2019 | Business

County’s Tax-Supported Business Incubators are ‘Bleeding Money’

Losses at three small-business centers topped $1 million last year

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The Rockville Innovation Center, located at 155 Gibbs Street, is housed in the same building as VisArts.

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Montgomery County’s three small-business incubators are losing more than $1 million a year and the county is considering hiring an outside consultant to help bolster them.

“Now that we’re bleeding out these leases, I’m a little bit concerned that our goal isn’t to figure out how to create a program … it’s how do we get the money back for these assets that are bleeding money,” said County Council member Andrew Friedson at a Thursday meeting of the council’s Planning, Housing and Economic Development Committee.

The committee reviewed a report showing a center in Germantown was losing $575,000 a year, the Rockville incubator was losing $590,000 and the Silver Spring incubator was down by $107,000 a year, as of Dec. 31.

The tax-subsidized incubator program started in 1995 to help foster startups in emerging fields, such as biotechnology and information technology, and there are 20 to 30 companies at each of the three incubators.

A nonprofit economic development corporation replaced the county government’s economic development office in 2016, but the incubator program remained with the county. The incubator program also works with Montgomery College in Germantown.

Friedson asked for closer coordination between the county and the economic development corporation.

“I think at the very least, we need to figure out how the goals of this incubator program align with the EDC’s [economic development corporation] strategic plan, because it seems we’re sending our ships in different directions but without intentionality,” Friedson said.

“Recently the program was described as lame, and it’s gotten to be lame and stagnant. It needs focus, and these companies need to be encouraged to graduate,” said Ruth Semple, an economic development manager who met with the committee.

Friedson said he is worried that the incubator program has gotten into the habit of “throwing things at a wall and seeing what sticks.”

County Executive Marc Elrich has said he wants to use vacant spaces in the county as possible new incubators, possible starting an incubator in the Silver Spring area to help with the food-service and hospitality industry.

Assistant Chief Administrative Office Jerome Fletcher said he did not have a cost estimate for a consultant.

“I want the best of both worlds. I want someone who can understand and leverage our local assets, but who has national scope,” he said.

Fletcher, who joined the county last month and previously worked in the District of Columbia’s small business office, said that it is standard for jurisdictions to hire a third party on business development issues.

Friedson, a former employee in the state comptroller’s office, said he wants to know what the county is paying for.

“I would like to know not only what we are expecting to pay, but what we are expecting to get out of it and what the results have been in other jurisdictions,” he said.

The Germantown incubator has a biotechnology focus, Rockville includes information technology and Silver Spring concentrates on cybersecurity.

Dan Schere can be reached at Daniel.schere@bethesdamagazine.com

This story has been updated to reflect the fact that Montgomery County’s Economic Development Corporation does not manage the incubator program