Appalachian Incubators Spawn Almost 1,300 Companies

Incubators provide an integral and flexible component of many communities' tech-based economic development efforts. When successful, business incubators can provide a focal point for encouraging entrepreneurship in even the smallest cities and metropolitan areas. Ample evidence is presented in the latest survey of incubators supported through the multifaceted $35 million Entrepreneurship Initiative of the Appalachian Regional Commission (ARC).

Since 1978, ARC has made 108 grants totalling more than $17 million for business incubation projects. Using 2004 data gathered from 76 of the 85 known incubators in the region, the report summary yields:

• Appalachian incubators have graduated nearly 1,300 businesses.
• Nearly half of the incubators are associated closely with a university or community college.
• The incubators have helped create 38,000 jobs -- 24,500 directly within current tenants and graduate businesses and 13,500 indirectly attributable to these same firms.
• The average Appalachian incubator provides space to as many as 16 tenant companies and serves an additional 14 non-resident firms.
• Ninety-four percent of Appalachian incubators are nonprofits with 1-2 full-time equivalent staff positions.
• Nearly half of all Appalachian incubators service technology or manufacturing firms.
• At 41,000 sq. ft., the size of Appalachian incubators is consistent with the national average. However, 30 percent of ARC area incubators are very small, consisting of 15,000 sq. ft. or less.

Only 28 percent of the respondents considered themselves financially self-sufficient (i.e. when operational revenues exceed or meet operating costs). Another 20 percent rely on external contracts and operations-based revenues to consider themselves self-sustaining. The balance of 52 percent rely on subsidization that averages 53 percent of these incubators' budgets.

The report also sheds light on other key issues: 30 percent have too little leasable space available to support the overall cost of services and facilities; 57 percent charge below-market rental rates; two-thirds of the incubators require tenants to graduate/exit after a predetermined time limit is reached; and 54 percent offer no placement or relocation assistance to graduating tenants.

A Survey of Business Incubators in Appalachia was released during ARC's July 17-19 conference, "Incubating Innovation and Entrepreneurship: Supporting Business Incubation and Knowledge-Based Enterprise in Appalachia" in Charleston, W.Va. The report is available at: http://www.arc.gov/index.do?nodeId=2880