Incubating businesses for the economic vitality of the community

Rachel Sankey

Past Staff

September 16, 2024

RIVER FALLS – Thirty-seven years ago, when the River Falls Economic Development Corporation (RFEDC) was formed, Sheri Marnell – director of the St. Croix Valley Business Innovation Center (SCVBIC) – said one of the original goals of the corporation was to have a business incubator.

The reason, she said, was to help foster the area’s entrepreneurs, which in turn would have a positive economic impact.

Though a long-standing desire, planning for a business incubator wouldn’t start in the River Falls area until about 12 years ago, Marnell said – and its opening wouldn’t come until five years after that.

“The RFEDC, along with the University of Wisconsin-River Falls (UWRF), the City of River Falls and – also soon after – Chippewa Valley Technical College (CVTC) came together and said, ‘hey, we all want to help small businesses,’” she said. “‘We all want the economy to grow. We’re all doing it on our own – wouldn’t it be better if we just all did it together and were stronger together?’”

From there, Marnell said the four organizations hired a third-party consultant to do a feasibility study on the idea of a business incubator in the area.

The answer they received, she said, was a “yes, however.”

“Our area surely needed a business incubator, but because we’re rural, it needed to be mixed-use,” she said. “(That’s why) we don’t have a true specialty like some business incubators do.”

Marnell said the SCVBIC welcomes nearly all business industries – except for retail, only because the center is not staffed 24/7, therefore, it’s not conducive to having a shop.

After the feasibility study was completed, she said the four founding partners got together to plan the next steps.

“(We asked) ‘how do we make this happen?” she said. “‘What is everybody’s superpower that they can contribute to make this happen?’”

Between the four organizations, Marnell said the game plan was:

• The City of River Falls provided the land needed in the industrial park that SCVBIC is in, and brought on a treasurer from the city.
• The RFEDC owns the building and any debt that may be acquired.
• UWRF offered to help staff the building. Marnell said she is one of those UWRF employees and works with the College of Education, Business and Allied Health.
• The CVTC is the main sponsor for the SCVBIC’s training room and also provides some maintenance on the building.

The SCVBIC officially opened in January of 2018. 

When it came to funding the building, Marnell said the organizations received a $1.4 million grant from the U.S. Economic Development Administration (EDA), $250,000 from the State of Wisconsin and former Senator Sheila Harsdorf and corporate funding.

“In January, it will be seven years (since SCVBIC officially opened), and the data is quite amazing,” she said. “When you think of the ROI (return on investment) on the $1.4 million grant from the government… because it’s an economic development EDA grant, we measure three main criteria: How many jobs were retained, how many jobs were added and then any capital that has been infused from the business.”

In the six-plus years since opening, Marnell said the center has retained 159 jobs, added 120 jobs and invested $34 million of capital.

“So, when you think about that, a $1.4 million grant was a good investment,” she said. 

What is a business incubator?

As a business incubator, Marnell said “we are a stepping stone for our businesses.”

“We are not a forever home, which is good and bad,” she said. “It’s always bittersweet when businesses graduate from us, but it’s also really exciting when they graduate.”

Ideally, Marnell said businesses are a part of the incubator for three to five years. 

“We welcome businesses that are pre-revenue up to stage two,” she said. “We don’t do a cohort model where everyone has a business startup, and you walk through it together for 12 weeks – that would be more of what’s called an accelerator program.”

To become a member of the incubator program, Marnell said entrepreneurs must go through an application process.

After businesses who have applied are approved by the management committee, Marnell said they sign a short lease, in which they pay fair market price for space depending on where they are located in the building.

“We also have a handbook that everybody has to sign, really just reminding everyone that we’re a business building, and that we do collect annual survey data,” she said. “And, part of the expectation is that everybody meets with me quarterly – at a minimum – and that they participate in a number of various activities that are given to them throughout the year, and that they choose to be part of our ecosystem.”

Creating an ecosystem at the center, Marnell said, is “really important.”

“If these businesses aren’t in an incubator, most likely they’re renting an office in an office building, or they have a standalone industrial space, but they’re not around other entrepreneurs,” she said. 

Outside of the quarterly meetings with her – which she said are tailored to each business and its needs, such as looking at income and expenses – Marnell said members are also encouraged to go through the small business development entrepreneur training program.

“Whether they have a business plan or not, it allows them time to focus on the strategy of – what is their value proposition, who is their competition and who is their target market?” she said. 

Beyond that, Marnell said the center offers monthly topics that might be of interest to businesses.

“What’s tough, because we’re a mixed-use business and we’re open 24 hours – our members are here at all times of day,” she said. “They have all different needs and (are at different) stages, so there’s not ever a topic that everybody is interested in. So, we want to make sure that all of the chamber members, and again, the community as a whole, have access to that.”

Some monthly topic examples include using QuickBooks, business law, using social media and maximizing a business’s ROI.

The monthly topics, Marnell said, are also open to the general public. 

Networking events are also available for businesses throughout their time in the program, she said. 

“Ultimately, we don’t want our businesses to rely on us, because we want them, when they graduate, to keep moving in the direction that they want,” she said. 

Marnell said an ideal number of businesses to have at the innovation center at any given time is anywhere from 20-25.

At one point, she said the center was sitting at 99% occupancy, with 33 businesses in the program.

“Twenty-five percent of the businesses grow in space here…,” she said. “We’re sitting today at 90% occupancy, and we have 17 businesses. And the reason that is is because, again, 25% of businesses have grown in space here. So, we have 17 incubator businesses, and then we have an additional 13 businesses that are co-working, mail only or support businesses that operate here.”

Some current members in the incubator program, Marnell said, include Workplace Languages, Mindful Fork Catering, Motus Casters, Barbell Coffee and SiteDreamers.

Outside the incubator

Though the business incubator is what Marnell said she would consider the main portion of the innovation center, she said it’s not all the building offers. 

Businesses and individual professionals are able to have a co-working membership and a mail-only membership at the center without being part of the incubator program, she said. 

“Co-working members are those businesses that just don’t want to work at home, especially now after COVID-19,” she said. “A lot of companies are offering remote work, and they know they work better away from home in that space.”

In addition to rentable co-working space, the building offers office space, light industrial space, food-ready space and an open second floor – all of which can be viewed at stcroixinnovation.org.

Meeting rooms and private offices, Marnell said, are also available for rent by the hour.

“We had a lawyer that, their office was an hour away, and had a client down here, so they just rented a private office from us for a couple of hours,” she said. 

Other businesses that have utilized the meeting spaces, Marnell said, include Royal Credit Union, WinField United and TW Vending.

The innovation center, she said, also does in-kind donations for nonprofits to use the spaces.

“Last year, I believe it was a value of almost $30,000 that we gifted nonprofits to use for our space for their board of directors meetings or things like that,” she said. 

Most mail-only memberships, she said, provide at-home businesses with a business address, so they can keep their home address private.

This summer, Marnell said the innovation center also had a Monday’s Maker Market as a way to support entrepreneurs of all sizes and shapes – “whether it was a service- or product-based business.”

“Think of it like a farmer’s market, but for all businesses – again, service business, you could be a 12 year old selling cookies – any kind of entrepreneurship,” she said. “We actually had more participation from non-members than members.”

Meeting a need

Since opening in 2018, Marnell said the SCVBIC has continued to meet the needs of businesses in the area – but said the work is never finished. 

For example, she said adding the food space two-and-a-half years ago solved a huge gap in helping the local economy.

“We have no ghost kitchens, no opportunity for food businesses to grow – except for the Twin Cities,” she said. “And there’s a little bit of opportunity in Eau Claire, but that’s not a realistic space for our businesses, and those waiting lists are pretty long in those two areas.”

Though the addition of industrial and food spaces has been great – both for the innovation center and for area businesses – Marnell said there is already more demand for additional space in both areas of the building. 

“When we opened the food space, we filled it without even marketing – it was just word of mouth,” she said. “Since then, we’ve turned away – I feel like it’s probably at least once a week, or every other week – a business that would want to come here.”

Just like the business incubator program, Marnell said at the beginning, about nine businesses were working in the food space.

Now, she said, it’s down to five businesses – “because those five businesses have taken over the other spaces.”

“They are growing, which is great,” she said. “But now we have one of those five businesses that just bought a forever home, which I’m really excited about, but as he leaves, one of the businesses wants to take his space, so then we’ll be down to four businesses. So again, it’s great, but we really need more space for our businesses to grow into.”

Marnell said plans are in the works to help solve the spacing issue. 

“We hope to be submitting an application to double the size of our building to the EDA,” she said. “That’s what we’re most excited about, is to really reduce that waiting list – specifically in the industrial and food spaces.”

Marnell said the center should hear back about the application this fall, and from there, it’s about a two-year process.

“So, (if) they approve it, we then do final designs,” she said. “We’ll have to potentially get another loan. There might be a capital campaign that we go after, (in which) we would welcome sponsors.”

Statistics are positive

Recently, Marnell said the SCVBIC redid its feasibility study in preparation for the planned expansion – and the results did not disappoint – reporting statistics such as:

• The national average business survival rate after five years is 50%. In the SCVBIC’s direct service area – which covers St. Croix and Pierce counties – the business survival rate was at 61%. 
• If businesses take the small business development entrepreneur training program through the SCVBIC, their survival rate jumps to 70% after five years.
• Out of the 24 businesses that have graduated from the SCVBIC, 87% are still around. 

“We know from our feasibility study that businesses are more successful when they’re part of an incubator,” she said. “But to go from 50% at the national level to 87% is pretty amazing.”

Additionally, Marnell said 97% of graduates have stayed in the region. 

“Going back to economic development, that really helps build the case that we truly are helping grow our economy, not only inside our building but as our businesses graduate as well,” she said.