business incubator as anchor tenant for ypilanti’s water street

I know I already said that I had my great idea for 2007, but I think I’ve got another one. Actually, someone else might have had this particular idea first, but, since I haven’t read it anywhere else, I’m going to take credit for it… The details supporting the idea are below, but here it is in a nutshell… The City of Ypsilanti should pursue federal and state grants in order to construct a business incubator as an anchor tenant in the Water Street development. If I’m interpreting all of the information I have correctly, this could be done at almost no cost to the City. (They City would probably have to donate the land, however.)

(An “incubator,” for those of you not familiar with the term, is a brick and mortar facility in which multiple startup companies are housed. These entities share core facilities in an attempt to keep down startup costs, etc. There is also generally a new business development specialist on hand to consult on strategy, coordinate meetings with potential funders, aid in the attraction of employees, etc. At some point, these companies are encouraged to leave the incubator so that new companies can come in and take their places. As most new companies fail, this is a risky undertaking. And, in exchange for accepting some of that risk, the backers of the incubator sometimes take an equity stake in those companies being launched.)

This just kind of dawned on me a few minutes ago, as I wrapped up my writing of the minutes of the August 20 Ypsilanti 2020 Task Force meeting. At that meeting, members of the Task Force were joined by representatives of the EMU Business School, Ann Arbor SPARK, and the UM Center for Economic Diversification. The session began with each of the representatives talking about what their respective organizations did, and how they might be of assistance to the City of Ypsilanti as we face the ramifications of this looming budget crunch. Several ideas were discussed during the Q & A that followed. If you want to watch the whole thing, Steve Pierce has video on his site. For the purposes of our discussion, however, I’m just going to select the bits and pieces relative to the establishment of an incubator in Ypsilanti.

First, we heard from Amy Cell, the Director of Talent Enhancement at the regional economic development group Ann Arbor SPARK, who mentioned that some preliminary discussions have already taken place on the subject of a SPARK presence in Ypsilanti. One of the ideas being discussed, we were told, was an incubator to spur the creation of local high-wage-paying businesses.

David Mielke, the Dean of the EMU Business School, who has experience with incubators and sits on the Board of Ann Arbor SPARK, said that ideally such a facility would be 5,000 square feet, with 500 square feet for each of 10 businesses. (My assumption is that many of the companies to occupy such a space would be launching from University research conducted around the state of Michigan.) Mielke also mentions that such an incubator would cost on the order of $250,000 to operate annually.

At another point in the conversation, after mentioning that Ypsilanti is in a favorable position to attract federal funding due to the closing of the Visteon plant, Larry Molnar, the Director of the UM Center for Economic Diversification, mentioned that the Economic Devolopment Administration (EDA), in the past 36 months, has put $16 million dollars worth of grants into Michigan for incubators. (I need to confirm this number.) “They’re in the incubator business,” he says. If, he says, after we as a community write our Economic Recovery Plan, we determine that an incubator is something that we want, he’d be happy to work with us on a grant to the EDA.

Molnar, who often does due diligence work for the federal government on such matters, says that he’s doing three or four incubator feasibility studies right now. One of them, he tells our group, is for the Washtenaw area. (He said that he could share that report with us, but I haven’t seen it yet.) Assuming his analysis is favorable, it’s hard to imagine there’s an area of the County that could use such a facility more than Ypsilanti. (To get the average one up and running, he says we’re talking about $1 to $2 million.)

Molder, at some point in the meeting, also alludes to the fact that the Michigan Economic Development Corporation (MEDC), in the past few weeks, has put out $1.7 million dollars for incubator grants. And, word is, they’ll be making similar investments for another two years. That money, he tells us, is Community Development Block Grant (CDBG) funding. It’s “HUD money,” he explains to us, but it’s not considered federal money. So, the EDA, which requires a match for such projects, would consider MEDC CDBG money as “Ypsi money” toward a match. (This is a very good thing, as it means we could get something going with no money from the CIty coffers.)

The upshot, if I’m interpreting all of this correctly, is that Ypsi could, if it played its cards right, qualify for something on the order of $500,000 to $1 million from the MEDC, through the CDBG program, and then use that money as a match when going after EDA funding. And, I’m thinking, as an act of good faith, the City could contribute some portion of the Water Street parcel, the value of which, I’m assuming, would also be considered part of our community match. That would put between $1 and $2 million in play for a facility.

I could go on and on… The facility could be “green,” and we could stipulate that some percentage of the companies brought into the incubator be “green” companies. I’ve heard Congressman Dingell speak elsewhere about a Michigan BioFuels Lab — why not put it in Water Street too? Why not position Water Street as the first green/sustainable business zone in the country? The City, according to this vision, could give away parcels to companies dedicated to such endeavors (as long as they were paying taxes)… OK, maybe that’s a bit too ambitious, but, at the very least, let’s go for the incubator. I can’t help but think that having a commitment for a 5,000 square foot facility with 10 new companies wouldn’t bring a few top-tier developers back to the negotiating table.

The plan isn’t without its flaws. First and foremost, the business of incubators is fraught with risk. Incubators fail all of the time. But, personally, I think, for the good of the community, we just need to see something happening on the site… Second, I don’t really like the fact that this vision, as I’ve outlined it, requires building a new facility. I’d much rather refurbish an older building for the purpose, but, unfortunately, the Water Street property doesn’t have anything that would lend itself to such a use. And, I think the Water Street location is absolutely critical, as we need something there to spur development… I’m sure there are other downsides as well, but those are the only ones I’m going to give you. You’ll have to come up with the rest on your own.

So, while a minor league baseball team might be sexier, I think this might be easier to accomplish in the short-term. I also don’t think that one would preclude the other from happening. So I’m hoping no one tries to make this a situation where we’re put into opposing camps. Being pro-incubator isn’t being anti-baseball.

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  1. mark
    Posted September 3, 2007 at 1:41 pm | Permalink

    On re-reading the post, I see how it might sound like I – at least at the beginning – was taking credit for the idea of an incubator. I wasn’t. My contribution, for the most part, was just the part about putting it on Water Street to spur further development and putting together some of the grant pieces that were mentioned in various places.

    My suggestion would be to put together a Water Street Incubator work group ASAP to start looking into it in more detail.

  2. egpenet
    Posted September 3, 2007 at 9:58 pm | Permalink

    There are two empty and serviceable sites within one block of EMU better suited to the incubator idea … Ave Maria and the old Barfield executive offices.

    Once Ford drags their sad ass out of the ACH site, there are several buildings on that site ideally suited and ready to go.

    Why aren’t we suing Ford’s butt for the tax credits we gave them over the years to stay … “pretty please, kiss, kiss, kiss” … hmmm? Wimpy, whimpy, whimpy.

    BTW, Ypsi is crawling with new business and entrepreneurs! I think an incubator for a “green” product or organization would be excellent.

  3. mark
    Posted September 3, 2007 at 11:08 pm | Permalink

    I’d love to see an incubator in Ave Maria, Ed, but I think if we’ve got a shot to kill two birds with one stone we should take it. If we can leverage state and federal funds to create a viable anchor tenant for Water Street, I think we need to pursue it. For our City to stay solvent, Water Street has to get moving.

  4. Amanda
    Posted September 4, 2007 at 12:37 am | Permalink

    incubator commercial kitchen as part of it would be GRAND…. there’s a new one over in hart, michigan– and a lot of models for how to do it well all over, but really nothing like it anywhere in our area. an incubator kitchen allows people to rent space to make/process/etc food-related products. we have a big need and market opportunity for it around us– and it’s a way to support entrepreneurs from very small to much bigger scale… as well as support local food systems!

  5. egpenet
    Posted September 4, 2007 at 9:15 am | Permalink

    1) Splitting Water Street into little pieces … anything more than two, perhasp, three will make it undesireable.
    2) The city can’t afford to even GIVE it away, much less offer tax rebates.
    3) Detroit’s incubator for tech is over by Second and Temple, I believe, and has been successful due to its close proximity to Wayne and the Cultural Center, and the Ford Hospital.
    4) Using what there will immediately begin to produce benefits rather than build new.
    5) Even downtown would be better.
    6) The parcel (Water Street) needs to be big … more than naming a restroom for $5000.

  6. egpenet
    Posted September 4, 2007 at 9:18 am | Permalink

    Amanda’s idea is super! Ties in to what Kevin Hill has done in Howell and the concept behind the former Oasis … even more importantly the latest trend/fad in hospitality here and abroad are demonstrator kitchens, where the vacation or the outing revolves around helping a prominentl chef preparee the local cuisine.

    Amanda … how’bout a set of outdoor community ovens at the Frog Island community garden … where we weekly prepare our breads and smoke our meats, etc.?

  7. Ed
    Posted September 4, 2007 at 10:45 am | Permalink

    I’ve smoked my meat many a time on Frog Island.

  8. Rodneyn
    Posted September 4, 2007 at 11:55 am | Permalink

    A business incubator may have a better chance of success if it is located within an existing, renovated building with “good bones” (open floorplan, solid structure, heavy duty electrical/mechanical infrastructure) and close to other business and commercial services (banks, restaurants, supplies, etc.).

    Constructing a new building and site improvements would require a much higher initial investment, reducing the potential return and burdening the incubator with higher operating costs.

    The problem with Water Street is that the only “existing building” remaining that might fit that bill is the building that used toi house Crawford Door Co. and the old MESC offices on Park & Michigan. The building isn’t bad, but the location is awful.

    Most importantly, for any business incubator to succeed in the City of Ypsilanti, the city government should not be involved in any way with its operation.

  9. egpenet
    Posted September 4, 2007 at 2:06 pm | Permalink

    The mix of old and new in our downtown … or Ave Maria, or Barfield, or what almost happened with the artist group at 555 … are perfect examples of incubators in a natural, ready-made, downtown setting.

    Grennwich Village USED to be such a place, as WAS Soho … till the prices went up. Even Harlem was incubating quite nicely until the city began to tax the success story to death. For some time now, Brooklyn neighborhoods have been THE best places for a diversity of arts, crafts, small shops, tech start-ups, and all types of service, product and retail operations.

  10. Posted September 4, 2007 at 2:35 pm | Permalink

    Hm… I can’t believe I didn’t think of this when I met with you a couple of weeks ago, Mark. When Think Local First was first getting started we did a lot of research into various things we could do in the future, and one was a green/’local living economy’ business incubator. I still have that report somewhere… basically what it said what you’ve summarized above – most larger/official incubators are allied with a local University (which gives them access to resources and talent), and offer a range of services – just office space, or a lot of intensive mentoring/business assistance. Incubators do tend to center around a particular sector of business, which has tended to be high-growth industries (IT, bio-tech) with a goal of getting the companies big enough to get large fast, and eventually go public. (At which point they relocate out of the state, etc etc, but I digress. The point is that the most often used model of incubators might help economic development as a whole, but not necessarily help foster businesses who want to stay in the area).

    Obviously Think Local First isn’t large enough to think of doing this, but I still think about it now and then when I see some of the great existing business spaces downtown.

  11. Posted September 4, 2007 at 2:50 pm | Permalink

    You know, now that I think of it more, there are really two incubator models that would fit. One would be the new, shiny building built on Water Street with grants and help from EDA funding / EMU/ U of M/ etc. It would probably have to focus on high-growth high-wage industries, but hopefully green energy would be one of these potential industries.

    The other one would be more informal – sustainability-oriented businesses that locate in one building with shared space and potentially some shared services. For instance, NEW in Ann Arbor was supposed to be a nonprofit incubator, but it turned out few of the nonprofits ever ‘grew out’ of it. It has turned into an affordable shared space for local nonprofits, which is very much needed.

  12. Posted September 10, 2007 at 11:21 pm | Permalink

    Yes, this is a great idea, but you can’t coin it my friend. I actually brought this up as a concept in 2005. Similar working models as evidence of viability were the New Center in Ann Arbor, and the Peace & Justice Center in Portland, Maine. Regardless… this would be a fantastic “just make it happen” project.

    Back then several of us were having a meeting of the Midtown Neighborhood Association at that fantastic coffee shop on MI Ave. The topic of discussion was if there was time to apply for a matching “Cool City” grant for a major project that would benefit the neighborhood. Several ideas were kicked around, and mine was a way to retain 555, and to provide a then young Growing Hope a home, to have a non-profit & micro business incubator. A community corporation would be set up to lease space below market rates to non-profits, micro businesses (<5 employees) and have large open spaces for artist studios. The idea goes on, but you get the point.

    There was limited capacity to do such a thing, so the grant was not applied for. Instead we built the community garden on Congress Street as a measured step to build the Association’s resume for future grant applications.

    So… I’d love to lay out a medium-range plan to make this happen. Heck, if I might even consider running for Council to see it through if such a demand for my time was wanted by friends and neighbors.

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