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2011-10-18 11:10:53
By Kate Dailey BBC News Magazine
Analysts suggest supporting innovative start-up companies to increase hiring.
For the second part in a series on job creation in the US, a look at incubators
designed to turn great ideas into huge corporations.
Massachusetts Institute of Technology's Entrepreneurship Center is located
equidistant from the university's business school, its media and architecture
school and engineering wing, in an area managing director Bill Aulet calls the
"demilitarised zone."
"The geeks can come over and the suits can come over and they can all work
together to build a company," says Mr Aulet.
Inside, it has everything a young entrepreneur might need to start a business:
soundproof phone booths for private calls with investors.
Cozy cubicles with whiteboard walls for meetings with business partners.
And boxes of boxes of Ramen noodles for strivers who can't spare the cash or
the time for a proper meal.
In one room, MBA student Birju Shah is hunched over a laptop.
He is the founder of MDBug, a medical transcription and electronic medical
records company, and Sugar Crew, a social networking site for people with
diabetes.
Next door, three 20-something men in jeans and T-shirts write formulas on the
wall.
They run Ubiquitous Energy, a company that has developed a way to make light,
flexible solar cells that can conform to almost any material.
Embracing innovation
Outside the building, an entrepreneurial "walk of fame" salutes giants like
Thomas Edison, Steve Jobs, William Hewlett and David Packard, as well as MIT
alumni Mitch Kapur, founder of Lotus Software, and Robert Swanson, founder of
Genentech.
Thinking outside of the box
The innovative approach of FastCap Systems, a company started with help from
the MIT Entrepreneurship Center, has the company feeling good about their
future. The BBC visited the Boston, MA offices for their optimistic take on
employment.
Founded in 2008, they make lighter, more fuel-efficient batteries for hybrid
cars and industrial use. The goal, says FastCap founder and CEO Riccardo
Signorelli, is to dramatically reduce the cost of hybrid cars, making them
accessible to more consumers. The early success of their company has them
looking to expand.
The implication is that the students working from dawn to dusk inside the
centre aren't that different from the industry titans memorialised outside, and
that they too could go on to create some of the most successful companies in
the world.
In a time when unemployment hovers at 9.1% - with unofficial estimates coming
in at much higher - most new companies created are those that only employ one
person: so called "jobless entrepreneurship".
But those companies supported by the Entrepreneurship Center have the potential
to help usher in a new era of job growth and economic stimulation.
In a report published last week by the presidential jobs council, "nurture the
high-growth enterprises that create new jobs" was listed as one of five
common-sense solutions to help reduce unemployment.
"If the United States is going to grow its labour force and sustain that growth
over the long term, government must foster an environment in which
entrepreneurs can create high-growth companies that succeed in a global
economy," the report says.
That work is already being done at MIT and other university-backed programmes
that seek to turn the intellectual capital produced on campus into successful
companies.
America's schools pump out some of the best-trained, most motivated students,
with the potential to make huge advancements in biotech, information systems,
engineering, energy, and medicine.
Start Quote
Starbucks frowns on doing biological experiments on their tables
Douglas Crawford Associate director, QB3
But current fiscal conditions make it difficult for those types of projects to
launch. Unlike smaller ventures, such as starting a law firm or a cleaning
company, nascent innovation-based businesses need a large influx of cash for
research and development and can take years to develop and bring their product
to the market.
"Those are capital-intense markets, with all the capital still sitting in the
sidelines," says Thom Ruhe, director of entrepreneurship at the Kauffman
Foundation.
"Banks are flush with cash and they're not lending it. Investors and hedges are
flush with cash, and they're not investing like they used to," he says.
"It's been this way for a couple years, and nothing we're looking into shows
that's going to change anytime soon."
Building global brands
Incubators like the MIT Entrepreneurship Center help in multiple ways - cutting
down on overheads by providing meeting space and infrastructure support like
wifi and computers, and helping to connect worthy projects with interested
investors.
"This centre is absolutely central to the success of our operation," says
Ubiquitous Energy co-founder Erdin Beshimov.
'We want to build a fantastically successful company that's a great place to
work for, that has a global brand and a tremendous social impact world wide,"
says Mr Beshimov. "It's a good goal, but it's not an easily achievable goal."
How to foster innovation
Suggestions from the presidential jobs council include:
Reform immigration policies to attract and keep highly skilled entrepreneurs
Produce financial incentives for firms to go public
Incentivise investments in start-ups
Increase patent office staff to keep up with demand
Shorten patent application process
Reduce student loan burdens for young business founders
Support mentorship programmes
Source: Taking Action, Building Confidence: a report from the president's job
council
For companies that dream big, institutional support is critical.
Having a fabulous technical mind or an amazing biotech product doesn't mean
much without the ability to navigate loans, patents, and investor relations.
And unlike other small businesses, highly innovative companies can't often get
started in an empty garage or rented office space.
"You can't create a biotech startup at a Starbucks table with a notebook," says
Douglas Crawford, associate director of the California Institute for
Quantitative Biomedical Research (QB3), an entrepreneurial support programme at
the University of California.
"Starbucks frowns on doing biological experiments on their tables."
Founded in 2000 and active for about six years, the state-supported programme
hopes to turn technology created at the University of California into companies
that can create jobs for the rest of the state.
"We have a mandate to support the sort of science that can lay the foundation
for whole new industries, then ensure that the fruit of that work gets to
market as quickly as possible," says Mr Crawford.
That includes renting single benches in hi-tech labs at a price that "even a
grad student could finance on a credit card", he says.
Mixed results
Four of the six companies that originally rented lab space in that lab received
venture capital funding, while another was purchased by a larger company for
$50m ( 32m).
But not all companies started through these incubators will succeed, and even
those that do won't restore America to its industrial glory days.
Ubiquitous Energy's Mr Beshimov says that his company's main staffing needs
will be engineers with advanced degrees.
Though Mr Crawford notes that many of the biotech manufacturing jobs can be
done by employees without advanced degrees and trained on the job, the output
is small.
The 45 companies successfully aided by QB3 currently boast about 180 employees
- impressive by biotech standards, but barely a dent in California's 12.1%
unemployment rate.
On the other hand, HubSpot - a marketing software company founded in 2006 by
MIT's current entrepreneur-in-residence - has over 300 employees, and is hiring
across several departments.
Supporting innovation can't be done in academic settings alone.
Government funding, immigration reform, and corporate co-operation are just
some of the things needed to help foster new companies that will create new
jobs.
But for the young entrepreneurs currently at work, there's no time to wait.
Their big idea might just be the next big success.