County Obtains $1.9 Million Grant for Incubator Program

From the September 10, 2004 print edition of the St. Louis Business Journal
By Rick Desloge

Startup businesses in St. Louis and St. Louis County can choose from among a half-dozen business incubators. But where does a small business that's outgrown the incubator turn?

The St. Louis County Economic Council plans to address that question with a new Center for Business Growth it expects to unveil in late October or early November. The new center will have a physical presence on the 10th floor of the World Trade Center building in Clayton, but also will operate as a virtual incubator for companies that are beyond the startup phase, said Bruce Hoskins, an executive director of the new center.

"Many of these later-stage businesses need the same kinds of support as the incubator companies, because they are out there on their own and don't always have all the necessary skills," said Jan DeYoung, who also oversees business incubators St. Louis County operates with its partner, St. Louis City Development Corp.

St. Louis County secured a $1.9 million grant from the Small Business Administration (SBA) to pay for the new program, which will focus on businesses that have five or more employees and a commitment to expand. The Center for Business Growth will offer business coaching, executive mentoring on issues such as interviewing techniques and buying health insurance, and networking opportunities and programs to generate business leads. Hoskins, who had been director of marketing for technology firm G.A. Sullivan, and Donna Heckler, also an executive director of the new center and formerly a marketing executive with Medicine Shoppe International, joined the Economic Council staff in May to spearhead the new effort.

"We're calling it an incubator without walls," Hoskins said. "It should be able to serve many more times the 50 or so startup businesses" now in the Economic Council's physical incubators.

The Economic Council currently operates three incubators -- in West County, South County and in midtown St. Louis -- that can serve a total of about 50 companies. A fourth incubator that will serve 10 to 15 companies is scheduled to open in Wellston in north St. Louis County next month. Startup businesses can remain in the centers up to four years. Unlike other specialized incubators for high-tech and biotech firms, the Economic Council's incubators serve a broad range of companies that are usually financed by the owners or through family and friends.

Originally, the Economic Council was going to use the SBA grant to open another physical incubator. The idea changed to a small-business resource center both because of the need and the opportunity to serve more businesses, Heckler said.

"I'd still like to have access to some of these incubator resources," said Mary Pownall, who with her husband, Steve, owns Bemas Software Inc.

Bemas, which develops human resource and benefits administration software for clients nationally, moved out of the West County incubator in August 2003. The seven-person firm still faces growth issues and other challenges that the incubator staff helped Bemas address, Pownall said.

"We'd always had in mind putting together an advisory board," she said, and that task would be easier if the business had a continuing relationship with the incubators.

That kind of help would be available in the new center.

Most of the SBA grant money, 45 percent, is going to run programs for the new center's small-business clients, Heckler said. Development and management of the center and its facility, combined, will take a similar percentage.

She cited 2001 U.S. Census data that showed the St. Louis area had only a 4.5 percent growth in firms with 10 to 500 employees but managed to achieve the same growth in employment and payroll as the United States as a whole, which had a growth rate for firms with 10 to 500 employees nearly triple that of St. Louis. Of businesses in St. Louis, 96 percent have less than 500 employees, according to Census data.

It's not clear from Census data why St. Louis does a better job at stimulating growth in jobs and payroll. Heckler speculated that the region has a wealth of former corporate executives who start businesses here rather than leave the area, and St. Louis has strong educational institutions that support the small-business community.

Businesses that work with incubators have a greater chance of surviving, and businesses with five employees or more have a greater likelihood of growing, she said.

The SBA grant came after a push by U.S. Rep. Richard Gephardt, who visited the Economic Council's incubator in South County last year, DeYoung said. His staff is still hammering out details for the grant, including lining up mentors from some of the region's larger businesses.

2004 American City Business Journals Inc.