Is the Bluffton-based incubator helping businesses grow?

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Is the Bluffton-based incubator helping businesses grow?

By GINA SMITH
gsmith@islandpacket.com
Published Saturday, January 5, 2013   |  1067 Words  |  

Jared Jester graduated from the Savannah College of Art and Design on a Saturday and, two days later, stood in line for a business license for his own one-man company, Jester Communications, to design applications and websites.

In the years since, his business has grown into an award-winning Bluffton company that makes iPhone and iPad apps for the marine industry, Gov. Nikki Haley and other S.C. politicians. He and his team are working now to find investors and expand into the agricultural and the marketing arenas.

It's one of nine startup companies in the Don Ryan Center for Innovation, a taxpayer-supported incubator helping to get fledging companies off the ground.

Research and opinions are split on whether business incubators are worth public investment.

Local governments and universities seem to think they're good use of taxpayer money. They're ponying up the cash to create them, fueling their rapid growth.

Across South Carolina, 20 incubators exist, including ones supported in part by the University of South Carolina and Clemson University, as well as local governments and chambers of commerce, according to data from the S.C. Department of Commerce. Nationally, they now number nearly 1,300, up from only a dozen in 1980, according to the National Business Incubation Association

Incubators are intended to provide a launch pad -- a few months to a few years of taxpayer-supported assistance, including subsidized office space, business advice and help in finding seed money. Ultimately, the companies are supposed to move out of the incubator, create jobs and aid a region's efforts to build a niche, often in emerging-technology fields.

Companies like Jester's say it gives them a leg up to do just that.

"I went to art school and they don't teach you much business there. The center has been a great help to us," said Jester, who credits the incubator with providing business advice, meeting space where his company can pitch to clients and research by Clemson University that shows Jester Communications is targeting the right markets for expansion.

But others aren't convinced incubators are providing help that motivated entrepreneurs with great business ideas couldn't find on their own.

Scott Shane, an economist and professor at Case Western Reserve University in Cleveland, Ohio, said no research has set up an experiment capable of determining incubation success.

"In the absence of any clear scientific evidence, policy makers are spending money on a belief that it (incubation) works, but it may not," Shane said. "We should only spend (public) money if we have evidence that something works."

BLUFFTON'S COMMITMENT

The Town of Bluffton has jumped into the incubator game, providing nearly 80 percent of the incubator's funding this fiscal year. That breaks down to:

  • More than $154,000 to pay the incubator director's salary, some of the its operating costs and $50,000 to Clemson for its services.
  • A town pledge of another $50,000 per year for the next two years to pay Clemson, which launched the incubator with the town and other partners in May.
  • The hope is for the incubator to be a true enterprise in the near future and not reliant on town dollars, said Tony Barrett, Bluffton town manager. It currently receives some non-public help -- $200 per month in rent from each of the startup companies and sponsorships from private businesses.

    But the biggest boon may come from Clemson University, which plans to start three more incubators in other parts of the state. The university conducts market research, technical research and training for the companies.

    FINDING THE 'OOMPH'

    "In the world of pest control, the big guys have all the money and all of the advantages," said Louise Hodges, owner of Greenbug, one of the incubator's startups that's producing an organic bug repellent and a system that sprays it onto lawns through homes' irrigation systems.

    Clemson is testing how effective Hodges' product is at repelling bed bugs, while the incubator staff has helped her with legal, insurance and business advice.

    "As a small business owner trying to make it, it would have been impossible to do all of this on our own," said Hodges, who came up with the organic bug repellent when she moved to Beaufort and realized how little time people spent in their yards because of mosquitoes and other insects.

    "We did the research. We had the idea. But we needed the oomph to make it a reality," she said. "The incubator is helping us make that happen."

    DO THEY WORK?

    Clear evidence that incubation helps or hinders startup businesses is difficult to find.

    One 2010 study by a New York researcher, with funding from the Kauffman Foundation, found incubation hurts a firm's long-term survival, and that only 3 percent leave the incubator and try to make it on their own. The study evaluated 18,000 businesses in 950 incubators.

    But a 2011 study, funded by the U.S. Department of Commerce, which has long financially supported incubators, found incubation increases a company's chances of making it on its own and said public support is an important ingredient for an incubator's success.

    Jordan Berliner, director at the Bluffton incubator, said the odds for success must increase -- assuming an incubator provides the advice and resources that businesses need. Berliner, with input from a board of directors, chooses the businesses that are invited to join the incubator.

    "Some just provide office space, which is not enough," said Berliner, who has more than 30 years of business experience including running his consulting firm in the Washington, D.C., area. "But if it provides all of the services a new business needs, then that's got to enhance their chances."

    Follow reporter Gina Smith at twitter.com/GinaNSmith.

    Related content:

    Bluffton incubator adds 2 new businesses, Aug. 27, 2012


    Four businesses join Bluffton incubator project, May 3, 2012

    Director hired for Bluffton technology incubator, March 8, 2012