- The Washington Times - Monday, February 19, 2001

A Fairfax County, Va., incubator of new technology companies has teamed up with a German group in hopes of fertilizing new business relationships between Northern Virginia and Europe's largest economy.
With the help of the Fairfax County Economic Development Authority, eIncubator of Falls Church has cut a deal with IQ International Incubator of Berlin initially aimed at helping German companies that are ready for international growth to settle in the Washington area.
"The partnership is mutually beneficial," says Burkhard Koch, CEO of the German firm. "IQ's overseas connection [to eIncubator] will guarantee continued support for IQ's German clients as they enter the U.S. market."
Though it remains an economically distressed area, Berlin has pockets of New Economy-style business, such as telecommunications and multimedia, making it a good match for Northern Virginia, officials say.
Incubators are in the business of helping young companies get up and running, and generally operate on an equity-for-services basis. Companies that are at a very early stage of development give incubators a slice of their business in exchange for assistance with marketing, legal, and accounting task.
Incubators also usually help firms gain access to funding, either through an in-house fund, or through established relationships with venture capitalists.
The incubator industry is currently experiencing a forest fire of failures, with the number of active incubators now around 138 in the entire country, down from 230 in the middle of last year, according to the Boston-based Aberdeen Group, a research firm.
The main problem, according to David Wright, Aberdeen's vice-president for equity services, is a lack of funding for clients. Many incubators take on early-stage companies, only to find that the firms run out of money before they can turn a profit.
"The largest sin of the incubator industry has always been that they don't have enough money on hand," Mr. Wright says.
The parties to the German-American deal, which was inked last week, hope to avoid the recurring problems of incubators by focusing first on German companies who are ready to take the leap overseas.
IQ will sift through its own clients and hand the decision over to eIncubator, which will have the final say on whether the company is ready to enter the U.S. market.
"Even if the company is doing well in Germany, the United States is another matter," says Nelson Cooney, chief operating officer of eIncubator.
The Falls Church firm initially made contact with IQ through Fairfax County, which opened an office in Frankfurt last year. The county was considering opening an incubator for foreign firms itself, but ultimately decided to plow $1.2 million into eIncubator, a privately held firm.
The move gives the county a 10 percent stake in the incubator, Mr. Nelson says.
The partnership also injects another element in Northern Virginia's efforts to promote itself as an international center of the technology business, even as American technology companies are reeling from a year of bankruptcies, layoffs and falling stock prices.
Gerald Gordon, president of the Fairfax development agency, calls the partnership "a great way to carry out [its] mission to bring foreign-owned companies here."
Meanwhile, eIncubator hopes that the companies that it is currently assisting, from wireless to software firms, will eventually be able to take advantage of the Washington-Berlin axis it has created by expanding into Europe.
"We hope this will be reciprocal," Mr. Cooney says.
Given the collapse of many incubators, Mr. Cooney concedes that his firm sometimes faces a "knee-jerk reaction against incubators."
But the venture stands a good chance of success, despite the harsh environment that incubators currently face, Mr. Wright says. London-based Protege, for example, has been "wildly successful" in bringing U.S. business to Europe.
"The execution of their concepts can easily end in disaster," he says.

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