Tom Whitehurst

Sunday, July 9, 2000

Not all incubators are alike

   FORTUNE Small Business magazine has a cover story this month that should be of great interest around here, considering that it's about incubators and our civic leaders are talking seriously about starting one.
   Incubators are (forgive the pun) a hot term right now, like dot-com or anything that starts with "e-" or "cyber-." A lot of us may not know what these words mean, except that they sound trendy and high-tech, and are somehow related to the phenomenon of young people in California and Austin who don't know how to dress for a job interview but make more money in an hour than their parents do in a year. Or so the myth goes.
   " 'Incubator' is kind of an anomalous term, like 'economic development,' to mean a facility where you grow businesses," said Ronald Kitchens, chief executive officer of the Corpus Christi Regional Economic Development Corp. "That's a pretty wide variety."
   The Fortune Small Business article is a cautionary tale about one variety - the for-profit Internet incubator that provides office space and some start-up and management assistance in return for a large stake, sometimes 50 percent or more, in new companies.
   'Good ideas'
   It is important to note that this is NOT - repeat, n-o-t, NOT! - the kind of incubator being considered for Corpus Christi. Here, they're talking about a nonprofit incubator, for the purpose of creating jobs and growing the economy, not for the purpose of growing the bank accounts of individuals involved in the business of incubating.
   It hasn't been determined how the incubatees would compensate the local incubator, but City Councilman John Longoria, who has been pushing the incubator idea, says a 1 percent stake in the company is a figure that has been kicked around.
   The Fortune Small Business article spells out the key distinction between for-profit and nonprofit incubators. Here's how it describes a nonprofit:
   "These are the original, feel-good organizations that help non-business-educated craftsmen who have good ideas create companies. Government-funded; often in underdeveloped cities; provide mentoring, business development and office space. Typical stake: none to nominal (some require CEOs to give back to community)."
   'Interested in an affiliation'
   The local people involved in incubator discussions here would agree with that, except they might have left out "feel-good" (though they feel pretty good about what they're trying to do).
   What they're trying to do remains fairly open-ended at this point. They know they want it to be public-funded and they want heavy involvement by Texas A&M University-Corpus Christi - though not necessarily with funding.
   "At this point, the university has no intention of owning or operating an incubator," said Paul McKimmy, the university's director of workforce development. "It's certainly interested in an affiliation and exploring ways to support an incubator, but the incubator would be its own nonprofit entity and the affiliation with the university has yet to be determined, other than that the university is not going to own it."
   Thus far, the incubator buzz has been tied somewhat to the November sales tax election. It has been recommended that if voters approve a one-eighth-cent sales tax for economic development, 20 percent of the proceeds go to the incubator. But those involved in the discussions say an incubator could go forward, with or without the sales tax - though they certainly want that revenue source.
   'Create opportunities'
   There is agreement that the incubator could incubate the university at the same time that it heats up the economy. It would provide consulting work and a research laboratory for faculty and students, and the businesses it grows could snag the graduates who now leave Corpus Christi in search of greater opportunity.
   "The fact that our technologically trained students are leaving Corpus Christi in large numbers is not lost on the business community here," McKimmy said. "And in our discussions about an incubator the subject comes up repeatedly. Basically we want to create opportunities for our graduates here."
   And for the university.
   'The MIT of the Gulf'
   "What seems to be working very well nationwide and is my belief could work here is a university- based incubator that is really a technology transfer facility," Kitchens said. In other words, the university figures something out and a business that starts up in the incubator turns this new knowledge into something profitable.
   "Research and development by a university and by academia is key to it. Otherwise, you are using old technology and trying to develop something that by and large, if it could be done, it already has been done somewhere by somebody.
   "All famous universities in the United States are famous either for their sports programs or for their research and development," Kitchens said. "We're probably not going to be the national champions in football but it would be nice to be the MIT of the Gulf of Mexico."
   (The Fortune Small Business article, "The Dot-Com Factories," is in the July-August issue and on the magazine's Internet site at fsb.com.)
  
  

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