Incubators Help Start-Ups Take the Next Step

ROCKVILLE, Md. (TheStreet) -- Incubators are a great resource for small-business owners to cultivate and grow their firms.

Also referred to as "innovation centers," incubators are often affiliated with a university or county economic development office. They house groups of growth companies, usually technology-centric, that can learn from each other while sharing resources provided by the incubator staff.

They're generally funded by money from universities and municipal governments. States and counties like them because companies that grow in an incubator ultimately set up shop in an area nearby, giving the municipality a good return on its investment by boosting the neighborhood's economic base, according to the National Business Incubation Association.

"An incubator is a great economic development tool to seed companies in a certain economic sector into your economy," says Sally Sternbach, executive director for Rockville Economic Development in Rockville, Md. About 85% of firms housed in an incubator survive five years or more, she says. In Sternbach's county (Montgomery), the rate is 92%.

She says small business owners who currently work out of their homes but are ready to make a move to a more professional setting are good candidates for an incubator.

But for those entrepreneurs who do better work in a garage, an incubator wouldn't be a good fit. "You need to know if you're coachable," says Tom O'Neal, director of the University of Central Florida's Technology Incubator in Orlando. "You don't need to go to an incubator if you're just looking for an address because people there are going to try and tell you and teach you things."