Cities Push the Business ‘Start-up’ Envelope

The business incubator is no longer a new idea. Cities are pursuing business accelerators, a kind of incubator on steroids.
January 2012
William Fulton
By William Fulton  |  Columnist
Director of the Kinder Institute for Urban Research at Rice University and former mayor of Ventura, Calif.

Okay, you’ve learned how to “incubate.” But how do you “accelerate”?

Once considered a daring innovation, the business incubator is no longer a new idea. Almost every city has an incubator of some sort, usually a low-priced, co-location space for startup companies with some business support services. Now cities and economic development agencies are focused on “accelerators,” a kind of incubator on steroids that provides access to a wider range of startup services, including networking with peers and investors, and connecting businesses to university technology transfer offices and the like. The idea is not just to get businesses going, but also to speed their growth. Some accelerators are private, some are public, and some are attached to universities or other nonprofit entities.

From opposite sides of the country come two very different stories about accelerator efforts -- both of them conventional in one sense and out of the box in another. In Boston, longtime Mayor Thomas M. Menino recently established an “innovation district” on the South Boston waterfront in the hopes of attracting fast-growing companies (Read "The Boss of Boston: Mayor Thomas Menino"). The innovation district idea isn’t new. In fact, it uses a lot of traditional real estate development techniques common in urban redevelopment. But it is pushing the envelope in a few ways. The first is with the Boston Innovation Center, a gathering place for entrepreneurs that was created as part of a deal for a larger redevelopment project. The second is with the arrival of Babson College, whose main campus is located in suburban Wellesley and now has an entrepreneurship program that will focus on Boston’s innovation district.

Meanwhile, Arizona State University (ASU) has set up an accelerator at its SkySong business facility in suburban Scottsdale, just north of the main campus in Tempe. The accelerator is tied not only to the campus, but also to the larger business community. Instead of focusing on tenured faculty -- who may not be interested in taking entrepreneurial risk -- the ASU accelerator seeks out postdoctoral fellows who have big ideas, low salaries and not a lot of patience for the tenure track. ASU doesn’t focus solely on high-tech companies, but on any company with high potential. “If you want to create a business consisting of a bunch of 7-Eleven franchises, we’re not interested,” says Gordon McConnell, who was recruited from Ireland to serve as executive director for venture acceleration at ASU. “But if you want to reinvent the convenience store concept, we want to work with you.”

The accelerator movement is still … well, accelerating. But already it has yielded some important lessons about how to move from incubator to accelerator. These include:

  • Keep strengthening university partnerships and take advantage of every opportunity. As the Babson College move indicates, emerging university partnerships are not only with scientific and research institutions, but also with business-oriented institutions that focus on entrepreneurship. Don’t forget community colleges, which can be vital in producing the skilled labor force required.
  • Keep building the ecosystem of services that these entrepreneurs need. That means making sure angel investors, venture capitalists, intellectual property lawyers, and others know about the accelerator and want to have a presence there. If startup businesses do not have to troll elsewhere for these services, they’re much more likely to stay local. If the service providers realize that they can do business at the accelerator, they won’t want to go elsewhere.
  • Make sure these companies have the infrastructure they need. Internet-based companies, for example, often need extremely high-speed Internet service, which usually requires fiber-optic cable. If your accelerator doesn’t have that, you’re probably out of luck.

Maybe the biggest lesson is that an accelerator can be one location or many. Not all investment funds or lawyers are likely to be located in the accelerator or the innovation district, for example. Nor is all the space required by a fast-growing company likely to be available in this one location. In other words, an accelerator may not be a single building or even a single district.

More than anything else, an accelerator may be a frame of mind or an approach to economic development. Perhaps the best way to think of it is to simply view your entire city or region as a business accelerator, and then take the steps necessary to make it a success.