Cluster-Focused Business Incubators Fuel Urban Economic Growth

Written by Amanda Maher

Business incubators used to be considered an innovative approach to supporting small businesses. Now they are ubiquitous, but some cities are taking the concept a step further and aligning incubators more strategically with their economic development plans. They create incubators that bring together entrepreneurs around a specific industry cluster, such as energy or food.

Clusters refer to a set of closely related and interconnected industries operating within a particular region. Typically, the term cluster is used informally to refer to an economic sector, an industry, or an interconnected set of businesses operating within a defined area. In a new survey of the nation’s 10 largest metro areas, ICIC found that between 2003 and 2011, the “dominant” clusters in aggregate grew roughly three times faster than the ten metro areas in aggregate. Cluster-focused incubators help to create a critical mass of interconnected businesses, thereby helping local clusters thrive.

Two of ICIC’s What Works for Cities case studies show examples of inner city business incubators focused on the food cluster. CropCircle Kitchen, in Boston, offers entrepreneurs both private and shared spaces, including cold/frozen storage, dry food and equipment storage, and access to processing equipment – kitchen equipment that is often costly for a startup company to acquire individually. In less than four years, CropCircle launched more than 100 companies, creating more than 200 local jobs. CropCircle recently expanded to include CCK Pearl, a 36,000 square foot food production facility in the former Bornstein & Pearl Meat factory in inner city Dorchester.

La Cocina (“The Kitchen”) is a non-profit business incubator in the heart of San Francisco’s Mission District, a working class community with a high immigrant population. Many of the incubator’s entrepreneurs had long worked out of their own homes. La Cocina formalizes their operations and helps entrepreneurs become self-sufficient. Though the incubator initially focused on providing Latin American immigrant women with low-cost, licensed commercial space, it has since expanded its support system to include access to food industry experts, resources and business training to which many low-income entrepreneurs would otherwise lack access. La Cocina has launched more than 10 businesses, is incubating 30 others, and has created more than 100 locally based jobs.

In Los Angeles, where the City has committed to growing the clean tech, life sciences and biotech industries, the LA Cleantech Incubator (LACI) specifically seeks out early-stage clean tech companies and helps them grow into the formal marketplace. LACI offers “plug and play” space, mentorship and education, and links entrepreneurs into extensive networks including local government, universities and corporate partners.

One of those LACI partners is JPMorgan Chase. “Beyond their vital role in our economy, small businesses are often the source of innovation and inspiration. Helping local, small business clusters grow faster and create more jobs will take JPMorgan Chase’s involvement in the entrepreneurial community to a new level,” says Scott Geller, CEO of Chase Business Banking. The bank’s support of the clean tech sector in Los Angeles “is an innovative investment in the city’s future,” echoes Los Angeles Mayor Eric Garcetti.

Finally, in New Orleans, where the city continues to rebuild its base of businesses after the devastating Hurricane Katrina in 2005, Propeller offers incubation and co-working facilities for a range of entrepreneurs—all of which strive to achieve some sort of social mission. Serving a more diverse group of interests than the incubators above, Propeller still seeks businesses in one of four target clusters: food, water management, public health and public education. Between 2011 and 2014, Propeller has incubated 35 new ventures and these companies have collectively generated $6 million in revenue and 72 new jobs.

Despite their focus on different clusters, each incubator is alike in that it provides budding entrepreneurs and emerging firms with mentoring, access to extensive business networks and connections to capital providers. Indeed, in each of the nation’s 10 largest metros, incubators and networking are the most common cluster-oriented small business growth strategies.

Read ICIC’s latest report, “The Missing Link: Clusters, Small Business Growth and Vibrant Urban Economies”.

Read ICIC’s latest What Works for Cities case study, “Propelling Business and Job Growth Through Social Innovation”.

Above Photo by Cheryl Gerber of The Propeller Incubator in New Orleans