Networked incubators - Hothouses of the new economy

Business incubators such as Hotbank, CMGI, and Idealab! are a booming indus try. Offering office space, funding, and basic services to start-ups, these organizations have become the hottest way to nurture and grow fledgling bu sinesses. But are incubators a fleeting phenomenon born of an overheated st ock market, or are they an important and lasting way of creating value and wealth in the new economy? The authors argue that one type of incubator, called a networked incubator, represents a fundamentally new and enduring organizational model uniquely suited to growing businesses in the Internet economy. It shares certain fea tures with other incubators-mainly, it fosters a spirit of entrepreneurship and offers economies of scale. But its key distinguishing feature is its a bility to give start-ups preferential access to a network of potential part ners. Such incubators institutionalize their networking-they have systems in plac e to encourage networking, helping startups, for example, to meet with pote ntial business allies. That doesn't mean incubatees get preferential treatm ent; it means only that they have built-in access to partnerships that migh t not have existed without the incubator. Even with this advantage, however, networked incubators can easily follow t he road to ruin. To avoid failure, they must create a portfolio of companie s and advisers that their incubatees can leverage. That can be done by stra tegically investing in portfolio firms and by enlisting a large set of busi ness allies. It can also be done by establishing connections and relationsh ips that are anchored more to the incubator than to particular individuals.