- The Washington Times - Monday, September 11, 2000

Foreign companies that want to put down roots in the Washington area get a shot in the arm if they use the services of Incubator America, but no one is promising them a cakewalk.

After a year of operation, the Arlington-based hothouse for new technology firms believes it has found a niche to distinguish itself from the numerous incubators and their close cousins, the "accelerators" that have popped up in the Washington area over the past few years.

But Incubator America, which is affiliated with George Mason University's Enterprise Center, has also wrestled with one of the toughest tasks of any firm that wants to be an international player: getting the word out overseas.

"The biggest challenge is marketing the incubator itself," said Marshall Ferrin, director of international business development at the center. "It's expensive and it's slower than marketing domestically."

With one Finnish, one Israeli and two Japanese companies already ensconced in Virginia, Incubator America can point to the initial signs of success. But getting them there was anything but scientific.

The Finnish and Israeli embassies proved important conduits for two of the firms. There was also a road trip to Tokyo and Osaka, aided by the Japan External Trade Organization. And, oddly enough, that trip brought Incubator America into contact with a Russia firm ready to take the plunge in the United States.

Incubators and accelerators typically function by taking an equity slice of the companies they agree to take on as clients. In return, the companies usually get office space in the incubator, help with ancillary services like accounting, and, very importantly, assistance in attracting venture capital.

Incubator America, Mr. Ferrin is fond of repeating, is so far the only place in the Washington area where foreign firms can turn for assistance in making it in the U.S. market, still the brass ring for young technology firms the world over.

Local focus

Incubators that cater to a foreign crowd overwhelmingly are an exception, not the rule, and for a simple reason, according to Dinah Adkins, executive director of the Athens, Ohio-based National Business Incubator Association.

Planting foreign companies here, at least in the initial stages, tends to create employment in the foreign country, rather than at home in local economies, she said.

Many incubators there are roughly 950 nationwide are at least partially funded by local economic development authorities, and they tend to shun projects that do not translate into new jobs at home and a wider tax base.

"They want to create new companies, and new jobs, in the United States, in their own neighborhoods," Ms. Adkins said.

That said, incubation is not a zero-sum game, Ms. Adkins said. International Business Incubator, a Silicon Valley-based organization, has shown that it brings money into the local economy by virtue of the ancillary purchases made by foreign companies.

They purchase new cars, airline tickets, and secretarial services, among other things, Ms. Adkins said.

Mr. Ferrin concurred with this assessment. But he also said that Incubator America, which receives funding from Arlington County, also generates employment opportunities, though they would be focused on sales and marketing in the United States for the foreign firms. Research and development typically already takes place largely in the company's home country, he said.

Still, Mr. Ferrin said Incubator America is aware that it needs to be self-sustaining to avoid charges that it is simply helping foreign companies establish here. Firms that are accepted into the incubator pay a flat fee of $1,200 per month for office space and certain business services, and are expected to leave the space within two years.

"One lesson we have learned is that the incubator needs to stand on its own two feet," Mr. Ferrin said.

The main difference between an internationally oriented incubator and a domestically focused one is that foreign companies need a proven track record in their home countries before being accepted by Incubator America.

"In the United States, companies [that go into incubators] have to have good ideas," Mr. Ferrin said. "The foreign companies need to have plenty of experience and good financial stability."

Another Washington area organization, Bethesda-based Agnition, is gearing up to nurture American companies with an international flair. But Agnition is not nearly as far along as Incubator America, according to Sujal Shah, Agnition's chief executive officer and managing director.

The company, which is backed by wealthy investors from the area, will begin occupying space at 14th and Q St. in the District by the end of the month.

Agnition, which bills itself as an "accelerator" because it aims to move companies out on their own more quickly than incubators, plans to establish partnerships with organizations in other countries to facilitate market entry by companies from the Washington area.

"Our ideal would be a global network of incubators and accelerators," Mr. Shah said.

Agnition has already established a partnership with the Canadian Advanced Technology Association, and is working on another agreement with a New Delhi-based organization, Mr. Shah said.

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