Business incubator review lacks data

A new, preliminary review of small-business incubators statewide found that while Washington has spent millions of dollars on such organizations, there isn’t enough data to adequately measure their performance.

But incubator advocates contested that conclusion Wednesday, saying there is proof that incubators boost small businesses’ success.

While some incubators, including the local Spokane Intercollegiate Research and Technology Institute, submit data to the state, the information isn’t sufficiently consistent to show how incubators’ client firms fare compared with other small businesses, according to the report by auditors from the Joint Legislative Audit and Review Committee.

“Stated simply, claims of saving businesses and saving jobs may be misleading when they are not backed by rigorous analysis that compares incubated to comparable non-incubated firms,” according to the 20-page document, commissioned by state lawmakers.

More than half of new small businesses don’t survive after four years, according to federal statistics.

A state agency founded in 1994, Sirti differs from most other state incubators. It offers lab and office space in two buildings and services aimed to help grow Inland Northwest technology firms.

Sirti Executive Director Kim Zentz contended her organization does report the type of information requested by auditors. While Sirti hasn’t finalized a life-to-date review of clients’ success rates, Zentz said, she hopes it will be included in the final report, due next month.

Sirti has reported certain statistics, such as the number of jobs created by client companies, to the state consistently for more than two years, she said.

“We feel that it would have been very easy to point out that Sirti is a notable exception, but clearly (the report) was focused on a particular program,” Zentz said, referring to grants to some nonprofit incubators through the state’s economic development agency. “This is nothing new here for us.”

John Woolley, a research analyst for the report, said auditors tried not to point out specific incubators. There are “certainly examples of incubators collecting outcome information which we would hope then would allow for that comparative analysis, which is hard to do,” he said.

Woolley pointed out that incubators, like economic development measures generally, are difficult to measure.

He presented the report to the legislative committee on Tuesday, and some lawmakers discussed a need for greater incubator reporting.

Sirti has received $25 million in federal and local matching funds since 1994, and it receives money biannually from the state. It is slated to get about $1.7 million from the state for fiscal year 2008.

“I think it’s a great idea for the state to review these particular questions about business incubators,” Zentz said. “I think they’re asking the right questions.”

As of last fall, there were 1,115 incubators nationwide, according to the National Business Incubation Association. Statewide, there are 14 incubators with facilities, two that operate “virtually” without a building and eight under development, said Lincoln Ferris, executive director of the Washington Association of Small Business Incubators