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Incubators: Vital as Ever to Small Business

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You might hear that there are too many business incubators. Or that they cost too much to start and maintain, especially since there might not be a big payback. And that there’s no promise that all of the graduates will stay in the local market.

Know that, however, no matter what naysayers think, the number of incubators in Maryland has been growing and, given the complexities of today’s market, the sector is moving forward.

After all, if no such investment is made, there can’t be a return in the form the next Profectus BioSciences, which is now a $14 million company; or AVIcode, which was purchased by Microsoft in 2010 for a figure that was reportedly in the tens of millions of dollars. Both are graduates of bwtech@UMBC.

The Setup

Today, there are 30 incubators, and 23 incubation organizations, in Maryland, according to the Maryland Business Incubation Association (MBIA). Whether you think that that’s too many or maybe not enough can depend on your focus, said Ellen Hemmerly, president of the bwtech@UMBC Research & Technology Park.

Can there be too many incubators? “Theoretically, perhaps, but it depends. Those that operate in Maryland are not all the same, as some focus on life sciences, some focus on cybersecurity, some focus on other industry sectors,” said Hemmerly. “The bottom line is that they’re about expansion and creating jobs.”

Expansion leading to more jobs is just what has transpired at UMBC; a decade ago, bwtech@UMBC was a newer concern that was nurturing about a dozen budding businesses; today, it’s home to 124 companies that are housed between north and south campuses; 65 are incubator companies and many graduates have moved to the college’s research park.

At bwtech@UMBC, the north and south buildings have separate incubator programs, with Northrop Grumman Corp.’s (NGC) Cync cyber program residing in bwtech@UMBC North.

That setup is “unique,” Hemmerly said, adding that she’d like to develop similar relationships with other large corporations, “especially since they’re under increasing pressure to innovate, especially in cybersecurity, so having NGC behind us when we make such pursuits is very beneficial. Incubators are recognizing that partnerships with Fortune 1000 companies can really help their programs, and can even attract companies from other states.”

Overall, what has been created at bwtech@UMBC is what many incubators, by definition, shoot for: a continuum of resources for young companies, which are placed according to their stage of development.

Hemmerly said there are a couple of reasons for bwtech@UMBC’s growth during the past decade. “One is that we’re affiliated with the university and have access to its students; second is the dedication of more space in our incubator park, which has reached 75,000 square feet for north and south [which is the landmark former Martin Marietta building] combined,” she said. “Lastly, we’ve expanded our staff of experienced entrepreneurs.”

While she opted not to reveal details of bwtech@UMBC’s multi-million-dollar budget, Hemmerly added that, “The budget is larger for bwtech South, because we operate and maintain the facilities, as well as deliver programming; at bwtech North, we partner with private sector landlords like Corporate Office Properties Trust and Merritt Properties, so most of the budget there is for programs.”

Differences Are Key

While bwtech@UMBC has grown many times over, sizes of incubators vary. For instance, the Anne Arundel Economic Development Corp.’s Chesapeake Innovation Center (CIC) opened in Annapolis in 2003 as a National Security Agency initiative and grew considerably, with 55 member companies having completed the program.

However, the size and direction of the CIC fluctuated over the years; it moved to Odenton in 2014 and is now a smaller operation that is “close to Fort Meade, thus some of the three- and four-letter agencies,” said Executive Director Michael Tentnowski, adding that “we can now better serve the primes and the post.

“It’s less about real estate now and more about the programmatic services,” he said, adding that the CIC’s space in Seven Oaks includes executive offices that it manages for the Halle Group, collaboration space, resident memberships and the virtual memberships.

Today, the CIC has four resident members, four collaboration members, and a fully-occupied executive suite with six offices for one company, DarkWeb ID, which offers cybermonitoring and remediation services.

But currently, expansion is not in the works. “When we acquire a budget to make that move, then we will initiate it,” he said.

As for any concerns about where tenants might eventually land, Tentnowski said that, “The whole point of a structured program is to encourage the companies to locate locally,” adding that, “Nationally, 84% of graduate companies have stayed in the area in which they were incubated, with 87% still in business five years after graduation,” according to the International Business Innovation Association (InBIA, formerly the National Business Incubation Association).

He also thinks that saturation point is on the horizon concerning the number of incubators in the region.

“There is still a bit of a surge in the mid-Atlantic, and the concept is also expanding rapidly internationally, in developed and developing countries,” he said, “but not so much in other parts of the U.S., where the InBIA has been reporting that there has been a decline.”

Working Together

Another incubator that debuted around the same time the CIC did is the Maryland Center for Entrepreneurship (MCE), which is part of the Howard County Economic Development Authority and operates from a 28,000-square-foot facility at the old Bendix building, in Columbia. It currently offers space and facilities for 25 resident companies and also serves 40 affiliates.

“We serve a number of functions,” said Peter Ettinger, the newly-named executive director of the MCE. “We work with fellow incubators, especially in cybersecurity, life sciences, and advanced manufacturing and logistics. Our plan now is to define what we do well and deliver programs and services that enable companies to grow.”
Like bwtech@UMBC, the MCE also has a significant asset. In this case, it’s the 250-member Howard Tech Council, which includes many companies that mentor the incubator’s startups and provide other services.

The MCE program comes in three steps, said Ettinger: early stage, then creating a viable product, and shooting to have the companies ready for market in three years. “And no more than three years — except for biotech companies, since we don’t have wet lab space here,” he said. “We send them to bwtech@UMBC or University of Maryland Biopark, in Baltimore, for instance, because that’s how we can be collaborative, not competitive.”

The goal, he said, “is to build a company within the community that housed it. But if we can’t supply the needed support to certain companies, we hope that they stay in Maryland, where the incubator and business communities can provide the opportunity for growth.”

More to Come

Despite the cautious market outlook of others, like Tentnowski, Robert Snyder, president of the MBIA, said that incubators are “getting more and more popular. I see no saturation.”

There are many reasons why, Snyder said. “One is that there are many localities in more urban and suburban areas — they are even more coming along in rural areas — and more higher education institutions seem to be” adding them to their offerings.

That’s news, because there were “only about 20” in Maryland five years ago, he said.

“There are going to be more, too,” Snyder said, in addition to the relatively new entries in Baltimore from The Johns Hopkins University, The Johns Hopkins Hospital, and the Institute for Marine and Environmental Technology, which UMBC is involved in. “We have two members who are what we call association members, which means that they are actively planning to establish incubators; I also know of two others that are also in the planning stages.”

As for the actual success and survival of incubators and accelerators — which typically offer money and more resources over a shorter period that a traditional incubators and their contributions to the area’s economy, he said that the MBIA “doesn’t yet have data,” but will shortly: Early in 2016, the MBIA will present an economic impact study.
Like Snyder, Hemmerly feels that that arrow on the chart is still pointing up. So, onwards.

“Until we reach saturation, let’s create more incubators to promote good ideas and create more chances for success,” she said. “Every community could use one, especially since our economy is becoming more dependent on entrepreneurship.”