BOSTON (TheStreet) -- Technology companies such as IBM (IBM - Get Report), Texas Instruments (TXT - Get Report) and AOL (AOL) are teaming up with the country's business incubators to foster the next big idea -- or to scoop up a startup for an edge on competitors.Incubators are a haven for smart people -- they're the next stop after MIT, Caltech and Stanford -- though many lack business training. For budding firms at incubators, mingling with the private-sector savvy is a way to not only stay in business, but also to eventually go public or be bought by a larger company. In 1959, attempting to fill office space in a down economy, a businessman named Joseph Mancuso took an old industrial building in Batavia, N.Y., and turned it into the nation's first business incubator. The idea took off. At last count, there were more than 1,400 incubators in North America, according to the National Business Incubation Association in Athens, Ohio. NBIA member companies report that 87% of the firms that have graduated from their incubators are still in business. Incubators offer a safe haven for companies that might not otherwise make it due to a lack of business acumen -- in spite of a brilliant product plan. Incubator tenants also get more personalized advice from on-staff mentors than they would receive from time-strapped venture capitalists, says Wayne Barz, manager of entrepreneurial programs at Ben Franklin Tech. Ventures in Lehigh, Pa. And that's really important. "Not engaging broadly with people who can help you is a large mistake that a lot of entrepreneurs make," says Brad Feld, managing director of The Foundry Group and a business mentor at the three-month incubator program TechStars.
In a time when small business are struggling for funding, the incubator-application process can be fierce. Feld offers this advice to startups in search of a nest: "Apply early and engage actively in all the community events around the programs. At the minimum, you'll get helpful critical feedback." Here are six incubators that are notable for their innovative programs and successful exit stories. 1. TechStars Locations: Boston, Boulder, Colo.; and Seattle How to apply: The 2010 application deadline for Boston passed last month, but Boulder and Seattle entrepreneurs still have more than a month to sign up. What's the deal? Only 10 of some 600 applicants are accepted into this three-month software-focused startup program, which provides office space, up to $18,000 in seed funding, and mentorship from veteran entrepreneurs such as the CEO of robot vacuum maker iRobot ( IRBT). The chance to canoodle with other startups is also a plus. "We've seen a number of the founders become really close friends," Feld says. Successful exits: A 2007 graduate, SocialThing, which competes with FriendFeed, was acquired by AOL a year later. Filtrbox, also a 2007 graduate, was acquired by Jive Software last month. 2. Technology Advancement Program Location: University of Maryland at College Park How to apply: Getting into TAP involves a three-part process of submitting an executive summary, a technical plan, and a business plan, with mentors providing feedback at every step. Applicants must be willing to base their operations in Maryland for the long term. What's the deal? The four-year program offers relatively cheap rent for furnished office space, networking opportunities with area venture capitalists, business coaching, and access to university facilities such as the Nano Fabrication Laboratory.
Successful exits: 1986 TAP graduate Martek Biosciences ( MATK) posted operating revenues of $345.2 million for fiscal 2009. Fellow graduate Digene was acquired by Qiagen ( QGEN - Get Report) for $1.6 billion in 2007. 3. Ben Franklin Tech. Ventures Location: Lehigh University in Bethlehem, Pa. How to apply: Interested applicants can get in touch with Wayne Barz, the manager of entrepreneurial programs. "We're looking for some sort of written material, whether it's a full business plan or an executive summary," Barz says. "And then it's a couple of three-hour meetings until we get our arms around the company." What's the deal? In addition to good rental rates (generally $15/foot for office space and $18/foot for wet lab space), tenants, who stay up to five years, have access to capital investments and a network of experts who specialize in various technology manufacturing fields. Success story: Revenue for 1992 incubator graduate Orasure Technologies ( OSUR), which makes oral HIV tests, soared from $77,000 in 1989 to $71.1 million in 2008. Incubator grad Ciclon Semiconductorwas acquired by Texas Instruments in 2009. 4. Louisiana Business and Technology Center Location: Baton Rouge, La. How to apply: Interested applicants can get in touch with Executive Director Charles D'Augustino. The application process includes submission of a formal business plan. What's the deal? Besides cheap rent, clients gain access to business and financial counselors, not to mention an eclectic group of neighboring startups. Current tenants include Foam Finger Nation, a social-networking site for sports fans, and BioFluidica, which makes instruments for DNA analysis. Tenants typically stay at the center for three to four years before moving on to other digs.
Success story: A 1992 graduate, Object 9, masterminded the 2003 retro-branding campaign for Pabst Brewing Co.'s Pabst Blue Ribbon beer, and has done large projects for the company's Old Milwaukee brand. 5. Center for Emerging Technologies Location: St. Louis, Mo. How to apply: Interested applicants should ping the center. What's the deal? Largely focused on life sciences, the center offers myriad resources to help scientists gain business savvy, and helps new businesses apply for research grants and seed capital. Success story: Medical-device company Stereotaxis ( STXS) went public on the Nasdaq before even graduating from the incubator in 2005. 6. Austin Technology Incubator Location: Austin, Texas How to apply: After filling out an initial application form, successful applicants are invited to pitch their ideas to a team of ATI directors and then, if they're still standing, to a so-called success committee, which makes the final decision. Benefits: Tenants benefit from mentorship from venture capitalists, as well as networking opportunities with ATI's partner companies, including AT&T ( T - Get Report), IBM, Motorola ( MOT) and Dell ( DELL), all of which have Austin offices. Success stories: IBM acquired two ATI graduates, BuildForge and Webify, in 2006. ATI also has hatched at least four companies that went on to IPOs. -- Reported by Carmen Nobel in Boston.