CHICAGO – Ask people who run business incubators what they do, and the strange thing is, a lot of them don’t want their organizations to be referred to as “incubators”. That’s what I found out while researching a story I just did about what it takes to be a successful business incubator. I went to the National Association of Business Incubation to select incubators in the Illinois, Michigan and Ohio to speak with. I spoke to eight of them – and got basically eight different responses as to how they measure success. Here’s what they said:

ILLINOIS

Psylotech's Alex Arzoumanidis at The Incubator (photo courtesy of The Incubator)

The Incubator

Where: Evanston, Illinois

Started: 1986

The Incubator is one of the Midwest’s oldest business incubators. Since it started, the nonprofit has helped more than 350 companies. It has graduated 23 companies that employ more than 450 people in Evanston, and said a “fair number of graduates” overall is 135. Currently, it has 39 companies in the incubation stage which employ 80 people. Director Tim Lavengood said what they promote is innovation.

“We’ve been in the first 36 months of building a business for 25 years,” he said. “The best thing an incubator can be is the institutional memory of the startup process.”


TechNexus LLC doesn't like the term incubator - it prefers social collaborative (Photo Courtesy of TechNexus)

TechNexus LLC

Where: Chicago, IL

Started: 2007

TechNexus is one of those that says it doesn’t like to be called an incubator. Co-founder Terry Howerton said they never liked the term, saying that they “set out to create a colloboration center where a very wide percentage of people would hang out.” According to Howerton, 110 companies have grown inside of TechNexus, with those companies raising more than $60 million in capital and created 380 jobs. About 90 have graduated. Another 20 companies are in the incubator now. Howerton described their approach as a business-minded social collaboration.

“At the end of the day, we have a for-profit motive,” he said. “We’re not subsidized by the government, academia or the Illinois Technology Association.”


University Technology Park at IIT has both wet and dry lab space for rent. (Photo courtesy University Technology Park)

University Technology Park at IIT

Where: Chicago, IL

Started: 2006

University Technology Park describes itself as an incubator embedded within a technology park at the Illinois Institute of Technology. The nonprofit has helped 39 companies since it started, and graduated 19. Currently, it has 20 tenants.

“We built this to be the sparkplug to try to get companies to grow to bigger spaces but stay in the city,” said David Baker, its executive director.


MICHIGAN

The Southwest Michigan Innovation Center focuses on bioscience companies. (Photo courtesy of SMIC)

Southwest Michigan Innovation Center

Where: Kalamazoo, MI

Started: 2003

The Southwest Michigan Innovation Center focuses on incubating and accelerating bioscience businesses. It has served 44 companies since it started, graduating five startup companies. Its President and CEO Rob DeWit said the nonprofit thinks of its success holistically – not just in terms of graduates, but in terms of “the scientific churn that we’re able to create”.

The SMIC said its aware of at least 35 patents that have come out of the center, at least eight new investigational drug applications as well four companies that have reached the clinical trial phase of work.

“What we’re interested in, particularly the early startup companies, is how many ideas there are and how much we can help with the service of those ideas,” said DeWit.


TechTown

Where: Detroit, MI

Started: 2000

Techtown, a nonprofit incubator at Wayne State University, was incorporated in 2000 and opened its doors in 2004. It said it does not have a count for the number of businesses that have been there since it first began, but said they have provided training to 2,200 entrepreneurs. There are 250 companies at Techtown now.  Marketing Director Allison Guilliom said the organization does not provide graduation rates because it doesn’t graduate companies in the “traditional incubator sense”.

“We have had quite a few companies grow and expand out into other facilities, but we do not require companies to leave after they reach a certain maturation point,” she said in an email.


OHIO

The Cleveland Clinic's Global Cardiovascular Innovation Center (Photo courtesy of GCIC)

Cleveland Clinic Innovations

Where: Cleveland, OH

Started: 2000

Cleveland Clinic Innovations is the technology commercialization arm of the Cleveland Clinic, and includes the Global Cardiovascular Innovation Center. Each of the 35 companies within the organization are created as its own spinoff the moment it launches, with the Cleveland Clinic diluting its ownership stake as others invest. Of those 35 companies, one has gone public, two have been acquired and three to four are on permanent hold, said Executive Director Chris Coburn, who said the key thing for incubators is to “understand your place”.

“An incubator is typically a nonprofit entity seeking to address a market void,” Coburn said. “Understand what your special place on the spectrum represents and what it doesn’t.”


ShakerLaunchHouse, one of Ohio's newest business incubators (Photo courtesy of ShakerLaunchouse)

ShakerLaunchHouse

Where: Shaker Heights, OH

Started: 2008

Launched mostly in the past 18 months, the ShakerLaunchHouse considers itself as much a seed capital fund as it does a business incubator and accelerator. “Ideally, we focus on entrepeneurs or technology that can provide proof of concept in 90 to 180 days,” said co-founder Todd Goldstein. So far, ShakerLaunchhouse has 60 companies, 29 of which it has invested in.

“On any given day, to have 60 entrepreneurs working together is a huge boost for Northeastern Ohio,” Goldstein said. “We have truly developed a community around entrepreneurship that didn’t exist prior to starting LaunchHouse.”


Turning Technologies, which started at the Youngstown Business Incubator, is now a $50 million company. (Photo courtesy of Turning Technologies)

Youngstown Business Incubator

Where: Youngstown, OH

Started: 2001

“I’m not really a big fan of incubators,” CEO and Chief Evangelist Jim Cossler told me when I called to ask him about the Youngstown Business Incubator. When the nonprofit started, Cossler said it thought of itself a “traditional” incubator, providing free copies, rent and utilities. Then they realized they had to focus on a specific industry, and they choose software companies.

Cossler said they don’t believe in graduating companies but instead keep them around on their campus and transition to paying tenants. YBI has nine companies that pay rent, including Turning Technologies, a $50 million company that employs 200 people. Another 24 to 30 are still in incubation.

“We just felt firmly we would never have the resources, never have the financing, and more importantly, never have the expertise to be good at everything,” Cossler said. “And so rather than being mediocre at doing everything and saying yes to everyone to comes to our door, we decided let’s be world class at one thing and one thing that makes sense for Youngstown, Ohio.”

 

Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a  “fair number” of overall graduates from the incubator is 135.

 


Business incubators are designed to turn an idea or concept into a successful company. The goal is for these new companies to bring jobs and revenue. Across the Midwest, some have been around for decades, while new ones are just starting up. But many tend to produce few companies. Last week, we did a series of stories looking at the so-called Magic Bullets to save our economy. In that style, here, I report on what principles incubators need to focus on to create successful offspring.

Ann Arbor's informal business community the Tech Brewery (photo courtesy of Dug Song)

Each Friday, inside the old Northern Brewery building in Ann Arbor, 4:30 p.m. is known as “beer thirty”. That’s when the self-described tech geeks who are part of this informal business community gather for drinks.

The Tech Brewery houses three dozen start-ups – but don’t call it business incubator.

“We don’t call ourselves an incubator,” founder Dug Song said. “If anything we call ourselves a start-up coop.

Song has his own start-up – Duo Security. He began the TechBrewery after being frustrated by traditional business incubators. In his opinion, they provide little more than cheap rent for lots of start-ups – instead of what it takes to get a company up and running.

“A lot of folks get to a point where they don’t want to be in a hoteling kind of environment, which is a lot of what these incubators tend to be,” he said. “They’re a little bit more isolated.”

The lack of a hotel environment drew Victor Volkman to the Tech Brewery. He had been involved in other incubators where he says his business ideas went nowhere.

“You have a biotech company next to a software company next to a something of completely different origin and we really didn’t talk to each other,” he said, adding the value in the Tech Brewery is running into someone in the hallway who can immediately help solve a problem.

The biggest cost for start-ups is office space. That’s why most incubators provide free or reduced rent. But it’s not just about office space. Having the same type of companies together helps everyone grow – something Volkman said he has found at the Tech Brewery.

Volkman left the traditional incubator environment because it didn’t work for him. That turns out to be a common sentiment.

The University of New Hampshire at Manchester’s Kelly Kilcrease studied incubators across the country. Out of the almost 500 entrepreneurs he surveyed, Kilcrease found that their opinion of incubators was “lukewarm – at best”.

Based on Kilcrease’s research, the happiest – and most successful clients – came from a specific type of incubator:

“Those that stress a certain type of clientele, deliver high quality services and those who have professional managers are more apt to be successful than those that do not,” he said.

Kilcrease thinks an incubator’s true measure of success is its graduation rate – the companies that actually make it on their own, apart from the incubator.

Psylotech's Alex Arzoumanidis at The Incubator in Evanston (Courtesy of The Incubator)

Often, incubators – like TechTown in Detroit – don’t publish graduation rates. The Incubator in Evanston, Illinois is one of the oldest in the Midwest – it celebrates its 25th anniversary this year. They’ve helped more than 350 companies and have graduated 23 companies that remain in Evanston. Director Tim Lavengood said a “fair number of graduates” overall is 135.

(Ask an incubator about how they define success and each one answers differently. Check out these profiles of eight business incubators across the Midwest.)

Jim Cossler is the CEO and Chief Evangelist of the Youngstown Business Incubator. It started out in 1995 in what Cossler describes as a typical incubator:

“You know – here’s some cheap office space, here’s a photocopier, here’s a fax machine,” he said, adding: “We don’t really care what you’re doing, but please turn yourself into a globally successful corporation.”

They quickly realized that approach wasn’t going to work. In 2001, they began to focus on software technology firms.

Today, the organization has a network of more than 1,000 people virtually through a private LinkedIn group, as well as four buildings full of clients – including nine companies that no longer need the incubator’s help. In fact, these companies pay rent which makes up about a third of the nonprofit’s $750,000 total budget. (A rent, by the way, that Cossler says is a premium on other commercial office space in Youngstown.)

Turning Technologies began as a Youngstown Business Incubator company a decade ago. Its estimates this year's annual revenue at $50 million. (Photo courtesy of Turning Technologies)

Ten years ago this month, Turning Technologies walked into the Youngstown Incubator with its idea – adapt audience response technology to be used in classrooms.

Today, it’s a $50 million company that employs 200 people. One of the YBI’s paying tenants, the company takes up an entire building.

Co-founder Mike Broderick says the YBI is “fairly rare” in its level of success, which he attributes to their focus.

“What we really needed the most was expertise,” he said. “The introduction to potential clients, to people who had been through the type of thing we had done before, who could provide advice.”

Broderick told me something academic research backs up – he thinks the company would have succeeded even without the incubator. But the YBI’s network accelerated his company’s progress. And he thinks that’s the best an incubator can do – accelerate a potential company’s growth.

This story was informed by the Public Insight Network.

Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a  “fair number” of overall graduates from the incubator is 135. 


Rahm Emanuel earned his political breakthrough while working as the chief fundraiser for Chicago’s Richard M. Daley during his first mayoral campaign in 1989. When Emanuel moved on to positions in the White House and a Congressional job, Daley often functioned as a mentor.

Yet in his first five months in the office formerly occupied by Daley, Emanuel has laid the foundation to dismantle many of the core tenets of Daley’s long tenure as mayor. Changing Gears senior editor Micki Maynard, writing in The Atlantic, examines the changes outlined by Emanuel.

In part, they’re driven by finances. In facing an unprecedented $637 million budget deficit, Emanuel has proposed police and fire department cuts – two sacred budget lines in the Daley era – among a laundry list of other proposed reductions.

On Friday, Emanuel’s proposed $10 million cut to the city’s library budget, one that would cost the city 284 jobs, drew a frosty reception from some city aldermen, according to our partner station WBEZ.

After a dozen years of deficits, Emanuel has no choice. “The highest priority is to get the city’s fiscal house in order,” Joe Moore, an alderman from the city’s north side, tells Maynard.

But the differences between the two mayors branch beyond fiscal conditions. Stark differences also exist in their approaches to communication, their transparency in government dealings and personal style.

As The Atlantic headline suggests, Emanuel has become “the Anti-Daley.”


Three stories making news across the Midwest today:

1. Chicago food deserts dwindle. Fewer Chicago residents are living in food deserts, according to a recently released report. In the past five years, the number of residents living in so-called food deserts – a low-income census tract where a substantial number of residents lack access to a grocery store – has dropped 40 percent. The study’s author, Mari Gallagher, tells partner station WBEZ that some “big name” stores have arrived in poorer communities, but that the remaining problem lies in African-American neighborhoods on the city’s south and west sides.

2. Ohio unemployment rate holds steady. Ohio’s unemployment rate remained unchanged at 9.1 percent in September, according to data released Friday by the Bureau of Labor Statistics. It marked the third consecutive month the Buckeye State’s unemployment rate was at or above the 9 percent mark. State officials found some promise in the numbers. “We’re in a recovery, we just think it’s going to take some time,” Angela Terez, spokesperson for the Ohio Department of Job and Family Services, tells our partner station Ideastream. “We’re seeing some good things like initial unemployment claims going down, and the number of layoffs going down.”

3. Wisconsin repaying $1.18 billion. The state of Wisconsin owes the federal government $1.18 billion borrowed to pay unemployment benefits, according to the Milwaukee Journal Sentinel. The state has made $42.4 million in interest payments to date in 2011, and is taking several steps to pay the money back, including enforcing a one-week waiting period for people seeing unemployment benefits. Among 27 states that owe the federal government money, Wisconsin ranks 11th. California takes dubious top honors, owing $8.63 billion, according to the newspaper.


A few years ago, crime topped the concerns of residents in Atlanta, Chicago and New York. These days, residents expect low crime.

The mayors of those three cities spoke Monday, all agreeing those concerns have shifted. Anecdotally, they say that, these days, citizens ask them most about concerned with housing costs and their jobs.

Chicago Mayor Rahm Emanuel/Micki Maynard

“And if they have kids, school,” Mayor Michael Bloomberg of New York said, while speaking Monday, October 10, during a panel discussion that kicked off Chicago Ideas Week. “They don’t care about what’s at a national level or state level. If they haven’t lost a house or job, they’re worried about it. It is very local.”

Bloomberg was joined by Chicago Mayor Rahm Emanuel and Atlanta Mayor Kasim Reed on the panel about issues facing local governments, which was moderated by New York Times columnist Thomas Friedman and sponsored in part by Changing Gears and our partner station WBEZ.

Emanuel said that laying the foundation for economic growth and job creation has been the central focus of his first five months in office. He said Chicago’s central U.S. location has given the city a geographic advantage in maintaining – and hopefully expanding – its infrastructure.

“We’re the only airport system with two major carries, and a quarter to a third of the nation’s rail freight comes through Chicago,” he said. “Rails, roads and runways. We invest in those, Chicago will continue to recruit companies and expand.”

Here’s a look back at their discussion:


Next Wednesday, Changing Gears will co-host a town hall-style discussion that explores the global economic crisis and its impact throughout the Great Lakes region.

Robin Young, host of public radio’s Here & Now program, will moderate the event, which begins at 7 p.m. in the Blau Auditorium at the University of Michigan’s Ross School of Business. Admission is free and the event is open to the public.

Panelists include Linda Lim, Professor of Strategy at the Ross School, Doug Rothwell, President and CEO of Business Leaders for Michigan and Changing Gears senior editor Micki Maynard.

Michigan Radio and the Ross School of Business are co-sponsoring the event with Changing Gears.


All week, our Magic Bullets series has focused on big ideas that political leaders say can boost the economy. One you hear mentioned often is small business. But can small businesses really grow enough to help the overall economy? That’s what I set out to find out.

The way politicians tell it, small business IS the backbone of the economy. President Obama has said this many, many times – especially the idea that small business is “the key for us to be able to put a lot of folks back to work”.

It’s not just Obama. Warm feelings about small business come at all levels of governance, and on both sides of the aisle. Michigan’s Republican Gov. Rick Synder is the darling of the state small business community. Earlier this summer, at the Small Business Association of Michigan’s annual meeting, he urged members to “Talk about the jobs you’re creating, even if it’s one”, because, he  that would be the “backbone of the reinvention of Michigan”.

This is more than just political talk. In addition to the landmark federal Small Business Job Act of 2010, Midwestern cities and states have created their own policies. Michigan exempted most small business from its 6 percent corporate tax rate earlier this year. Cleveland’s Cuyahoga County is shifting its economic development strategy to help small-to-medium-sized businesses, saying that focusing on the “big project” doesn’t make as much sense anymore.

University of Chicago's Erik Hurst (Niala Boodhoo)

All of this prompted University of Chicago economist Erik Hurst to explore whether if small businesses do contribute to job growth. Hurst, who teaches at the Booth School of Business, has a pretty simple answer: “No”.

“I think when people talk about small businesses they think about the business that starts small and gets really big, like Google or Wal-Mart,” Hurst said. “They start in someone’s basement, or with one store, and they eventually grow to something quite sizeable. But most small businesses don’t do that.”

Hurst just published research based on an analysis of federal government and foundation data about small businesses.

The Small Business Administration defines small businesses differently according to the type of company. For example, in the case of manufacturing, the SBA thinks a small business is anything with less than 500 workers.

Hurst uses a definition of small businesses of having one to 19 employees, according to his research, what 90 percent of the businesses in this country are.

In Illinois, three-quarters of the 1.1 million small businesses are made up of just one person – people who are self-employed.

“Most small businesses are closer to your normal dentist than they are to Groupon or Google,” he said. “Most small businesses are dentists, plumbers, a small doctor’s practice.”

More importantly, Hurst’s research also looked at intentions of small business owners. This was his big finding: most of them don’t want to grow.

“The vast majority of small businesses are in a very few categories and most of them never grow. Their desire is to be a couple of employees and stay that size into the foreseeable future,” he said.

Dr. Mark Gamalinda (Niala Boodhoo)

When Dr. Mark Gamalinda began his Chicago dental practice almost 25 years, it was just “me, myself and I,” he told me.

“For the first year, I was just just slowly growing the practice,” said Gamalinda, who runs his practice from the North side neighborhood of Andersonville.

Dr. Gamalinda seems like the perfect dentist for nervous patients. He’s quiet, his office an oasis of warm, golden walls. Quotes from people like Emily Dickinson are painted inside patient rooms.

Over the years, his practice has grown. He now has a patient base up to almost 4,000, and three assistants, a hygeneist and a receptionist.

He buy supplies for the office at Costco. He supports small, local business too, sending out some work to a lab, and using another company that makes crowns and other dental prostheses he can’t make himself.

Now that he’s 50, he’s thinking about adding one final worker – another dentist who can eventually take over his practice.

Dr. Gamalinda told me he’s proud of his practice, and how it has helped support his family over the past few years. He does believe he’s part of not just the economic fabric of his neighborhood, but of Chicago, and the broader economy.

Andersonville's Farmers Market (Micki Maynard)

The few blocks that make up the business area of Andersonville are 93 percent locally owned like Dr. Gamalinda’s, according to the Andersonville Chamber of Commerce.

Ellen Shepard is its executive director. She disagrees with Hurt’s findings – and said that she thinks small businesses, independent businesses, are vital to the economy.

“When we think about the model for economic growth, I think we have to think less of the growth of the wealth of the economy and more towards the growth of self sufficiency, internally, within communities,” she said.

It’s clear those big companies – those Googles, and Groupons – and yes, Wal-Marts still are the biggest drivers of the economy, and of job creation. But Shepard said that doesn’t mean we should count out even the one-man business – because maybe a healthy combination of both is what the new economy should be.

What do you think?


Three stories making news across the Midwest today:

1. Ford deal official. In a final tally, the United Auto Workers announced today that 63 percent of production workers and 65 percent of skilled-trade workers voted in favor of ratifying a four-year contract with Ford. “I believe UAW Ford workers understood the importance of each and every vote,” UAW Vice President Jimmy Settles said in a written statement. Earlier this month, UAW workers approved a new contract with General Motors by similar margins. Chrysler is the only Big Three automaker without a new contract, although voting began Tuesday on a tentative agreement.

2. Great Lakes crucial to economy. Cargo shipping throughout the Great Lakes supports 227,000 jobs and channels billions into the U.S. and Canadian economies, according to a report released Tuesday. “This report bears out what we’ve long known – that the Great Lakes-St. Lawrence Seaway is crucial to the U.S. economy,” U.S. Transportation Secretary Ray LaHood told WBEZ, our partner station. In July, Changing Gears reporter Kate Davidson examined the economic impact of Great Lakes shipping – and found a dredging backlog threatened to cripple the regional shipping industry.

3. Milwaukee lakefront plan unveiled. An “ambitious” plan to redevelop Milwaukee’s lakefront was unveiled Tuesday at a public hearing,calling for better pedestrian access to waterfront attractions and room for several blocks of development. The plan, submitted by Milwaukee County’s Long-Range Lakefront Planning Committee, endorsed tearing down freeway ramps, terracing O’Donnell Park and bulldozing the Downtown Transit Center, according to the Milwaukee Journal Sentinel. “Let’s take downtown and take it to the lake and vice versa,” Parks Director Sue Black said of the pedestrian portion of the plan.


Back in April, we did a story on the untapped potential in the Midwest’s music industry. Today, we have a better sense of the state of Cleveland’s music industry. For the first time, researchers have conducted a comprehensive study on employment and spending in the sector.

First, the economic impact number: $840 million. That’s how much the study says the music industry contributes to the Cleveland area economy.

But that impact comes from relatively few workers. In Northeast Ohio, about 6000 people work in the music industry. That includes everything from orchestras to record shops. In Cuyahoga County just 2700 work in music. That’s less than half a percent of the workforce.

“We weren’t entirely surprised,” says Kristin Puch, research manager at the Community Partnership for Arts and Culture. That organization advocates for the industry and conducted the study.

“It’s really quite remarkable how small but mighty the industry really is,” she said.

Puch says there’s a lot more potential here. Cleveland has a music reputation: for its Rock and Roll legacy and the Cleveland Orchestra. And, she thinks the music scene could benefit more from the region’s traditional industries: manufacturing and healthcare. Making musical instruments and music therapy are two areas for growth, she says.

The study is considered the first comprehensive look at the industry.  It used a combination of surveys and labor data. And, while the total employment numbers are tiny, the report found that the music industry’s employment was actually more stable than the workforce on the whole.

 


Latino kids now have the highest rate of living in poverty in the country. (Photo courtesy of Latino Policy Forum/Olga Lopez)

CHICAGO – Think the recession has been rough on your wallet? Consider this: Latino families, an ever growing part of the Midwest, saw a 66 percent decrease in wealth between 2005 and 2009, losing $2 for every $3 saved during that time.

That’s the first of many sobering statistics about Latino families that were presented by my public broadcasting colleague Ray Suarez of PBS NewsHour this morning at a Latino Policy Forum breakfast. Suarez said that Latino familes’ average wealth went from $18,359 in 2005 to just $6,325 in 2009.

Economic Policy Institute Chart on the correlation between housing starts and remittances to Mexico, 2008 (EPI)

Why? Suarez spoke about the “tumbling dominoes” of the heavy concentration of Latinos who work in construction, as well as families’ disproportionately high exposure to sub prime loans and diminishing home equity.

(The Economic Policy Institute wrote a few years ago about the tie between Mexican workers in construction and how housing start data can be correlated with the actual amount of money being sent back to Mexico.)

Those factors have helped contribute to the vast drop in wealth, and it also means that Latino kids now have the highest rate of poverty in the nation.

Suarez noted this was the first time in U.S. history that there were more Latino children living below the poverty line than their white counterparts. Overall, Latinos now make up 16 percent of the US population, 23 percent of nation’s children, and more than 30 percent of its poor children.

Why should you care? The 2010 census, which Changing Gears looked at last spring, showed us how fast the Latino population was growing as the country’s largest ethnic minority.

“This community is now too big for American to try to succeed without it,” said Suarez. “Our future prosperity is this country’s prosperity. If we don’t make it, it won’t just be us that’s worse off for it – everybody will be worse off for it.”

As Suarez pointed out: these children are the tomorrow’s wage earners, and not just in the workforce – they’ll be responsible, as he said, for paying his Social Security check.

(Interested in more? Check out my stories and posts about Latinos across the Midwest.)

Update: The Latino Policy Forum has posted the video of the speech: