All due respect to Forbes contributor Cliff Oxford and his Oxford Center for Entrepreneurs, but his post titled “Trouble in Paradise: Why Business Incubators Don’t Work” shows a glaring lack of understanding about how incubation works.
I lead a team that runs what has been named the best incubator network in the country … the University of Central Florida Business Incubation Program that boasts eight incubators in communities surrounding Metro Orlando along Florida’s High Tech Corridor.
My research team just finished a study of 224 university incubator clients matched up over time with 224 non-incubator companies in the same industry sector, started at the same time, in the same geographical area. As the graph shows, the university incubator firms did better when it came to employee growth while in the program and continued to grow at a higher rate after graduating from the program.
Not all incubators are created equal. Some are not even what I would call an incubator. The notion of measuring role models by counting the number of people still working in an incubator at 5 p.m. is interesting.
I remember the time I was worried about a client who bragged of creating 60-plus jobs although I never saw more than three employees when I occasionally stopped by.
It turned out that company worked all night to provide overnight service to their clients. They graduated from the program with more than 80 new jobs, were acquired by a larger company and created a lot of wealth in the region. As they were fond of saying, “When a meeting is scheduled at eight with our clients, you need to specify a.m. or p.m.”
I’m not sure what incubators Oxford has visited. In fact, I suspect he may be confusing incubators with some of the upstarts who have jumped on the bandwagon, set up shop in unused commercial space and preyed upon folks who really need the help an entrepreneur can only get in the proper environment.
Let me tell you about another of our graduates, RINI Technologies – an engineering company that develops thermal management technologies widely used by the Department of Defense. Building his company in our incubator after earning his Ph.D., Dr. Dan Rini proved manufacturing concepts that allowed him to expand from a small R&D shop to what is now a scaled manufacturing operation with 20 employees.
As the incoming chairman of the National Business Incubation Association, I’ve visited close to 100 incubators in the U.S. and abroad over the past 15 years, and I can assure you they are far from 9 to 5 environments. People shareinsights, get help from qualified mentors with real startup experience and share costs, gaining access to tools and services that would otherwise be beyond their reach. And, I would be remiss if I didn’t point out they are often doing this while outside of the office. I’d be more worried if they were always in the office.
Real incubators just don’t accept or tolerate the kind of companies described by Oxford. I say shame on anyone who would create a place for a hobbyist to hang out and underachieve and then call it an incubator. The author also states that it is cool to stay there;“in other words, no pressure.” Again, well-run incubators establish milestones with their client companies, they monitor their progress, and they push them to graduate. Incubator management looks for companies that are getting too comfortable and will ask them to re-engage or leave.
Legitimate incubation programs are getting mixed up with well-intentioned real estate deals and other new and untested entrepreneur support flavors of the day. Incubation is a process, not a place. When someone says they have an empty building that they want to turn into an incubator by offering cheap rent and a shared reception, you can easily guess what the outcome will be. Real incubators are part of an overall entrepreneurial ecosystem that creates an environment that increases the chance of a company’s success. They are not the cure for all entrepreneurial ills nor should they be. They have a specific role in the development of the entrepreneur.
Oxford couldn’t have been more right, however, when it comes to the statement that government should not be intervening and picking which companies to incubate. I learned that lesson the hard way. The selection process should be one that brings the right people into an incubation program at the right time. They need to be ready to leave the garage, serious about getting coached and mentored, and willing to learn the things that they don’t know. They need to learn how to work on their business, not just work in it.
My final point concerns the author’s final point: “The final point here is let companies first hatch themselves to see if they have the necessary entrepreneurial skills to compete.”
No one is born with all the prerequisite skills they need to be a successful entrepreneur any more so than there are born engineers, accountants or physicians. Some have a better aptitude for it than others but simply put, if you’ve met one entrepreneur, you’ve met one entrepreneur. They all have different needs, skill levels and industry demands. I’m no more going to risk my investment dollars on an untrained entrepreneur than I would risk my life to an untrained heart surgeon.
