GERGEN/VANOUREK: Entrepreneurs key to future

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By Christopher Gergen and Gregg Vanourek

OPINION/ANALYSIS:

As the jobless rate reaches new highs and the economy continues to founder, many people advocate hunkering down and waiting for the storm to pass. That may be a smart strategy in some areas, but when it comes to the federal role in catalyzing innovation and entrepreneurship, we should be doubling down, not hunkering down.

History has shown that government - when deployed wisely - can play an important role in funding and stimulating innovation. Industries such as electronics, nuclear power, aerospace, communications and computing benefited greatly from federal research and development and other investments. According to Massachusetts Institute of Technology President Susan Hockfield, more than half of U.S. economic growth since World War II has come from technological innovation, with much of it stemming from federally funded R&D.

In today's stressed economic climate, we must ask where we get the biggest bang for our buck. Yes, "shovel-ready" projects stimulate job creation, but investment in innovation and entrepreneurship should be pursued with vigor, starting with large-scale renewable-energy programs.

One promising approach, often overlooked, entails investing in the creation and expansion of entrepreneurship and social innovation incubators across the country. Incubators are designed to help fledgling entrepreneurial firms flourish in their most vulnerable start-up period.

According to the National Business Incubation Association (NBIA), there are more than 1,000 incubators across the country, up from just 12 in 1980. NBIA estimates that in 2005, North American incubators assisted more than 27,000 start-up companies, which created more than 100,000 full-time jobs and generated more than $17 billion in annual revenue. Importantly, incubators have been shown to reduce the number of small-business failures. NBIA reports that 87 percent of incubator "graduates" are still in business.

A recent study for the U.S. Department of Commerce Economic Development Administration found that business incubators are more cost-effective in creating jobs than roads and bridges, industrial parks, commercial buildings and sewer and water projects. In fact, incubators are estimated to provide 20 times more jobs than traditional infrastructure projects. What's more, these incubators can serve as a rich source of community building and broader social impact.

One local example is the Affinity Lab on 18th Street Northwest. Perched atop the Diner in Adams Morgan, the Affinity Lab was started nine years ago by two Web-development entrepreneurs, Charles Plank and Berit Oskey. They needed space for their fledgling company and thought other entrepreneurs might want to share it. They were right.

Today, the Affinity Lab is home to more than 30 companies employing more than 50 people. Some of the companies are full-time "residents," while others pay to use the office space and for networking opportunities among fellow entrepreneurs. Some of Affinity Lab's companies estimate that a significant portion of their business comes from relationships built in-house. The success of the Affinity Lab, dubbed an "entrepreneurial launch platform" by Mr. Plank, has sparked expansion plans into one of the District's new entrepreneurial hot spots: NOMA - North of Massachusetts Avenue - in Northeast.

Similar stories can be found across the country. For example, Durham, N.C., is deploying the same incubator concept to invest in, support and connect entrepreneurs committed to leading sustainable social change in the community.

The most recent version of the stimulus bill contains a $250 million annual investment in public-private incubators in distressed communities through the Economic Development Association. This is a great start and should be part of a comprehensive economic package to help fuel our communities' primary engines of economic growth.

• Christopher Gergen and Gregg Vanourek are founding partners of New Mountain Ventures, an entrepreneurial leadership development company. They can be reached at authors @lifeentrepreneurs.com.