By Sara Michael —

Budding entrepreneurs often know the isolation of launching a start up.

Besides just trying to cover overhead, new company owners can struggle with finding funding and taking the right steps to get their product or service off the ground.

Enter the business incubator.

Throughout the corridor region, business incubators have been providing the support and mentoring – not to mention affordable rent – to allow new companies to grow and thrive. In return, the area benefits from a model proven to boost economic development.

“It has been shown that companies that are in incubators are much more likely of success,” said Ellen Hemmerly, head of bwtech@UMBC, a research and technology community at the University of Maryland, Baltimore County.

Most of Maryland’s incubators are located in Baltimore City and Baltimore County and provide the  resources for the area’s burgeoning technology community, Hemmerly said.

Once a company graduates from an incubator, executives are likely to continue building the business where they began. In fact, 54 percent of recent graduates from the Emerging Technology Centers in Baltimore City are now located in the city, and another 45 percent are still in Maryland, said Ann Lansinger, president of the ETC. The incubator, a venture of Baltimore Development Corporation with two facilities, surveys companies every three months. 

According to the June survey, 86 percent of their companies are still in business, Lansinger said. Further, the average salary at their companies surveyed was $79,000 and average annual revenues $1.8 million, she said.

Indeed the foundation incubators provide have continued to spell success, as Maryland companies with small, humble roots grow in to competitive national and international players.

“We have been established to help identify young companies less than five years old in need of space and assistive services,” Lansinger said. 

In recent years, business incubators have evolved and matured, raising their expectations of the clients. The image of the companies housed in incubators has also changed, Lansinger said. No longer are incubator companies seen as weak, and instead are all the more wise for taking advantage of the support.

For starters, small business owners in an incubator can take their minds off the infrastructure and focus on their product or service. The ETC provides shared conference rooms, workrooms, mail services, Internet connections and often furniture.

“It's truly a plug and play environment,” Lansinger said. “It takes a lot of headaches out of it.”

But incubators are far more than affordable rent and flexible leases. Staff helps companies find funding sources, and mentoring services help with marketing, finance, product launch – the entire continuum, Lansinger said.

“While they are here, we work with each one of them carefully to define what their needs are,” she said. 

Incubators also create a community among the companies. Execs may share lunch and attend workshops and seminars together, drawing on each other's expertise and leaning on each other for support.

The companies do have to clear a few hurdles before settling into the space, said Ruth Semple, president of the Maryland Business Incubator Association. All incubators have a vetting process, which involves presenting a business plan to an advisory board or panel. The board looks for some management expertise, a foundation for the business, and enough capital to get started, she said.

“They have to have thought it through,” she said.

At the ETCs, the clients range from one developing pain management therapies to one offering customized video marketing for businesses. Graduates from the incubator include 600block.com, a Web site that lists food and drink specials around Baltimore, and Millennial Media, a pioneering mobile advertising networks company.

These companies coming out of the incubator have a much higher chance of succeeding, Semple said.

“When you start a new business, the failure rate is pretty high,” she said. “But incubator companies have an 80 percent better chance of being successful five years after graduating from the incubator.

This proves incubators can be a successful economic development tool, she said. “Incubators are a very supportive environment.”

Maryland incubator firms:
Employed 14,044 employees (5,374 direct employees and 8,670 indirect employees)

• These jobs contributed $845 million in annual salary and benefits to Maryland households
• Gross state product contributions totaled $1.2 billion
• Increased state output by $2.7 billion per year
• Contributed $104 million in state and local taxes

Source: Maryland Technology Development Corp.'s Maryland Incubator Impact Analysis and Evaluation of Additional Incubator Capacity, 2007

— September 2009 print edition