New York launches business incubators

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Kai Ryssdal: New York City has a lot of things going for it. But for all its charms and virtues, being known as a place to start up a small business and have it really turn into something isn't one of them. That's a bit of a sore spot for the Big Apple. Maybe for its entrepreneurial mayor, too. The guy who made a billion dollars founding a business news service. So Michael Bloomberg just opened New York's first city-funded startup incubator. From the Marketplace Entrepreneurship desk, Ben Calhoun reports.

BEN CALHOUN: In some ways, with its restaurants, street vendors, and bodegas, New York seems like small business central. But people say the reality for startups, is very different.

BRUCE NISWANDER: New York. Not been a small business friendly town. Bruce Niswander is professor at Polytechnic Institute of NYU, and the guy New York asked to run its new business incubator.

On one hand, he says New York's good for startups because it's easy to find smart, ambitious people.

NISWANDER: Like falling off a log. You got 8 million people here. Problem is the city's full of big companies that drive up rents and hire up the good support people.

NISWANDER: OK, they literally suck the air right out of the environment. And in the end, New York lags behind hubs of innovation like Silicon Valley and Boston.

NISWANDER: The fact that no Google has come out of New York City has been an underlying issue in this city for quite some time.

That kernel of envy combined with a unique set of circumstances during the recession. A lot of New Yorkers lost their jobs, many started thinking about trying new things. Plus sagging Manhattan real estate made office space more affordable. Finally the city's pro-business mayor was getting ready to run for re-election.

MAYOR BLOOMBERG: Well, good morning everyone.

A couple weeks ago New York Mayor Michael Bloomberg welcomed the first tenants to the city's new business incubator. Twenty-seven companies sharing space on a single floor of a downtown Manhattan office building.

MAYOR BLOOMBERG: Out of this could come the next Microsoft, Boston Realties, uh, Bloomberg, could be possible too.

The city plans to launch incubators in each of the other four boroughs. One venture capitalist at the announcement dismissed it as election-year window dressing. But the companies at the incubator, say they're grateful to be there. Anand Sanwal is the CEO of one of the startups, a venture capital information company called Chubby Brain.

ANAND SANWAL: If you'd seen our last office space, at one point we had six of us in 175-square-foot office.

That means each person in the company had slightly more space then there is in a porta potty.

SANWAL: We're very glad to be here for sure.

Sanwal says there's obvious benefits: subsidized rent, a receptionist, advice from NYU-Poly staff. But he says there are intangible benefits too.

SANWAL: It's almost like a support group in a way, right? You know, I think you get to hear that other people are going through something similar, and so there's sort of like a kinship of sorts, that you're like, 'This isn't just happening to us.'

The city's not investing a huge amount in these incubators -- 100,000 in the first, and 800,000 to start the next four. It's also being conservative about its expectations, saying the first incubator would be successful if just a third of the companies become sustainable within the next one to two years. Dinah Adkins heads the National Business Incubation Association. She says the recession just might be a New York's chance to play a little catchup.

DINAH ADKINS: There's a little bit more entrepreneurship created by necessity at a time like this, whereas in good times there's more entrepreneurship of opportunity. But some of the very biggest companies in the United States were created in the midst of recessions.

The city's currently shopping for real estate for its next four business incubators and hopes to pick out final locations this fall. In New York, I'm Ben Calhoun for Marketplace