Notes from the Field

We agree with the general principle that "technology enterprise development and economic development strategies should be custom-designed to be congruent with the unique strengths (and weaknesses) of the regional economy." Many Texas cities and regions have developed their own incubators to serve local needs, but the idea of a virtual network incubator for Texas has never been promoted. It is believed that local buy-in and support of a regionally based incubator is crucial to business development success. The paper seems conflicted on whether to have the VCET target a specific type of technology company. Initially, a key criterion for the University of Texas at Austin–affiliated Austin Technology Incubator (ATI) company selection was to target rapid and visible entrepreneurial successes (e.g., job and wealth creation), whatever the technology or business idea in order to produce early "wins" and to catalyze community interest and support. ATI also originally targeted and continues to target technology companies where the Austin region has a developed or emerging (new business development) strength. ATI also accepted a mix of companies in areas that benefit from sharing experiences and knowledge rather than bringing together direct competitors. The great percentage of these technology companies came from spin-offs of existing companies or from local entrepreneurs. Very few, perhaps 10%, came directly from university research. Increasingly, there is also the issue of developing synergies across technology platforms as in digital media or clean energy, as well as exploring the possibilities of international co-incubation of businesses. There is also something to be said for simply bringing together and networking bright entrepreneurs and providing them with an environment or context that supports their business development efforts.

Indeed, the public–private environment surrounding an incubator—the context—is, we believe, one of the best indicators of an incubator's potential success (Wiggins & Gibson, 2003). For example, experienced business professionals donated their time to coach ATI start-ups (they were also growing future paying clients), furniture stores donated office furnishings (they were also building loyal paying customers), the university contributed excess furniture as well as talent—faculty and students (the university was also developing a real-life business development laboratory and growing companies that hired university graduates).

Effective community networking (across academic, business, and government sectors) is very important to an incubator's success, and a successful incubator contributes to such public–private networking and relationship building (Smilor, Gibson, & Kozmetsky, 1988). Indeed, the paper (Figure 6) rightly emphasizes the key importance of social networks. The paper also mentions the importance of venture capital (VC). Figure 4 implies that an entrepreneur's main source of capital is from the state and VC. Currently, in the United States, VC investment in the seed and startup phases (the first round of investments) has decreased during the last decade (1995–2004) from roughly 18% to under 1.5% of total investment, whereas the importance of alternative sources of funding such as "bootstrapping," self-funding, and funding from suppliers and customers has increased. When ATI was launched in 1989, there was very little VC in the Austin region, but ATI was a key catalyst for increased quality deal flow so that local business angel groups had a reason to join such funding mechanisms as The Texas Capital Network (founded by IC² Institute in 1989) and VC's were attracted to, and launched in, Austin.

In Austin, Texas, the most successful technology start-ups did not pass through ATI (e.g., Dell, National Instruments) but those that were incubated by ATI most likely would never have been launched as successful growth-oriented businesses without ATI's assistance. Since ATI was launched by IC² Institute in 1989, this University of Texas Incubator has graduated 65 companies, created 2,850 direct and 7,150 indirect jobs, generated $1.2 billion in revenue, and secured $500 million in VC and seed investment. Four ATI graduates went...