TESTIMONY
by Shari Coulter Ford
NYC Tech Connect
New York, New York
June 23, 2011
testimony (PDF 120K)Testimony Before the City Council Committee on Small Business
Small Business Incubators in New York City
Good afternoon, Chair Reyna and members of the committee. Thank you for the opportunity to testify today on the role incubators play in supporting small business and nurturing entrepreneurs in New York City.
The New York City Investment Fund is the investment and economic development arm of the Partnership for New York City, the city’s business leadership organization. The Fund was created by Henry Kravis and other leaders of the Partnership to help build a stronger and more diversified local economy. Our Fund has money to invest on favorable terms, as well as mentors and experts who volunteer their time to help promising entrepreneurs in both the for-profit and not-for-profit sectors.
Over the last 30 years, incubators have become a popular way to foster economic development. According to the National Business Incubator Association, in 1980 there were just 12 incubators in North America. Today there are more than a thousand, creating billions of dollars in economic activity.
New York City was late to the incubator movement, despite the fact that finding affordable and appropriate real estate is among the biggest challenges facing local start-ups. The city did participate with Columbia University in financing the Audubon biotech incubator in the late 1980’s, but for more than a decade that was our only facility. In 1999, our Fund partnered with the Borough of Manhattan Community College and two venture capitalists to create the city’s first digital media incubator, called the TeleMedia Accelerator. I was the CEO of the Accelerator. Unfortunately, after just two years in operation, it was destroyed on 9/11. But that incubator did help launch the city’s now flourishing digital media sector.
During the past few years, the New York City Economic Development Corporation has led efforts to establish a new generation of technology incubators. One, at 160 Varick St, has become a hub for entrepreneurs and a visible symbol of the public sector’s support for NYC’s entrepreneurial community. EDC’s investment helped catalyze the private sector to start funding co-working spaces either in partnership with EDC, such as General Assembly, or on its own, such as Green Spaces, New Work City, and Sunshine Suites. All of these co-working spaces bring together like-minded entrepreneurs and provide them with inexpensive workspace to help turn their startups into established companies. There are now more than 20 of these spaces around the City.
Another important role for incubators is to provide specialized space and equipment for specialty businesses. At La Marqueta in East Harlem, Hot Bread Kitchen provides a professional kitchen for bakers and caterers, with rental rates that start out low and change as a business grows. The City Council provided significant capital to build out and equip the facility. Our Fund also provided financing to enable Hot Bread Kitchen to buy equipment and ramp up operations. The affordable space, along with seminars, networking events and access to mentors, is making it possible for many people who lack sufficient startup capital to open their own business.
At the other end of the incubator spectrum are so-called “virtual” incubators that do not offer physical space, but provide entrepreneurs with the resources and relationships they need to start and grow their business. Our Fund joined with the City Council to establish a virtual incubator that we call NYC Tech Connect. Launched in January this year, the mission of NYC Tech Connect is to foster the development of a stronger entrepreneurial ecosystem in the hard sciences (including bioscience, engineering, cleantech and material science). The City has significant sunk costs as the center of academic research in life sciences, renewable energy and material sciences, but is not capturing the jobs and economic development benefits that could be realized by local commercialization of the great science emanating from its academic centers. Since our launch in January, we have initiated multiple programs and events which have attracted several hundred entrepreneurial engineers. We’ve also worked one-on-one with more than 50 aspiring entrepreneurs.
The common theme among all effective incubators is that they fill a void in the marketplace. They rent out affordable space that is not easy to find; they offer flexible terms—such as full and part-time use—for entrepreneurs; and they provide resources to help develop business models and secure funding. So what should the public sector’s role be going forward? At a time of limited resources, we believe that the city should invest in incubators where the private sector is not providing capital. One example is in bioscience, where specialized, affordable lab space in small increments is still needed, but not being created by private companies. For early stage bioscience companies, there is not the equivalent of a “desk” that exists for tech companies. By investing in pre-built lab space that can accommodate a company with 1 or 2 people, the city can retain more of the early stage biotech companies that spin out of our universities. The public sector should also get involved when it can bring a unique partner to the table, like it did with the Fashion Incubator, started by the Council of Fashion Designers of America. The Fashion Incubator is a good example of providing future entrepreneurs with the mentors and resources needed to take an idea or a small business to the next level. Incubators can be good public investments, but we should only invest when there is a need and it is clear that there will be a positive return on the money the city spends.