So who knows? State sponsorship of FSCs may eventually turn out to be a useful vehicle for export promotion. But don't hold your breath.
START-UP ASSISTANCE: HATCHING NEW BUSINESSES
What makes a good incubator? Management
Ask anyone who knows about business incubators, and you'll hear about June Lavelle. Ask Joe Agati, and he'll tell you why. "June," he says, affection and awe in his voice, "is a maniac."
Agati should know. Back in 1985 he started a furniture-manufacturing company. Since 1987 he's been a tenant in Chicago's Fulton-Carroll Center for Industry, a nonprofit business incubator founded and directed by the energetic Lavelle. If he's had any problems there besides the usual day-to-day trivia, he can't think of what they are. The rent is cheap -- about a third of what the space might cost elsewhere. He didn't have to spend a lot of money buying equipment such as copiers. Lavelle and her staff reviewed Agati Furniture Co.'s first business plan and gave him tips about financing. Then there's the incubator atmosphere, which is both congenial and cooperative. When a nearby tenant needed more room to work on an big order, Agati lent him some space; when Agati recently needed an extra piece of equipment, he borrowed it from another.
Getting started in Fulton-Carroll rather than on his own, Agati concludes, has made a critical difference in his company's history, helping it grow from 3 to 17 employees. "We'd have had a hell of a lot harder time if we'd been someplace else," he says. "It's a shame all start-ups don't have this kind of resource."
That's the kind of thinking that has led to a sixfold increase in the number of incubators over the past five years. Today's more than 300 incubators -- centers for start-ups that feature shared business services -- are mostly nonprofit, with about three-quarters getting some state or local government funding. For governments, subsidizing incubators is a way of helping new companies without getting bureaucrats involved in evaluating business plans.
Do incubators work? Lavelle's -- one of the nation's oldest -- certainly does. In nine years of operation only 16% of its 142 tenant companies have failed, and the remainder have created 1,094 jobs. Still, it took her nearly five years to break even, although she started with a $1.7-million grant from the U.S. Economic Development Administration.
But it takes more than financing to make a successful incubator -- as Agati could tell you. In addition to managing the building, Lavelle helps her companies network and find financing. She organizes group consulting programs, getting high-quality consultants even though the start-ups can pay only in installments. And recently she initiated an innovative revolving-loan program that uses purchase orders as collateral, so fledgling companies can finance their first orders. "It's a rare individual who can pull off what she's pulled off," Agati says.
All of which suggests that not every incubator will offer what Fulton-Carroll offers -- and that some incubator sponsors may accordingly be disappointed with the long-term results. Still, even the most minimal benefits of a nonprofit incubator -- inexpensive rent, shared office equipment and services, a network of outside professionals -- can help a young company. As long as your expectations are moderate, your risks are few.
And if they're not moderate, you can always shoot for a spot at June Lavelle's center. But that takes time: the Chicago incubator has a 20-company waiting list, and 8 of the current tenants are awaiting additional space.
WHERE TO GO FROM HERE
The best information about government programs comes from entrepreneurs with firsthand experience; that's the only place you'll get a critical perspective on which programs are worth pursuing. But if you're starting from scratch, here are some places to begin.
* For information on the Small Business Innovation Research program, contact the SBA's Office of Innovation, Research and Technology, (202) 653-6458.
* For information on Certified Development Corps. near you, call your SBA district office or the Small Business Answer Desk, (800) 368-5855. But beware: not all CDCs are created equal. There's a huge difference between the ability, resources, and experience of the most active CDCs -- some of which have done as many as 300 deals -- and the least, which need to do only 2 a year to remain certified.
* For state programs, try either of these directories (neither is comprehensive):
The States and Small Business: A Directory of Programs and Activities, 1989. A 411-page directory of state listings published by the SBA; $12. Call (202) 783-3238.
Directory of Federal and State Business Assistance, 1988-1989: A Guide for New and Growing Companies (NTIS order number: PB88-101977). A 170-page directory published by the U.S. National Technical Information Service; $29, plus $3 handling. Call (703) 487-4650.
In addition, more than half the states now have small-business offices, toll-free hot lines, or small-business advocates. If your state doesn't, call its Department of Commerce or Economic Development. Linked-deposit programs, however, are run through the state treasurer's office.
The state government probably won't tell you about local programs, which are often the easiest to approach for financial assistance because they have the greatest stake in your success. In cities of more than 50,000, start with the economic development office, recommends Robert Davenport, of the National Development Council. In smaller towns, the best source of information may be the mayor's office or county government.
