Business was booming in the three city incubators last year as entrepreneurs rushed to develop ideas that they thought they couldn't afford during the economic slump of earlier years.
Two of the incubators are considering expanding to a second building because of the demand, and a third expanded at the beginning of the year and had the building nearly full by December.
At the Nott Street Industrial Park incubator, startups now fill 22,000 of the 30,000 square feet available.
All 25,000 square feet are being used at the Schenectady County Community Business Center, which reported at the end of the year that it was full for the first time ever.
U-Start Business Incubator, the smallest incubator in the city, doubled its square footage to 2,000 when it opened a second building last January. There was no waiting list for that space, but by the end of the year, all but one of the offices had been filled.
“We almost doubled in one year, which is remarkable,” said director Jon Lemelin. U-Start is affiliated with Union College.
About one-third of the businesses being nurtured in the city incubators can be expected to grow into successful, independent companies, according to national statistics.
SUCCESS RATE
The success rate for businesses that begin in an incubator is about 66 percent. About one-third move out and continue to grow, while one-third move out and succeed but do not grow larger, and one third fail.
That may sound like tough odds, but it's four times better than the rate for startups that don't benefit from an incubator.
Lemelin said the odds are so much worse for what he calls “kitchen-table entrepreneurs” because they don't have access to experts who can explain things like insurance and marketing plans, and because they don't appear professional if they're working from home.
“When you get a call from your first prospect, that's when the dog starts barking or the baby crying and people aren't going to take you seriously,” he said.
But all incubators are not the same. The three in the city cater to different groups and have different requirements for their clients.
Both U-Start and the Business Center put a limit on how long an entrepreneur can stay, while the incubator in the industrial park does not.
Lemelin said the limit – three years at U-Start – is really a reality check.
“They've either grown to the point where they've grown out of the space, or if after three years they don't grow out of the space, we start to wonder if they ever will,” he said.
But industrial park incubator manager George Robertson said there are not many places that a small startup can afford after the incubator.
Some successful graduates have gone on to build their own buildings, but that's an expense many can't afford, said Robertson, director of the Schenectady Economic Development Corporation. SEDC manages the Nott Street Industrial Park.
The rest of the “graduates” need to lease space, but it can cost well over $40,000 to build a small laboratory, Robertson said.
Most landlords would refuse to pay for such expensive renovations for startups because it would be too much of a risk.
“The traditional landlord's gong to say, 'You nuts? What if you're gone in six months?' ” Robertson said. “That's really the role we play, is to take that risk.”
He said entrepreneurs also have difficulty finding space even if they can afford to pay for the renovations.
He said he's considering adding buildings for manufacturing and small office space at the industrial park because there are few available spaces in the city.
QUESTION OF SPACE
The lack of space is why some startups move to the industrial park incubator after aging out of one of the other incubators, he said.
The park also offers the largest amount of space, with some clients using 10,000 square feet before being able to afford their own building.
The other two incubators have more limited space for each business.
U-Start offers 300 to 400 square feet of space per tenant; cramped quarters if the business has more than two employees.
The Business Center has 25,000 square feet and leverages that space by only accepting microbusinesses, defined as those with fewer than 25 employees.
Any business is accepted at the industrial park, while U-Start will only take high-tech companies. The entrepreneurs at U-Start must also promise to hire in Schenectady and at least intend to locate in the city if the business is successful.
NOT AN ADVISER
For entrepreneurs who want business advice, the industrial park incubator is not the right choice. It doesn't offer any educational programs, although Robertson said some tenants want to arrange a partnership with U-Start so they can attend U-Start's programs.
U-Start holds monthly meetings on topics of interest, from taxes to legal control of intellectual property, a popular subject at the tech center.
Entrepreneurs can also work with a mentor or a board of advisers, made up of successful business owners who will go over business plans, marketing and sales reports and other data to pinpoint areas where the entrepreneur could improve.
Clients have access to U-Start's conference rooms, fax machines, copiers and other office supplies. Rent is low – about $200 per month for a 200-square-foot office – and includes Internet connections.
The Schenectady County Community Business Center also offers low rent and specialists who can help owners write business plans, make decisions about lending and marketing and related matters. Any company can apply there, but at the end of the year, the center was full.
The board of directors announced in December that they had accepted the application of a locomotive parts manufacturer who would use the last 4,000 square feet of the available space. That brought the center up to 14 businesses in 25,000 square feet and was the first time the center had been full since it opened in 2000.
The board of directors is now considering opening a second building. The first building is located at 920 Albany St.
The Nott Street Industrial Park incubator has no restrictions. It takes in anyone, first come, first serve, with no application process.
Most of the companies there now are high-tech firms, Robertson said.
And they're growing fast.
TADIS, a document-scanning company at the park, has grown from 1,200 square feet to 5,000 square feet and just won a state contract to digitize two years of state accident reports.
Lakeside Technology Inc., a software company, is developing new software for automotive parts inventories while selling its medical billing software.
Another new company, Edison Analytical Laboratory, is focusing on nanotech research.
That meant finding a landlord willing to pay for the expensive renovations needed to build a laboratory, Robertson said. The incubator paid for those costs at no charge to the tenant.
“Startups barely have the money to run the business, pay the rent,” Robertson said. “They don't have the money for improvements like that.”