Establishing a university-connected business incubator has become one of the more prominent proposals for reinvigorating Minnesota's high-tech economy. Incubators typically offer early-stage businesses low-cost space and a variety of services to help them become viable. They're not a new idea, but they've gained new visibility nationally with the success of a few Internet-related efforts. Incubators can help individual firms, but they're not necessarily the key to a building a high-tech economy.
JUST NORTH of University Avenue in Minneapolis - near the University of Minnesota campus - you'll find a mix of grain elevators, and grim industrial buildings, many of which have seen better days. The university's architecture dean, Thomas Fisher, is standing in the shadow of a grain elevator where drainage rains from the roof.
Fisher sees the area, nestled between the university's Minneapolis and St. Paul campuses, as the perfect location for a privately developed research park and within that, a business incubator, that will help convert university innovations into new industries.
"The basic idea is that when somebody develops something that's promising, they can't do it in university facilities," Fisher says. "They need to be able to move off-campus, but they also want to be close to campus, and frequently graduate students will work in these start-up companies. So it has to be something that they can do at a relatively low cost, relatively conveniently, and we all hope that it flourishes to be the next 3M."
The vision is now on paper, in a planning document heading for the Minneapolis city council.
The notion of a technology incubator at the university to help reinvigorate Minnesota's high-tech economy has received endorsements from the Star Tribune and the dean of the University of Minnesota's Carlson School of Management. The Minnesota High Tech Association and the policy group the Citizens League have also expressed interest in the idea.
Whether an incubator can seed a new high-tech industry, the assistance they provide can make the difference for small firms.
Jim Grabek is president and CEO of Comedicus, a tiny company developing a catheter technology for treating heart ailments. The Columbia Heights firm is part of the portfolio of Genesis Business Centers, a for-profit incubator company which provides office space and assistance in exchange for company stock. Grabek says the incubator's connections with the Anoka County economic Development Partnership helped bring in a $50,000 investment.
"It's a good environment to start companies with in an incubator," he says. "You eliminate the costs of the facilities and office space to focus yourself and your company on where the technology needs to go to become a viable company. And there just aren't that many good, warm places to nurture new start up companies."
The force behind the Genesis Business Centers is Harlan Jacobs, a successful investor and entrepreneur who seems to dote on the fledgling businesses in his portfolio. Most incubators are run by non-profits, government or have academic affiliations.
Jacobs has three for-profit incubators in the Twin Cities and has consulted internationally on the issue. His vision is to expand his empire, and is planning a new incubator near the University. Jacobs is ambivalent at best about a university rival. "Part of me says 'yea,' and the other part of me says, 'oh no.' I don't think public dollars from the taxpayers should go to compete with a private-sector business like mine."
Jacobs says an incubator for university technology should grow from the private sector. "I would not, as a citizen and taxpayer, favor a state employee or a University of Minnesota employee being in the business of running an incubator," he says. "You've got to be a good judge of horseflesh. The best possible training for someone to be a successful incubator manager in my opinion, is for someone to have first been a reasonably successful investor."
University of Minnesota President Mark Yudof voices similar concerns, saying he brings a jaundiced eye to the notion of an incubator.
"I have this fear that this is the model of the 1970s and '80s and it may not be the right model for 2000 and beyond. And I don't view us as particularly good at running businesses. So I would be very careful. I certainly would not do it alone. I would only do it in partnership with private enterprise and/or state government. I don't see us becoming the sole proprietors of some sort of incubator."
Yudof may find a profusion of potential partners. By some counts half a dozen Internet-related incubators have formed in the Twin Cities in the past year. Nationally, a handful of for-profit incubators have produced successful Internet ventures or seen their own stocks soar, at least until the recent market downturn.
Critics have portrayed the rush of new incubators as the latest dot-com get-rich-quick scheme.
Some contend that assessment is too harsh. Steve Johanns, is co founder of Farm Team, a new for-profit Internet incubator in the Twin Cities. "You're seeing the formation of a new consulting model that is taking place in this new economy," Johanns says. "It has to do with the fact that companies can be built around ideas as opposed to bricks and buildings and machinery."
Johanns says Farm Team hopes to nurture companies with easy access to capital, industry connections, business and technical acumen , to jump start them in an arena where speed is critical; all with a focus on fostering Minnesota and Midwestern companies.
Candace Campbell, a national authority on business incubators cautions that while they can help individual companies, and promote economic development, they offer no guarantee of restoring Minnesota to the map of US technology hotbeds.
Campbell's study of incubators in the 1980s found client firms typically survived, but did not mushroom into high-powered growth companies. The incubator industry claims credit for creating 245,000 jobs in 19,000 companies, and a few high-profile successes like Internet service providers Mindspring, now Earthlink.
Campbell says incubators can reduce the time and cost of bringing new technologies to market, and help a region capitalize on its technological strengths. "They're not the silver bullet," Campbell cautions. "You still need those ingredients of talent and technology and capital to make them successful. But they can bring those pieces together to the extent possible and focus it on a few good ideas, in the hopes that they will work."
Incubator proponents say those key ingredients are in place in Minnesota, and a university incubator would help ensure Minnesota thrives in the knowledge economy. But they also say an incubator should be part of a broader strategy that includes expanding state investment in university research.