How Incubators Nurture New Businesses

CHICAGO (TheStreet) -- Behind every successful small business there's a crucial network of early supporters -- the friends and family who believed from the beginning and offered help and encouragement when the future was uncertain.

Startups are fragile by nature, but the right mentoring and resources can dramatically increase their chances of success. That's the idea behind business incubators, which may be the key to increasing U.S. employment and improving the overall economy.

While tech-focused incubators may get the media hype, the overall model can be adapted to almost any industry.

Business incubators fill a variety of functions. As the most basic level, they function as a shared office, where entrepreneurs have access to photocopiers, meeting rooms, lab space and other amenities unavailable in a home office. Perhaps even more vital are the support services they offer, from counseling to assistance with financing to informal peer interaction.

"With the most recent recession, we have seen increased interest in business incubation as a way to create new jobs and promote economic growth," says Linda Knopp, director of policy analysis and research at the National Business Incubation Association, which holds its 25th annual meeting this weekend. "Business incubators serve as a type of 'grow your own' strategy for economic development, as opposed to efforts to attract existing businesses from other locations."

There's also a strong economic case for the incubator model. A study by the U.S. Department of Commerce's Economic Development Administration found that business incubators are the most cost-effective form of job creation -- better than building bridges or upgrading highways. On average, jobs created through incubators cost $144 to $216 per job, as opposed to $3,000 to $7,000 for public works projects. Employment created through incubators also tends to last longer than temporary construction work.

Just like the jobs they create, incubators take different forms, tailored to the local economy. One of the largest and most successful is the Environmental Business Center in San Jose, Calif. Since it was founded in 1994, this Silicon Valley powerhouse has helped more than 150 clean energy and environmental technology companies. The Business Center not only offers building space, but expert coaching, advisory services and access to investors and strategic partners.