business.
“That,” she said, “is definitely a trend.”
And she thinks having more choices is a good thing.
Binko concurs. “The good news is that Maryland has about 50 entities, encompassing incubators and various co-working spaces. That’s almost unmatched for a state our size.
“We also have a large business base for the core components that make incubators and co-working effective,” he said. “Think of the critical industry sectors and innovation categories we have here that lend themselves to venture building”