Can incubators hatch foreign influx?

With experts agreeing New York City's economy needs an influx of new companies, several projects are underway to create special office environments to encourage foreign firms to move here.

Plans are being developed by the Russian government, the German multinational conglomerate, Bertlesmann, A.G., and the Port Authority to provide supported office space for foreign companies. Elsewhere in the United States, private investors and at least one university have already opened such international business centers. New York State is also getting into the act and trip has been made to Asia to lure high-tech corporations into our fertile environment.

The New York City plans focus on the idea of taking a company that is medium to large in its home country and helping it become established in the U.S. The company would rent a small amount of office space in a setting helpful to new companies.

These "incubators" would be set up to accommodate many different companies and provide concierges and common services such as secretaries, photocopiers and furniture, as well as entrees to bankers, attorneys and business contacts.

Pete Collins, national director of Emerging Business Services Coopers & Lybrand, is involved with 120 incubators and is helping the Port Authority formulate its plans. Collins said a successful incubator needs active support for both the management of the incubator and the tenants.

While very few incubators are involved in aggressively recruiting potential tenants from overseas, one such incubator, Collins said, is the Ben Craig Center in Charlotte, North Carolina. It is owned and operated by the University o North Carolina, which uses it as a tool for its business school. It is so successful, in fact, that a twin 50,000-square-foot building is about to be added.

In conjunction with its incubator work, Coopers & Lybrand has developed an incubator computer network, called "Bator Link", which connects all of the locations in America as well as some in Canada, Mexico, Australia and Europe. The National Business Incubation Association provides it free to their members as well, he said.

"They log on and seek markets for the companies in their facility and seek advice as to how to operate their companies," he said, including advice from C&L professionals and the federal government.

The participants also have computer access to a company of "angels" who can make venture capital money available in amounts ranging from $50,000 to $1 million.

"Incubation is not just shared office pace with receptionist," Collins said. "Incubation is so much more. It has a manager who acts as a business mentor and as a coach to the companies under his or her care, and an advisory board of business people who can complement the knowledge of the entrepreneur and the manager. A lot of places that call themselves incubators are just shared office space."

Collins said the manger promotes networking and interaction between the companies and, he said, 60 percent of these companies often trade with each other.

"There is so much interaction around the water cooler that benefits everybody," he said. "I'm not sure yet that this is being fully leveraged in New York."

Verlee Prybyloski, executive director of international business for the New York City Partnership and Chamber of Commerce, said incubators are a good idea and one whose time has come. She admits, however, that the Bertlesmann and Port Authority projects are both at the incubator stage themselves.

"We're in conversations with them about how to think them through," she said. "We are going to market them to foreign businesses once they have them developed enough."

Electra Yourke, project manager for the World Trade Department of the Port Authority, said their incubator would be exclusively for foreign businesses that are planning to locate facilities in the United States and particularly in the New York region.

Naturally, the Port Authority plans to put the incubator into the World Trade Center.

"They can move in on day one without figuring out how to get the phone hooked up," Yourke added, "and if they want to eventually locate in the World Trade Center we won't say no."

And if the executives would like to stay at the Vista, she said, "we would only be too happy to accommodate them."

The Port Authority incubator will provide assistance in locating business services including tax planning, cargo logistics and interaction with government agencies. Coopers & Lybrand will participate as partners.

Sven Oehme, managing director of the European American Chamber of Commerce in the United States, which was involved in the New York City Partnership and Chamber of Commerce's Mayoral a trip to Europe to "well" the city, said the incubators are a really good idea as it is always a major step for companies to come to the United States. Oehme noted that a large number of European Companies have gone to New Jersey, Connecticut and Westchester, "You have to really make the city attractive to companies and foreign investors."

Wilhelm A. Rosenberg, president and CEO of Mega Invest International, which manages metropolitan area properties and capital investments for high net worth individuals from Germany, said some of the Fortune 500 German companies are obtaining pre-destined corporate headquarters buildings in the United States from workouts and takeovers and are inviting other companies to join them.

"It's a very good opportunity because they are killing two flies at once," Rosenberg quipped.

He mentioned BASF as one German company which is doing this in New Jersey.

Most big German companies are hesitating to go directly into Manhattan, Rosenberg believes, because of the lack of incentives compared to places like New Jersey. He was delighted the city was taking a first step in that direction with the Bertlesmann deal.

As part of its deal to purchase the bankrupt Bruce Eichner building at 1540 Broadway and receive nearly $10 million in benefits from New York City, Bertlesmann agreed to create an international business center and market it through a campaign primarily directed to Germany and other Common Market/EC countries. They have already begun that in conjunction with the Partnership's Mayoral trip to Europe last June.

That trip opened a dialogue on a CEO level that will continue this fall as the Partnership is planning a second trip to Europe, said Prybyloski, adding they expect to be working this time on specific issues and questions.

Chris Alpers, senior vice president of Bertlesmann Inc., said a market study is being conducted in Germany to target the needs of the companies. "Our target group will not be very large companies but will not be start up companies either," he said.

There are a number of ideas for the space, he said, which will occupy between 25,000 square feet to 50,000 square feet at 1540 Broadway. Bertlesmann itself will be occupying another 700,000 square feet of the approximately 9,000 square feet of office space. Additionally, should the need arise, more space may be dedicated at 666 Fifth Avenue after a Bertlesmann subsidiary moves to 1540 sometime in the first quarter of next year.

Alpers expects to offer a number of shared amenities such as a conference room and typical clerical services and an on site concierge consultant. Networking services and consultants would also be available. Although not yet set, the companies would pay an "aggressive" rent with some consulting services included.

Attorney Michael Caretnav Bailkin, a partner with Stadtmauer Bailkin Levine & Masyr who was instrumental in lining up the Bertlesmann incentives, said the incubator will be the now-defunct Alliance For International Business Development's one successful project.

Unlike the other economic development incentives, Bailkin stressed, this particular one can have vast geometric leverages because it will be focusing on companies ready to enter the global economy.

Said Bailkin: "Bertlesmann will be creating a catalytic center for those not now in the New York market. They are not just getting cheap space but business relationships."

Marketing Russia

Gronich & Co. Managing Director, James P. Stuckey, said he and chairman, Dan J. Gronich, worked on the Russian Trade and Cultural Center deal for more than a year and are still involved while construction is underway.

The Russians intend to create about 25,000 square feet of incubator space, apportioned on two floors of 5 World Trade Center. The Russians will also be renting another 53,000 square feet in a 25-year lease that will contain other offices, a performance space and a cultural center.

The Russian incubator will not be just for newly formed companies and a number of banks, trading companies, aircraft companies, and Russian insurance companies are exploring the option. When Yeltsin was visiting New York recently, he brought representatives from 80 businesses in 13 industries and toured the space.

"We're dealing with an entire nation beginning to market itself," Stuckey said.

Yourke said at the Russian Trade Center, they control the tenancy and it is a dedicated space. She said the Port Authority has other private tenants at the World Trade Center who provide space for their primarily trading company clients, "That's private incubator," she said. "What we are doing is a public one."

One private entrepreneur is Mark C. Lamela, president and CEO of InterGest North America and chairman of the Board of Transnational Partners which has operated international incubators since 1972, and is now found in 28 countries.

Currently operating in New York City out of 330 Madison Avenue, InterGest is servicing 112 foreign and American companies in 5,000 square feet of space. Of those, there are 30 to 50 clients which "don't even step in the door" as they may have a small sales office elsewhere and merely require back office service from the incubator.

While an incubator provides flexible space and the company can often stay in that nurturing environment, after two to three years, Collins said, "a company usually obtains the critical mass to move on."