Fairbanks Economic Develpment Corporation

FAQ's

Alaska is still new to the idea of business incubation. In this section, we attempted to explain most of the common knowledge about incubation and give information on what the ATBA project is.

General Information

What is an accelerator?
What is the difference between an accelerator and an incubator?
Is Fairbanks the first?
Why cannot businesses start on their own?

Who Benefits

What is the economic impact of the project?
Why does Fairbanks need it?
What is the benefit for the UAF?
What is the benefit for the Fairbanks community?
What is the benefit for the Native community?

Business Model

What is the mission?
Who is leading the effort?
Why technology accelerator?
Is there enough "demand" for its service?
How much will it cost?
Does it compete with local landlords?
What is the timeline?
What if it is not successful?

General Information

What is an accelerator?
According to the National Business Incubators Association (NBIA), an accelerator/incubator is the entity that nurtures the development of entrepreneurial companies and helps them survive and grow during the start-up period when they are most vulnerable.

What is the difference between an accelerator and an incubator?
There is none. It is the same idea expressed differently. The term accelerator is more recent and contains stronger business connotation.

Is Fairbanks the first?
Fairbanks is not the first to come up with the idea. There are over 5,000 incubators in the world. There are at least 2 other acting incubators in Alaska. However, the Alaska Technology Business Accelerator (ATBA) is the first project targeting research transfer and development of value-added ideas.

Why can’t businesses start on their own?
Traditionally, there are a lot of obstacles to opening a business and it is not a secret that 80% of start-ups fail in the first 5 years. The leading reasons for failure are management support (58%) and financing (45%). The accelerator will help create the environment where management support and access to capital is provided.

Who Benefits?

What is the economic impact?
An accelerator accomplishes several goals:

Creates jobs and new money:

The NBIA estimates that North American incubator client and graduate companies have created about half a million jobs since 1980.
Every 50 jobs created by an incubator client generate approximately 25 more jobs in the same community.
In 2001 alone, North American incubators assisted more than 35,000 start-up companies that provided full-time employment for nearly 82,000 workers and generated annual revenue of more than $7 billion.

Creates business that would not start otherwise:

Business incubators reduce the risk of small business failures. Historically, NBIA member incubators have reported that 87 percent of all firms that have graduated from their incubators are still in business.

Develop new industries in their community

84% of incubated companies stay in the area where they were incubated.
Many case studies show how business acceleration assisted communities to diversify the economy (San Diego, Pennsylvania, Washington, Idaho).

Why does Fairbanks need it?
ATBA is the platform for establishing a more productive exchange between the University of Alaska Fairbanks and the Fairbanks community. The product of this exchange will be new value-added jobs and a diversified economy. Alaskan economy is currently heavily dependent on government and extraction industry.

What is the benefit for UAF?
About 25% of North American accelerators have assisted in establishing effective research transfer. The University of Alaska Fairbanks is a strong research institution, not to mention the only in Alaska, and it needs an effective research commercialization mechanism developed.

Provide alternative income sources in a form of royalty revenue
Raise UAF’s reputation as a worthwhile research institution
Attract private sector and facilitate university-community exchange
Retain UAF alumni in the area
Stimulate new research activity by showing how the old research is applied
Increase employee morale and motivation

What is the benefit to the Fairbanks community?
Fairbanks’ economy is highly reliant on government and extraction sector. Over 80% of jobs in Alaska do not even require a university education. Those are not the signs of sustainable economy. ATBA intends to change these trends by:

Creating value-added jobs that last beyond extraction boom and government subsidies
Diversifying Fairbanks’ economy by establishing the industry that can become a competitive advantage of Alaska in the future (technology products/services require minimum or none at all shipping expenses)
Creating a reason for talented UAF graduates to stay in the community
Stimulating improvement of infrastructure as new business will require expansion
Attracting entrepreneurial talent to Interior Alaska

What is the benefit to the Interior Native community?
The community is concerned about giving an opportunity for Native communities to stay in the villages and live their lives as they always have. ATBA can provide an opportunity for “bush” population to generate sustainable income. A series of economic researchers (R. Lucas, J. Graca, J. Caballe, M. Baranova) have proven through regression analysis that investment in physical capital, i.e. infrastructure, brings higher returns on investment than investment in human capital. Since well educated work force tends to leave their poorly developed communities, creation of the infrastructure in those communities is what keeps the assets in the community. ATBA will create an infrastructure (an accelerator building), which will help to retain Alaskans, giving them a valuable job and sustainable income.

Business Model

What is the mission?
ATBA’s primary mission is to create the essential environment necessary to maximize the probability of developing private industry businesses whose product output will be based upon a variety of high value-added technologies.

Who is leading the effort?
Fairbanks Economic Development Corporation works together with the business community of Fairbanks and the University of Alaska Fairbanks to start this project. We are currently in the process of bringing various partners to work on this effort.

Why do we need a technology accelerator?
Technology is a very broad term and implies business beyond software and electronic engineering. It can be anything that adds significant value to the product/service, relies on some kind of research generated idea and is easily transportable. The advantages of creating a technology industry in Fairbanks are multiple:

Relies mainly on human capital, not physical resources
Easily exportable; low transportation costs; client interaction is web-based
High value-added, well-paying jobs (~$70,000K)
Leverage Alaska’s research university (UAF)
Over 37% of U.S. incubators focus on technology

Is there enough “demand” to create the accelerator?
Potential clients of the ATBA are researchers at UAF (faculty, graduate students, staff), entrepreneurs from community, spin-offs from existing firms, and students with potential products and/or management skills. A survey of over 200 faculty members and students conducted at UAF in April 2005 showed very inspiring results:

31% think that their research has practical applicability and are willing to patent it
23% think that their research could have practical applicability
45% have an interest in either starting or co-founding a new company
86% would consider using the incubator’s assistance

Even though words do not always go along with actions, if only 10% of respondents truly believe in what they say, 8-10 people out of 200 could be clients of the accelerator.

Community potential for entrepreneurship is even greater. Every Alaskan can name at least 3 people that venture to start their own business, despite difficulties. How many more will there be if necessary support is provided?

How much will it cost?
The sustainable model of the accelerator relies on the construction of a $10-12 million facility. Most of the incubators nationwide used buildings as the key to their self-financing. Having an anchor tenant, who will pay for 60-65% of the accelerator space, will provide cash-flow for the accelerator operations. Once the initial capital investment is made, ATBA will not need any grants to be sustainable.

Will the accelerator building compete with local landlords?
No. ATBA will create business that otherwise would not start. It generates more potential clients for local landlords, since incubation period is limited to 3-5 years for each client, rather than “steal” them.

What is the timeline on the project?
The first business will enter the ATBA process as soon as the building in constructed, which could be 2-3 years from now.

What if it is not successful?
No one in the world can guarantee a success for anything. Any worthy initiative always involves risk. Just like any business must have an “exit” strategy planned, ATBA’s business concepts leaves room for flexibility. In case the demand for ATBA services is overrated or there are other unpredictable hurdles, the accelerator facility will remain as a viable asset to the community and/or university.