Hatching success: Maryland’s business incubators ‘further along’ than many nationally -- Gazette.Net







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Related story: For Maryland startups, ‘the incubation is very critical and helpful’

Get Real Consulting, which builds electronic personal health records, foresees explosive growth next year, with revenues expected to skyrocket to $10 million from $3 million this year. The Rockville company, which also has an office in India, employs 13 in Maryland and is looking to hire five more this year.

Seven years ago, Get Real was a little more than a professional service based in President Robin Wiener’s home.

Then she discovered the Shady Grove Innovation Center incubator, where the low overhead and supportive staff led her to sign with Microsoft, Wiener said.

The Montgomery County Innovation Network, which includes the Shady Grove incubator and four others, has graduated 100 businesses such as Get Real over its 13 years of operation. Eighty-five of these graduates remain in business, said John Korpela, manager of the network.

This success rate, which is mostly repeated at many of the state’s other 23 incubators, especially in the capital region, seems to buck a national trend, according to a recent study on incubators. That study, however, is at odds with data from the National Business Incubation Association.

Among the state’s major incubator success stories are Martek Biosciences of Columbia and Digene of Gaithersburg. Martek, which produces baby formula nutritional supplements, recently sold for $1.1 billion to Dutch life sciences and chemical company Royal DSM. Martek is a graduate of the University of Maryland's Technology Advancement Program incubator in College Park. The same program also graduated Digene, which sold to Qiagen for $1.6 billion. Both remain in Maryland.

Incubators typically offer office space at market or lower rates, along with shared conference and lab facilities, and offer business development and management programs to accelerate their startups’ growth. They are largely supported by rent from the tenant companies.

“Our job is not to be bureaucrats. We’re businesspeople; we identify with the entrepreneurs,” Korpela said. “We don’t have all the answers, but we know where to find them.”

In general, aggregate data on incubators are sketchy and hard to track, both nationally and in Maryland.

For example, the most recent Maryland incubator data are from 2006, before the Great Recession, when Maryland’s incubators supported more than 14,000 jobs and generated more than $104 million in state and local taxes, according to the Maryland Technology Development Corp. Tedco, along with the Department of Business and Economic Development and private partners, host the annual Maryland Incubator Company of the Year Awards program Tedco also provides early-stage funding for technology-transfer and -development companies.

Study: Dismal graduation rate

The 2010 national study, partly funded by the Kauffman Foundation in Kansas City, Mo., which researches entrepreneurship issues and trends, reported that only 4 percent of the 18,426 businesses surveyed from 950 incubators graduated over an 18-year period. The U.S. has more than 1,000 incubators.

Post-doctoral scholar Alejandro Amerzcua of the Whitman School of Management at Syracuse (N.Y.) University conducted the study. He concluded that although incubators produce fast-growth companies, those companies are also quick to fail. Of the 655 companies that reported graduating in the survey, 193 closed soon after leaving.

The National Business Incubation Association argued in a published response that these findings don’t match industry experience and questioned the survey’s definitions and methods. While the survey defined business incubators as facilities that offer adaptable space at reduced rates that new businesses can lease on flexible terms, the association’s definition also includes a selection process, comprehensive business services and management that coordinates the delivery of services and graduates companies.

Most of Maryland’s incubation programs match the national association’s definition, although most are younger than 10 years old. Its oldest include the 22-year-old Clean Energy Technology Incubator, part of the bwtech@UMBC program in Halethorpe and the Shady Grove facility.

The bwtech@UMBC program has three incubators plus a research park where graduates can locate, and has graduated 46 companies. Of those, 10 are out of business and 12 were sold. The program has incubated 90 companies and produced 379 jobs, David Fink, director of entrepreneurial services at bwtech wrote in an e-mail to The Gazette. About 45 startups are currently incubating.

“Maryland is further along in terms of incubation. We have more established systems and are starting to see niche incubators,” said Executive Director Ellen Hemmerly, referring to bwtech’s new cyber incubator, which has 16 tenants.

Hemmerly said the next generation of successful incubators will focus more on these niches.

The Frederick Innovation Technology Center incubator has graduated 14 companies since 2005, with one that later failed and one, BioReliance, acquired, said Michael Dailey, its executive director.

Over the state line, meanwhile, the Virginia Incubation Association lists 30 incubators, compared with Maryland’s 23. Among these are the Dan River Business Development Center, which has graduated 22 businesses in its 10 years; the West Piedmont Business Development Center, which has graduated 20 since 2002 and helped create 220 jobs; and the Fairfax Innovation Center, which has graduated 30 since 1999.

To encourage growth and success, many Maryland incubators also conduct annual and biannual reviews of their tenants to ensure the startups are meeting the milestones established in their lease.

“Ultimately, nobody benefits from keeping an unproductive company in the program for too long,” said Clay Hickson, vice president of the Maryland Business Incubation Association and director of the TowsonGlobal incubator. “The success of the incubator is gauged on the success of the business.”

While he applauded Maryland’s work on its incubation programs, he said more needs to be done as far as implementing supportive policies and funding across the board.

“It’s important to help incubating businesses find early-stage funding, like is available in the West Coast,” Hemmerly said.

a sampling of Maryland incubators


— Comprises three incubator programs, with oldest dating to 1989.

— Has incubated 90 companies, 45 currently.

— Graduated 46 businesses; 12 were sold and four went out of business.

— Created 379 jobs.

— Average incubation time is three or four years

Montgomery County Innovation Network

— Comprises five incubator programs, with the oldest dating to 1998.

— Has incubated 160 companies, 142 currently.

— Graduated 100 businesses; 85 still in business.

— Created 2,000 jobs; total current payroll of $36 million.

—Average incubation time varies from one to five years, depending on industry.

Frederick Innovation Technology Center

— Opened in 2005.

— Has incubated more than 45 companies, 30 currently.

— Graduated 14 companies.

— Created 215 new jobs, generated $17 million in economic impact to county.

— Average incubation time is two to five years.

Sources: Incubator programs

Maryland incubator tenants in 2006

— Employed 14,044: 5,374 direct employees and 8,670 indirect employees.

— These jobs contributed $845 million in annual salary and benefits to Maryland households.

— Gross state product contributions totaled $1.2 billion.

— Increased state output by $2.7 billion per year.

— Contributed $104 million in state and local taxes.

Source: Maryland Technology Development Corp.