Southern California Incubators
Find help in hatching your small business

If you own a start-up company, you might benefit from the services offered by a local incubation center. Since many small companies fail in their first five years of business, an incubator may be what a start-up needs to get through its growing pains. According to the National Business Incubation Association, a private, nonprofit organization, 87 percent of the companies that "graduate" from incubators remain successful (staying "in the black").

Incubator facilities offer office space to start-ups at reasonable rates, advice from business consultants, and contacts for obtaining financing and other services. Some incubator centers will provide services to companies not renting space.

Here in Southern California, there are several such centers.

Incubating
Incubators usually offer office space for far less than the going rate. For example, a lease at Altadena's Business Technology Center can start at about $1 per square foot, which is roughly 40 to 50 percent less than leasing comparable commercial space in the Los Angeles area. Some centers even include the cost of the utilities and other services in their lease prices. Most of the time, however, you have to provide your own computing equipment.

Another perk to renting an incubator's office space is that you can save additional money by sharing equipment (such as LCD projectors, copiers, fax machines, and perhaps your own equipment) with other companies using the incubator facility. You can also share lunch and conference room expenses.

Incubators provide hands-on managerial assistance in the form of staff experts (local businesspeople and city government officials) who offer additional guidance. Often these advisors can provide contacts to companies seeking financing, legal services, and more.

Consultants can help you write and refine business plans and establish goals for the future. They will constantly review your progress. While advice is readily available, targeted workshops at the centers are few and are given by separate, affiliated organizations.

What does an incubator get out of the arrangement? Most of these facilities are run by cities or counties that obtain funding through grants from the Economic Development Administration (Department of Commerce) and the Department of Housing and Urban Development. An incubator encourages businesses to move into an area, which in turn helps create local jobs and feed money into other local businesses and the community.

Incubators tend to target specific industries or types of business. The table below outlines some of the types of start-ups incubators look for. Companies that are considered vary in size between 2 and 50 employees. All incubators have stringent application processes in which they consider the potential success of the business and the number of jobs it may create for the community. Fledglings fill out a detailed application, including a list of financial references, a comprehensive business plan, financial projections, and past history. It's a lot like applying for a business loan.

So how do you find an incubator that can help your business? Begin by reviewing the "Local Incubators" table and investigating their services. But keep in mind that you don't necessarily have to turn to centers that are near your current business. Ask yourself whether relocation is an option. Then, check out incubator Web pages, make a few phone calls, and set up visits. Before you apply, ask about any processing fees. They start at $25 and can be higher.

One Company's Story
Bruce Nuanes, of NuCom Integrated Technologies, started considering incubators when he discovered how hard it was to meet monthly bills and still concentrate on making a great product. "An incubator that could provide office space and basic business services at below-market rates would allow us to concentrate on the business of growing a company rather than struggling to meet monthly overhead," he says.

NuCom, one of four firms at Alta dena's Business Technology Center, develops software and offers expertise in process automation, control systems, and information systems. The firm moved to the Business Technology Center in November 1998. NuCom started out leasing office space from the Pasadena Enterprise Center, a non-high-tech incubator. The Business Technology Center's high-tech emphasis appealed to the company, so it moved. "The main advantage, at least for NuCom, is the provision of investors, a critical issue to high-tech firms," says Nuanes. "We're in front of investors in the high-tech market on almost a weekly basis, and potential investors know what they are getting with firms at the Business Technology Center. The center also helps us find accountants and lawyers."

Nuanes has been happy with the Business Technology Center. The use of equipment included in the lease allows the company to funnel its start-up and seed capital into buying the software needed to develop products, service customers, and create marketing materials. The mentoring program is helping NuCom to refine its business plan and strategy. Nuanes also expects to share technical expertise with the other, newer companies at the center as they become better established. Another advantage the center offers NuCom is its close proximity to the Jet Propulsion Lab oratories, a potential customer. NuCom plans to maintain offices at the Business Technology Center through 2000.

Altadena's Business Technology Center
The Business Technology Center is located on Lincoln Avenue in Altadena (in the San Gabriel Valley), within a few miles of Cal Tech. The center opened in October 1998 and was sponsored by the Community Development Commission of the County of Los Angeles. The center focuses on high-tech start-ups and currently houses four companies. It boasts a huge, 40,000-square-foot facility that can house between 30 and 50 start-up companies. Though it's in a section of town that has seen better days, the impressive Business Technology Center shows that better days are in store.

Offices at the center are between 160 and 680 square feet in size. Occupancy rates start at about $1 per square foot, which includes utilities, telephone service, Internet connections, receptionist services, use of copiers and conference rooms, and sessions with experienced entrepreneurs turned company counselors. All have previous counseling experience.

The Business Technology Center's application asks for a business plan that details your product and its target markets. You're required to provide company financial data and background information about key individuals. Applications are reviewed by an entry committee. Businesses that don't need to lease space can apply as affiliate members to obtain business counseling.

Pasadena Enterprise Center
The Pasadena Enterprise Center (PEC) is located on Lake Avenue in Pasadena. The facilities are professional and attractive and currently house 26 small businesses. The center assists mainly minority- and women-owned businesses in various disciplines, particularly those located in Northwest Pasadena.

The PEC facility is a two-story, 14,000-square-foot building. Each floor has its own shared conference room, kitchen, and copy/fax room. Office spaces range in size from 93 square feet to more than 2,000 square feet, and the rent includes utilities (gas, water, and electric) and use of shared equipment (unlimited incoming faxes and 300 free photocopies are included per month; each additional copy costs $.07 per page). A receptionist will answer the phone with your company name and transfer calls. The building includes janitorial services and a security system, and a PEC representative told me that the facility would soon be getting cable modems. Your company is issued cards for 24-hour-a-day access.

You also get technical assistance and counseling through the PEC's Technical Assistance Program, including help with creating business plans and setting goals. Counselors will monitor your progress. Members have access to small business loan programs through the Pasadena Development Corporation, contracted by the City of Pasadena (fees vary). Businesses located at the PEC may be eligible to receive tax and other benefits by operating within the Pasadena/Altadena Enterprise Zone.

The PEC's application is comprehensive and requires a business plan, credit application, personal financial statement, personal and business tax returns, profit and loss projections, a balance sheet, an income statement, and résumés of the key administrators. There's a $25 processing fee.

If your firm could use some guidance, an incubator might be a good bet. You'll gain more visibility in the community, and by sharing business knowledge with other start-ups, you'll increase your company's chances of success. It could be just what you need to get your business cracking.

909-593-9675 e-mail:wkawamoto@earthlink.net