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A better way to create jobs

Nurturing start-ups works even better than infrastructure projects.

By Jeremy KutnerCorrespondent / July 2, 2009

The Food Innovation Center, a business incubator run by Rutgers University, helped Jamie and Jennifer Faitelson (pictured) make and bottle a new barbecue sauce.

Ann Hermes / The Christian Science Monitor

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Bridgeton, N.J. — Chef Hymie Grande stares intently as his bottles of barbecue sauce – the product of years of cooking, tasting, and tinkering – slide along a conveyor belt toward a roll of custom-made holographic labels. This is it, he says, the birth of his small-business dream.

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“Nobody else can say they have a sauce that is just like mine,” says Chef Grande (aka Jamie Faitelson), his face beaming. “This is the first time it’s real.”

The road to a business launch hasn’t been easy for the former luxury-watch salesman. With his business too small for commercial bottlers, who demand huge minimum orders, and too ambitious to work out of his home, Mr. Faitelson was stuck. One company he approached wouldn’t consider producing anything less than 35,000 bottles – a massive investment for a bootstrap entrepreneur.

Salvation came in the form of the Rutgers Food Innovation Center, a business incubator that nurtures young food entrepreneurs by giving them advice, a place to work, and, critically, access to a giant professional food production facility – complete with a labeling machine – to get their ideas off the ground.

“A small business like mine could never go to the big producers,” Faitelson says. Without professional guidance, he adds, he’s not sure he would be able to move forward. He now plans to enter his specialty sauce – which contains no high- fructose corn syrup, his chief selling point – at food shows and try to get noticed.

Interest in business incubators has exploded in the United States as recession-hit communities from New York City to Youngstown, Ohio, search for ways to revive their moribund economies. Already, well over 1,000 of these typically nonprofit organizations (more than 7,000 globally) shepherd local entrepreneurs through the beginning stages of business development with resources and services in the hope they’ll one day create local jobs.

They may be onto something. A 2008 study by the Economic Development Administration (EDA) found that, per dollar invested, incubators created more jobs than any other economic-development efforts – more than industrial parks and 10 times more than highway and other transportation projects (see chart). But not all incubators are created equal. As cities rush to embrace this hot economic-development strategy, they run the risk, economic-development experts say, of wasting lots of money.

“An incubator is only as successful as the labor market around it,” says Amy Glasmeier of the urban studies and planning department at the Massachusetts Institute of Technology in Cambridge. “If it doesn’t have a connection to the local economy, it’s just cheap real estate.”

So what makes a successful incubator? It starts with the ability to meet the many varied needs of entrepreneurs.

Debby Mitchell, a professor at the University of Central Florida in Orlando, came to the entrepreneurial world a complete novice. Her company, GeoMotion, combines education and fitness with such products as fitness mats and an integrated curriculum called Learnercise. Her company set up shop in the University of Central Florida Business Incubation Program three years ago.

“I moved my office into the incubator, and through them was able to find an investor a few years ago, and now I’m living the dream,” Dr. Mitchell says. Recession has trimmed her sales 20 percent, she says, but through a support group of fellow CEOs set up by the incubator, she has figured out how to ride out tough times.

“You’re getting basically free information,” Mitchell says of the contact she’s had with other entrepreneurs and a series of public relations, accounting, and legal professionals who work with incubated companies in the hopes that they’ll be clients one day. “I don’t have a business degree or a business background. For me to make that big a jump would have been tough without other support.”