January 25, 2012

State of Alabama
Press Release: Alabama Department of Commerce

Alabama Business Incubators Touted for Economic Growth

January 24, 2012


innovation depot devon laney.JPG

The Innovation Depot has begun work on its expansion project, scheduled to be completed in December. Devon Laney, chief operating officer, stands in on of the hallways of new offices that are nearing completion. (The Birmingham News/Tamika Moore)

Leaders of three Alabama business incubators say continued investment in their facilities and the companies they house is a key driver of economic growth in the state.

"I don't think there is a better economic development engine, a true economic development engine," said Devon Laney, chief operations officer for Birmingham's Innovation Depot.

A study last year said Innovation Depot, which houses 84 companies comprising 460 employees, had an economic impact of $1.4 billion on Birmingham's economy over the past five years. The goal of Innovation Depot and other incubators is to attract high-growth companies, many of start-ups in the technology sector, and help them develop their business.

Laney's comments came during a panel session Monday afternoon at the Economic Development Association of Alabama's winter conference at The Wynfrey Hotel in Hoover, where business, political and economic development leaders met to discuss opportunities and outlook for the state's economic prosperity. Other speakers scheduled to attend this week include Alabama Gov. Robert Bentley and Alabama Development Office Director Greg Canfield.

Last year, Innovation Depot won the "2011 Dinah Adkins Incubator of the Year" award at the National Business Incubation Association's International Conference in San Jose, Calif., where it went up against 2,000 counterparts from across the U.S. and 65 other countries.

Another Alabama incubator is the Shoals Entrepreneurial Center in Muscle Shoals, headed by Giles McDaniel. McDaniel, who also was on Monday's incubator panel, said the Shoals Entrepreneurial Center has landed 150 companies in its history. Those that have gone through the program now employ around 1,500 people in the Muscle Shoals area.

The key to longevity for an incubator, he said, is flexibility. One former tenant of the Muscle Shoals incubator told him that the company valued the services it received to be around $1 million, although it cost nowhere near that for the firm to be there.

"We don't try to make our companies fit into a mold," McDaniel said. "We try to fit into their mold."

There are 22 active business incubators in Alabama, which collectively employ 2,200 people, said Devron Veasley, director of the Bessemer Business Incubation System and the moderator of Monday's panel session. At any given point, a person in Alabama is no farther than 90 minutes away from one.

Research cited by the National Business Incubation Association says that $30 in local tax revenue is created from about $1 of government subsidy for an incubator program. So far, incubators in Alabama have operated without government investment, Veasley said, and that's not a bad thing, he said.

"We have to be entrepreneurial in how we fund our businesses," he said. "Most of us are listed as nonprofits, (but) we have to operate as a for-profit entity. In other words, if our clients aren't doing well, we aren't doing well."

One of the obstacles incubators face is persuading the rest of the business community in their communities that incubators are good for the commercial real estate sector and for banks, too. That's because when companies move from the incubator, they'll be looking for new space and additional financing, officials say.

Since Innovation Depot moved into the long-vacant Sears building in downtown back in 2007, it has become a success story for business growth in Birmingham. It recently completed a $1 million expansion project, which will allow it to bring in another 10 companies and increase total employment by those firms to 650.

"This state and the things that we can do to drive economic development, and growth in a knowledge-based economy has to start here," Laney said.

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