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Austin incubators aiming to help create the 'next-generation economy'


The following ran in the Sept. 22, 2012, edition of the Austin American-Statesman. Economist Bernard Weinstein provided expertise for this story.

September 25, 2012

By Kirk Ladendorf and Lori Hawkins

Monty Goulet is working to build his startup, Maestro Interactive Games, into a viable mobile gaming firm.
But as a first-time entrepreneur, Goulet — who is 23 — has a tight budget and a lot to learn. So when he heard about Tech Ranch, an Austin incubator that leases affordable space and offers mentoring sessions and classes by high-tech veterans, he wanted in.
"When you're just starting out, those kinds of resources make a huge difference," said Goulet, who moved to Austin after graduating from college in New Orleans last year. "At a university, the business classes are hypothetical. At Tech Ranch, you're studying your actual business with industry people who have done it before."
Today, Tech Ranch has been joined by a new wave of business incubators that have sprung up over the past few years in Austin and elsewhere in the country. More than a dozen incubatorlike programs are happening in and around Austin and more are on the way. Most of them are nonprofit organizations, but a growing number, like Tech Ranch, are for-profit businesses that typically take an ownership stake in companies they help.
The bulk of the incubator programs are being formed to speed the journey of young companies either to quick validation of their business plans or to rapid failure. The idea is to move fast, identify early challenges and either overcome them and win investment dollars or pull the plug and try something else.
The incubators are intent on helping to change the face of Austin's business community by providing the crucial support system for new companies that can help drive the economy forward. They are also a critical resource that entrepreneurs from outside Austin look for when they consider moving to town. A variety of companies, including the 3-year-old startup SpareFoot Inc., were attracted to Austin by incubator programs. More are expected to come in the future.
Today, the recent graduates of the local incubators collectively employ several hundred people. Within the next several years that figure could grow to several thousand, experts say, but there are no guarantees. Startups are inherently high-risk operations that can have both exciting highs and painful lows. Collectively there is a payoff. Austin Technology Incubator, the oldest of Austin incubators, recently estimated its economic impact in Austin over three years at $100 million.
Because of Austin's high-tech history, most of the incubators in town are tech-related. But at least a few local incubators, including Incubation Station, are aimed at nontech startups.
"The next great company to come out of Austin will come out of these accelerators and incubators," predicted Mike Rollins, president of the Greater Austin Chamber of Commerce. "This is where the jobs will be created in our town and for our children. This is the next-generation economy."
While anecdotal evidence points toward a surge in tech startup formation in Austin in recent years, the overall national data on new business formation is more discouraging. In a study released this month, the Hudson Institute said the number of new startups and new jobs from startups dropped sharply between 2006 and 2010.
But economist Bernard Weinstein at Southern Methodist University's Cox School of Business said it's not unusual to see business trends in Austin and other tech centers run counter to overall national data.
"Austin is special," Weinstein said. "Austin has a unique mix of lots of young people who are highly educated plus venture capital and a base of high-tech companies. When you put those things together, Austin looks pretty good."...