Changing Gears is a public media project about the future of the industrial Midwest. Each week, reporters Dan Bobkoff in Cleveland, Niala Boodhoo in Chicago and Kate Davidson in Ann Arbor cover issues of interest to the Great Lakes region. Changing Gears also sponsors public events and conversations.
CHICAGO – Over the past decade, the Midwest has led the nation in creating the biggest pockets of poverty. That’s the headline from a report from the Brookings Instituition, which was released today.
After a national decline in the 1990s, the population of poverty-stricken neighborhoods rose 30 percent in the last decade. (A poverty-stricken neighborhood is one in which at least 40 percent of the people live below the poverty line. In 2010, that was defined as $22,314 for a family of four.)
In our region, concentrated poverty — meaning people living in these neighborhoods — has doubled. The Great Lakes metropolitan areas of Toledo, Youngstown, Detroit and Dayton have experienced some of the largest increases among all metropolitan areas for concentrated poverty.
According to the association’s website, it looks like almost all the front-runners for the Republican nomination for President will be there – sans former Massachusetts Gov. Mitt Romney and former Godfathers Pizza CEO Herman Cain.
NAM is broadcasting the forum live on its website beginning at 10 am CT . It will also air in Iowa through the Iowa Public Television network. The session will be held at the Vermeer Corporation. Its CEO, Mary Andringa, is the current chair of NAM’s Board of Directors.
Read Changing Gears’ coverage of manufacturing here.
Business incubators are designed to turn an idea or concept into a successful company. The goal is for these new companies to bring jobs and revenue. Across the Midwest, some have been around for decades, while new ones are just starting up. But many tend to produce few companies. Last week, we did a series of stories looking at the so-called Magic Bullets to save our economy. In that style, here, I report on what principles incubators need to focus on to create successful offspring.
Each Friday, inside the old Northern Brewery building in Ann Arbor, 4:30 p.m. is known as “beer thirty”. That’s when the self-described tech geeks who are part of this informal business community gather for drinks.
The Tech Brewery houses three dozen start-ups – but don’t call it business incubator.
“We don’t call ourselves an incubator,” founder Dug Song said. “If anything we call ourselves a start-up coop.
Song has his own start-up – Duo Security. He began the TechBrewery after being frustrated by traditional business incubators. In his opinion, they provide little more than cheap rent for lots of start-ups – instead of what it takes to get a company up and running.
“A lot of folks get to a point where they don’t want to be in a hoteling kind of environment, which is a lot of what these incubators tend to be,” he said. “They’re a little bit more isolated.”
The lack of a hotel environment drew Victor Volkman to the Tech Brewery. He had been involved in other incubators where he says his business ideas went nowhere.
“You have a biotech company next to a software company next to a something of completely different origin and we really didn’t talk to each other,” he said, adding the value in the Tech Brewery is running into someone in the hallway who can immediately help solve a problem.
The biggest cost for start-ups is office space. That’s why most incubators provide free or reduced rent. But it’s not just about office space. Having the same type of companies together helps everyone grow – something Volkman said he has found at the Tech Brewery.
Volkman left the traditional incubator environment because it didn’t work for him. That turns out to be a common sentiment.
The University of New Hampshire at Manchester’s Kelly Kilcrease studied incubators across the country. Out of the almost 500 entrepreneurs he surveyed, Kilcrease found that their opinion of incubators was “lukewarm – at best”.
Based on Kilcrease’s research, the happiest – and most successful clients – came from a specific type of incubator:
“Those that stress a certain type of clientele, deliver high quality services and those who have professional managers are more apt to be successful than those that do not,” he said.
Kilcrease thinks an incubator’s true measure of success is its graduation rate – the companies that actually make it on their own, apart from the incubator.
Often, incubators – like TechTown in Detroit – don’t publish graduation rates. The Incubator in Evanston, Illinois is one of the oldest in the Midwest – it celebrates its 25th anniversary this year. They’ve helped more than 350 companies and have graduated 23 companies that remain in Evanston. Director Tim Lavengood said a “fair number of graduates” overall is 135.
“You know – here’s some cheap office space, here’s a photocopier, here’s a fax machine,” he said, adding: “We don’t really care what you’re doing, but please turn yourself into a globally successful corporation.”
They quickly realized that approach wasn’t going to work. In 2001, they began to focus on software technology firms.
Today, the organization has a network of more than 1,000 people virtually through a private LinkedIn group, as well as four buildings full of clients – including nine companies that no longer need the incubator’s help. In fact, these companies pay rent which makes up about a third of the nonprofit’s $750,000 total budget. (A rent, by the way, that Cossler says is a premium on other commercial office space in Youngstown.)
Ten years ago this month, Turning Technologies walked into the Youngstown Incubator with its idea – adapt audience response technology to be used in classrooms.
Today, it’s a $50 million company that employs 200 people. One of the YBI’s paying tenants, the company takes up an entire building.
Co-founder Mike Broderick says the YBI is “fairly rare” in its level of success, which he attributes to their focus.
“What we really needed the most was expertise,” he said. “The introduction to potential clients, to people who had been through the type of thing we had done before, who could provide advice.”
Broderick told me something academic research backs up – he thinks the company would have succeeded even without the incubator. But the YBI’s network accelerated his company’s progress. And he thinks that’s the best an incubator can do – accelerate a potential company’s growth.
This story was informed by the Public Insight Network.
Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a “fair number” of overall graduates from the incubator is 135.
All week, our Magic Bullets series has focused on big ideas that political leaders say can boost the economy. One you hear mentioned often is small business. But can small businesses really grow enough to help the overall economy? That’s what I set out to find out.
It’s not just Obama. Warm feelings about small business come at all levels of governance, and on both sides of the aisle. Michigan’s Republican Gov. Rick Synder is the darling of the state small business community. Earlier this summer, at the Small Business Association of Michigan’s annual meeting, he urged members to “Talk about the jobs you’re creating, even if it’s one”, because, he that would be the “backbone of the reinvention of Michigan”.
CHICAGO – Think the recession has been rough on your wallet? Consider this: Latino families, an ever growing part of the Midwest, saw a 66 percent decrease in wealth between 2005 and 2009, losing $2 for every $3 saved during that time.
That’s the first of many sobering statistics about Latino families that were presented by my public broadcasting colleague Ray Suarez of PBS NewsHour this morning at a Latino Policy Forum breakfast. Suarez said that Latino familes’ average wealth went from $18,359 in 2005 to just $6,325 in 2009.
Why? Suarez spoke about the “tumbling dominoes” of the heavy concentration of Latinos who work in construction, as well as families’ disproportionately high exposure to sub prime loans and diminishing home equity.
(The Economic Policy Institute wrote a few years ago about the tie between Mexican workers in construction and how housing start data can be correlated with the actual amount of money being sent back to Mexico.)
Steve Jobs’ death last week has reminded everyone firsthand the notion that everyone has ideas, and very few become actual products. That’s because ideas need a push – and in some cases, a big one, from from science, to become reality. It sounds obvious, but when we’re talking about actual products, that translates into actual jobs, and actual economic activity, it’s something worth exploring. That’s why I was so interested to learn more about Battelle Memorial Institute.
Columbus, Ohio – Innovation can strike in a variety of ways.
Take Emery OleoChemical in Cincinnati. The company started making candles in 1840. Today, it uses the same tallow to make things like glycerin, which goes into soap, detergent and makeup. And it uses technology that mimics what happens in a lightning strike to make the stuff. Mark Durchholz, one of the company’s regional business directors, explained how it works:
“We discharge electricity at very high voltage across oxygen and we make ozone gas,” he said.
A few years ago, the company realized it could use this same technology to branch out into a whole new business. By adapting this technology, the company has created three new product lines – now they’re making materials that make foam, not just from crude oil, but from soy.
If you’ve never heard of Battelle, not to worry. Neither had Emery OleoChemical – despite the fact that both have been around for more than 100 years, and Battelle is just 100 miles away in Columbus, Ohio.
Navistar builds all kinds of trucks across North America: at nonunion factories in the South and Mexico, as well as union shops in the Midwest. But the United Auto Workers at its Springfield, Ohio plant say a year of changes has made them competitive with those nonunion plants. And, they say they’re hopeful for the future of their jobs in the Midwest.
As I reported back in March, the economic ties between Japan and the Midwest are strong. Governors from Illinois, Iowa, Michigan and Minnesota are attending the 43rd annual joint meeting of the Midwest U.S. – Japan Association in Tokyo next month, the Japan External Trade Organization reported in its most recent newsletter.
Most recent manufacturing output data shows that the U.S. auto industry has been able to bounce back from disruptions because of the earthquake, Reuters reports.
There’s major technology news for our region, with the announcement by Google that it is buying Libertyville, Ill.-based Motorola Mobility for $12.5 billion in cash. Google said it would pay $40 per share, a 63 percent premium, based on the company’s Friday closing price on the New York Stock Exchange.
On Monday, shares of Motorola Mobility jumped as much as 59 percent, Reuters reported.