Business incubator users make case for it to stay
County Council members, company owners cite jobs, diversity, technology growth
When County Executive Steve Schuh earlier this month announced his intention to shut down Anne Arundel’s business incubator, he left little indication that he was open to changing his mind.
Incubator participants, convinced of the value of the program, are lobbying for another chance.
In the two weeks since Schuh said he expects the Chesapeake Innovation Center, or CIC, to close its doors July 1, members have been crunching numbers, reaching out to elected officials and brainstorming ways to keep the incubator in business.
At least two County Council members now say they plan to ask Schuh to reconsider his decision.
Councilman Pete Smith, D-Severn, said Anne Arundel should be focused on expanding its footprint in the technology sector. He sat down with incubator participants a week ago to discuss the announcement.
“These are like self-inflicted wounds,” Smith said. “We’re turning away companies that are the future, that are already here.”
He said, “Will some fail? Yes, but there are some that are going to change the world.”
Councilmen Jerry Walker, R-Crofton, and Andrew Pruski, D-Gambrills, also met with members of the incubator this past week.
Walker said he would join Smith in his call to keep the incubator open. Pruski, whose district includes the incubator, did not respond to a request for comment.
Schuh has cited economic and philosophical reasons for shutting down the incubator, which launched in 2003 as a hub for cybersecurity startups and other fledgling business ventures.
In a March 1 letter, he wrote that his administration “does not believe government should pick economic winners and losers in a business’ infancy.” He said he plans to redirect the money to more tax and fee cuts instead.
The county executive cited $11 million in public and private funds spent on the CIC since its inception. According to a summary of the incubator’s budget between its inception and the current fiscal year, the center has been awarded $11.9 million — about $7 million in county funds and $4.9 million from outside sources, including more than $76,000 in state startup funds and nearly $437,000 in contracts with the National Security Agency, which is headquartered at nearby Fort George G. Meade.
In the letter, Schuh also says the county has only collected $130,000 in equity payments from incubator participants. Member companies argue that’s an outdated way of gauging the CIC’s value — the equity model, in which members were required to give the incubator a 1 percent share of their company’s common stock, was only in effect for its first four years. A spokeswoman for the Anne Arundel Economic Development Corp., which manages the center, said the requirement was discontinued around 2007.
Participants point to the jobs created by current incubator members as one alternative metric for success. The 19 companies stationed at the CIC employ 189 people among them. The smallest enterprises are run by a single person, while the largest has 30 employees.
Then there are slightly more intangible benefits: Some member companies, for example, have offered internships to students from Anne Arundel Community College, giving them work experience for their resumes.
Many of the incubator’s startups are minority- or women-owned. According to AAEDC spokeswoman Rosa Cruz, eight of the incubator’s businesses are owned by minorities, two are owned by women, and two are minority- and women-owned. At least five have owners who are veterans.
Kendrick Faison, president of Spatial GIS, a minority-owned business at the incubator, said the program has offered him mentorship as he gets his data strategy consultancy off the ground.
“As a minority business, in this county, it’s already hard,” he said. “Having space like this affords me the ability to be around other businesses that are thriving.”
Ethan Dietrich, the founder of incubator member SixGen and one of the most vocal advocates for the center remaining open, calculated that companies would incur nearly $42,000 to compensate for the services the incubator offers. Those include a full-time receptionist, wireless internet and training space.
“Lowering barriers to entry drives innovation,” he said.
When asked whether Schuh would be open to discussion about keeping the center, spokesman Owen McEvoy was resolute.
“While we understand the frustration of some who will be affected by this decision, the taxpayers of Anne Arundel County have to be our first priority,” he said.
Despite their pledges to protest the decision, council members don’t have the power to restore funding to the center if Schuh includes the cut in his fiscal year 2018 budget, which will be unveiled May 1. The council can only reinstate funds requested by the school system.
Smith said he would push for a slower phase-out of the incubator if the county executive won’t agree to keep it.
“I’m not going to give up on this, and it’s not some issue that’s going to be swept under the rug,” he said.