Ohio's rural biz incubators thrive with best practices, clear results

 
What's not to love about operating a business incubator in one of Ohio's smaller communities? After all, they juggle tight budgets, dispersed populations and limited local markets.
 
Yet according to the Athens-based National Business Incubation Association (NBIA), rural incubators can indeed build strong companies and graduate clients. There is no magic bullet, but rather a synergy of practices and policies the NBIA has cataloged in its national study, Best Practices in Rural Business Incubation: Successful Programs in Small Communities, issued earlier this year.
 
The study included a survey of more than 100 rural and urban incubators across the country, including Ohio University's Innovation Center (OUIC) as one of nine case studies.
 
"If you are a rural incubator, it is even more important to show (performance) results," says Jennifer Simon, executive director of the OUIC. "'Nice to have' is not fundable. 'Is this getting results?' That's fundable."
 
The study found median urban incubator revenue was 75% greater than that of its rural counterparts. Rural incubators, however, graduated an average of two resident/clients per year compared to three for urban areas. These and other findings are helping many of Ohio's smaller incubators thrive.
 
While the press often focuses on incubators serving the larger urban areas, NBIA estimates there are approximately 40 incubators in Ohio, 23 of which are NBIA members. Many serve smaller communities such as Piketon, Hamilton and Zanesville. Athens and Tuscarawas counties host multiple incubators.

So how do these smaller facilities keep pace in the face of unique geographical and budgetary challenges?
 
Keeping it regional
 
The NBIA study found many successful rural incubators are organized as networks – either of facilities or programs – and all utilized regional support.
 
A strong regional network in Tuscarawas County is helping to realize a $5.4 million facility for high-tech research, development and intellectual property. The 25,000-square foot Eugene Tolloty Incubator is set for completion next summer. The incubator is adjacent to Kent State University's Tuscarawas branch, and managed by the county's Community Improvement Corporation. Moreover, it will serve at the anchor for the 170-acre Tuscarawas Regional Technology Park.
 
"Everyone was on board for creating a rural, high-tech atmosphere," says CIC Executive Director Gary Little. "We're trying to create a fertile environment for IT companies, computer animation, or any research/development companies to have a physical location in the incubator."
 
The Tolloty Incubator will also focus on student-run businesses and student internship opportunities. The emphasis is appropriate as Kent State is a participant in the nationally acclaimed Blackstone Launchpad student entrepreneurship program, which it has extended to its Tuscarawas and Stark campuses. The innovative program has already launched an animation and motion graphics company, The New Fuel.
 
"Having a bullpen within the incubator where students can reside and work with mentors, faculty and other successful executives from the area is something we're excited about," says Little.
 
Managers and capital: the right fit
 
Per the NBIA, successful incubators have managers experienced in business development that spend the majority of their time interacting with clients. Yet the NBIA study finds rural program managers spend significantly less time than their urban counterparts with client services. Rather, their time is consumed with issues such as facility management and network coordination.
 
To address that, OUIC's Simon says that her staff is focusing its efforts on current clients instead of "going after that next shiny thing." The organization has even opted to seek a lower dollar threshold in the upcoming Ohio Third Frontier funding competition for Edison Technology Incubators in order to serve a more limited number of client companies. She says that an entire OUIC team, rather than just the executive in residence, confers with its 25 client companies at least once a quarter.
 
"We want to know the things bugging you that we may be able to help find solutions to," she says, noting talent concerns are a common theme.
 
Likewise, Mansfield-based Braintree Business Development Center has launched a "Manager in Residence" program allowing companies to purchase a portion of a general manager. Braintree CEO Bob Cohen says the incubator vets and matches the appropriate candidate, such as a manager with pharmaceutical experience and a dietary supplement company.
 
"This (model) is usually found in bigger markets that can afford to have a CEO in waiting," says Cohen. "This is unique amongst the smaller markets."
 
The report also notes that best practice rural programs provide clients access to capital through internal loan/venture funds as well as capital networks.
 
For example, Braintree is in its second year of operating an early-seed Tech Sprout program that awards grants of $2,000 to $6,000. The fund, which has disbursed ten awards, makes proof-of-concept capital available to entrepreneurs in 21 northeast Ohio counties. Companies passing this stage can then apply for funds such as Lorain County Community College's Innovation Fund, which serves the same region.
 
Cohen cites how Braintree tenant company Right Time LLC successfully accessed both funds ($6,000 and $25,000) to commercialize its software product for the corrections industry, which determines the likelihood of success for ex-offenders and pinpoints improvement areas.
 
"You need different amounts of money to reach different inflection points," says Cohen. "But you don't need to award $50,000 to prove a concept and tie up money that could be used for another entrepreneur."
 
More than 560 jobs and $260 million in revenue
 
NBIA says that fewer than 22 percent of rural respondents collect outcome data. The OUIC, however, counts itself among that minority. The center publishes an annual report that captures five years of outcome data from clients and graduates each year, including jobs created and wages/taxes paid. It even commissions an annual report from Ohio University to determine the incubator's economic impacts on the local economy.
 
From 2007-2012, those client and graduate companies created 569 jobs with $266 million in revenues. The average wage paid to graduates of more than 80 companies was $53,000 – 67 percent higher than Athens County's median income.
 
"Our wage rates are competitive across Ohio, which is amazing when you consider where we are," says Simon, adding that incubators with solid outcome data have an advantage in the competitive state-funding arena.
 
It takes a community
 
NBIA notes successful rural incubators ensure their communities have a vested interest in the center's health. The Tolloty Incubator, for example, is coming to fruition in part due to the support of the surrounding community.
 
While the lion's share of funding came from the federal and state resources, a local board overseeing KSU's branch campus contributed $800,000 to the project. Little says Tuscarawas is the only Ohio county that has such an entity. The board also oversees the incubator managed by the Community Improvement Corporation.
 
"It was that local board that made the commitment when (the federal government) said we'll give you more grant money to build the incubator if you partner with the university…We were able to double the facility size."

 
Tom Prendergast is a Mansfield-based freelance journalist.