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La Cocina: Cooking up Urban Businesses
(avg: 4.50 of 5)
Objective: To bring to light an inner city business incubator that provides affordable space, equipment, and business training to help women entrepreneurs from low-income, minority, and Immigrant backgrounds launch culinary businesses.
Main Topic: Cluster-based economic development
Sub Topic: Food Clusters
Sub-Sub Topic: Business incubator
Geography: San Francisco, CA
Major Participants: Women’s Initiative for Self Employment, Women’s Foundation of California, National Business Incubator Association, State of California, and others (listed below)
Background: La Cocina ("The Kitchen") is a non-profit business incubator located in the heart of San Francisco's Mission District, a working class community with a high immigrant population. Many residents in this community were budding entrepreneurs working out of their homes. La Cocina sought to formalize this business environment, and help entrepreneurs become economically self-sufficient thereby creating a vibrant local economy.
The Incubator started in 2005 in response to a feasibility study conducted by several local economic development nonprofits, most notably, Women's Initiative for Self Employment (WISE). The study focused on the obstacles that were preventing participants in WISE’s business planning program from launching their own businesses. The study concluded that local entrepreneurs were unable to finance the notoriously high start-up costs associated with the food industry, such as purchasing equipment, finding affordable rent, and paying the licensing fees associated with such commercial kitchen space.
How it happened: WISE secured a seed grant through a private donor with The Women's Foundation of California, and secured further support through a nominal-rate lease to a 2,200 square foot space. After opening, La Cocina’s Executive Director fundraised $1 million to outfit the space with a hood system, ovens, stoves, a walk-in refrigerator and freezer, and other standard restaurant equipment.
Since opening, its budget has doubled from $500,000 per year to just over $1 million for fiscal year 2011-2012. The staff has also grown from two to seven full time people, each of whom is responsible for a unique program in the incubator. Fundraising depends mostly on foundations, but also depends on corporate partners, individuals, and a growing share of fee-for-service revenue.
How it works: After acceptance in to the program, entrepreneurs go through a Pre-Incubation phase. This 6-month period provides entrepreneurs with technical assistance to establish their business plans and the foundations of their business, including help with product refinement, marketing, finances and operations. Upon successful completion of this stage, participants move on to the Incubation phase. Entrepreneurs continue receiving technical assistance but now have access to the affordable commercial kitchen space to grow their business and sales. Upon meeting a set of Incubation benchmarks, participants graduate from the program and move out of La Cocina’s kitchen.
Initially, La Cocina was a community kitchen with a narrow focus on providing Latin American immigrant women with low-cost, licensed commercial kitchen space. As the Incubator has grown, its focus has expanded to bring in food industry knowledge, resources, and business training that many low-income entrepreneurs otherwise would not have access to. The Incubator now serves to reduce market friction by spreading costs related to infrastructure, facilities, licensing, legal and financial consulting, and education across the participants in a way that becomes affordable for the budding entrepreneurs.
Results for local economy: La Cocina has graduated 11 businesses and is home to 30 more. Those businesses have created over 100 locally based jobs, and created a foundation for financial independence in the lives of program participants. Recruitment occurs mainly through word-of-mouth and direct outreach by staff into the community. The business model allows businesses to simulate the impacts of as cluster, engaging in competitive collaboration with one another as they build their businesses. This advantage is the key to the success of the businesses.
Lessons Learned: La Cocina’s successes have been very place specific, and were designed with their local demographic and business clusters in mind. La Cocina encourages others who are planning their own incubators to thoroughly study the local business environment. They also recommend the following:
- Develop a business plan for the incubator.
- Think purposefully about financial sustainability, whether through producing income, grants, donations, etc.
- Define your mission early: what your particular community needs, who you want to serve, and how that can determine the direction of your project.
La Cocina also emphasizes the importance of strategic partnerships. Several organizations support their work, including: The National Business Incubation Association, CulinaryIncubator.com, Association for Enterprise Opportunity (AEO), California Association for Micro Enterprise Opportunity (CAMEO), Kickstarter, Oakland Business Development Center (OBDC), Opportunity Fund, ProFounder, TMC Development Working Solutions, Urban Solutions, Creating Economic Opportunities for Women (CEO Women), San Francisco Office of Small Business, Renaissance Entrepreneurship Center, Women's Initiative for Self Employment (WISE)
Remaining Challenges: As with many other non-profit incubators, fundraising presents a significant challenge for the organization. Their Executive Director, Caleb Zigas, has made a concerted effort to avoid dependency on foundation funding. As a result, La Cocina’s budget is 60% self-generated from rental fees. The other 40% is a mix of donor, foundation, and government funding. While its small staff is an asset in terms of the reduced overhead, the lack of a grant writer means that valuable staff time is taken up writing applications whenever funding is needed. This staff time, and the strings frequently attached to these funding sources, divert valuable resources from the businesses in the incubator. Caleb sees this issue as the most significant challenge moving forward, and has committed himself to reducing La Cocina’s reliance on outside sources even further.
Is it really smart for cities, or investors, to be investing in a particular industry? (In this case, food) - what happens when then there becomes an over-saturation of food companies in one area and the icubator cannot support new businesses?
By Sophia Egels on 06/05/2012
It really depends upon the focus and skills of the folks who start the incubator.
By Michael Franchell on 06/05/2012
Michael, I would add to that the overall size of the market and LQ of industry.
By Eric Voyles on 06/05/2012
How successful are incubators in general? Also, what are the ingredients for attracting high tech firms to urban communities?
By Frederick Metivier on 06/05/2012
Great argument - I've been involved in modelling workspace and incubators for different communities for over a decade now, and most of the papers from them are available freely on-line, but two that are probably of most interest in this discussion are: (1) - incubators for homeless entrepreneurs - http://www.scribd.com/doc/46461538/Growing-Homeless-Entrepreneurs-from-practice-to-theory-and-back-again (2) incubators in communities suffering general social and economic deprivation, and considering the role of faith communities in developing workspace facilities, and how such facilities can kick-start high value enterprises that woudl otherwise not be able to be launched - http://www.scribd.com/doc/39088737/Mosques-on-Stilts
By Adrian Ashton on 06/05/2012
The National Business Incubator Association has been wrestling with that for 30 years or so now and has both a lot of research and examples of all sorts of highly, sorta, or unspecialized incubators. Food processing incubators seem to work particularly well with the commonality of needs in equipment, expertise, type of space, networked relationships, and technical input needed from staff. Light manufacturing is another very common one with typically more shared in equipment, processes, and skillsets than market, it's probably the most common of all since most communities want more light manufacturing when they think about it a bit. Electronics incubators go back to Fred Terman's operations at Stanford's industrial park before World War II with Silicon Valley and the California electronics industry resulting (and his mentor Vannevar Bush incubating MIT's Route 128 electronics/computing cluster) so clearly there's some potent benefits to focus. The problem with the "any tenant at all" makes the technical assistance too scattered and general as well as showing little significant in the way of shared equipment/resources so it becomes a commercial real estate deal at best (and a third of business incubators are for-profit ventures.)
By Al Jones on 06/06/2012
Eric - If you have folks running an incubator that think it means hatching eggs then overall size of the market and LQ of industry are meaningless. You need experienced entrepreneurs and Super non-predatory mentors plus GAP funding. This applies to any market of any size. We have watched some of the incubators fire director after director because they hire the money guy who know nothing about building a company. We have a a lot of folks who claim to be running an incubator or claim to be ED folks when all they are, are people holding down a job that they know nothing about and are waiting for the rest of the world to find out about them and they will be canned.
By Michael Franchell on 06/06/2012
This type of initiative would presuppose that cities know exactly what industries would generate the best return for the city. And governments have a notoriously poor record of picking winners and losers in anything. Why wouldn't they set up the incubator and not limit its potential?
By Jim Wells on 06/06/2012
I avoid the terrm "should" but rather turn the question around to "what market are you trying to address" (or what problem are you trying to solve), in addition to understanding the intent and capabilities of the sponsor? The continuum of incubator or accelerator model is very wide, and granted, all are not equally effective at what they set out to do. A university that is investing in biomedical research may want to support its faculty and the commercialization of their research through a life science-dedicated incubator because, in part, the technical needs of those start-ups are unique and cannot easily be met in the private real estate market. An agricultural college seeking to promote commercial food kitchens for value-added food processing is facing entirely different issues. Not only in terms of facilities but more importantly, in terms of the type of staff support to be provided. Hybrids exist (e.g. IT and life sciences together in one facility) but each would require a dedicated program manager with unique expertise in that field. There is a lot of space inbetween, and a feasibility study, strategic and/or business plan to sort these issues out is a must in each case. And sponsors of incubator initiative should be prepared for a "no, don't start one" response
By Steven Spalding on 06/06/2012
Michael - agree. Our incubator, which is quasi-industry focused on advanced manufacturing (aerospace) and IT companies, is focused on Stage 2 and higher companies. We will take start-ups and Stage 1's but tend to refer them to the SBDC so we can focus on accelerating companies that can grow quickly with proper resources directed to them.
By Eric Voyles on 06/06/2012
I think it depends on the community the incubator serves. In urban areas, a more specialized facility makes sense but in more rural areas or mid-sized communities, a mixed use model seems to have the most success. In the community in which we developed an incubator (metropolitan area of approximately 80,000) we settled on a mixed use building (43,900 sq. ft) with larger spaces for heavy mfg., smaller/clean spaces for light mfg or laboratory space, mid-sized mfg. spaces, office space and an incubator kitchen. It's been very successful and it's been exciting to be a part. Each use has excelled or lagged at different times so there has been a healthy balance all along.
By Kristen Fish on 06/06/2012
Steve and Eric, thank you for your response. Steve, the problem we are trying to solve is lack of a good pay job for Upstate NY residents. I would recommend you read a book called the "The Coming Jobs War" by Jim Clifton, Chairman of Gallup. Now to some of your comments. It does make sense that an agricultural school should look at incubating startups with a agricultural product. But what if you have a local resident who has a great business idea and lack money to move to Wall Street. The school shows a real lack of understanding of their local community and their lack of willingness to help a startup that is not exactly in their area of study. With automation creating more efficiency in product production we need to increase the number of new companies to employ more of our residents. It is incumbent upon an educational facility to assist their local community entrepreneurs in creating more companies. If they refuse to assist a startup that is not in their area of expertise then we need to remove the Dean of that school quickly. That school does not meet the needs of their community in today's market place with high unemployment. Eric, I understand your desire to work only with Stage 2 companies but the SBDC or SBA in most communities does not provide the type of help that a stage 1 company needs. We have a local SBA which just will not spend the time with an entrepreneur that is needed. It is too much work for them. We need incubator centers that will work with the founder of a concept through the prototype of the product to then finding the enterpriser to find the customers for that product. There are very few such incubators around and that is exactly what we need in this stage of our economic development. Summary: we need to provide GAP funding and Super non-predatory Mentors that work with both the enterpriser and the founder so we can have accelerated economic development.
By Michael Franchell on 06/06/2012
Michael - I worked in a more rural location, Galesburg, Illinois, we had two incubators while I was there. Neither were focused on an industry primarily due to our rural location, deficit of site selection attributes and general industrial market stagnation. The first was what I would call a micro-business incubator. It was focused on very small companies, typically start-ups and first expansion most often out of a garage or basement. It was more of a traditional incubator. We offered shared clerical, meeting rooms, IT support, flexible leases, an office with up to 5,000sf of production/storage/warehouse space. This last area was separated by a chain link fence. This was only a problem on occasion. Most of our tenants were manufacturers, Industrial supply and Industrial service companies. Our other incubator, 120,000sf heavy industrial building, was set-up to take advantage of two issues occurring in the market. One, we lost 5000 manufacturing jobs from five closures/down-sizings. Most of the workforce was not going to be offered positions at new locations. Each location was a divisional HQ, so there was technical and management talent that could replicate the operation, if desired. Second, we were focusing on attracting smaller FDI investments - specifically China - and wanted to have a location that made it extremely easy for Chinese firms to set up an intitial US operation. We were successful. Our operational model on the micro-incubator spread costs among partners and so allowed the center to operate at a "profit". I think we won an NBIA award for our first tenant in the larger incubator. We also attracted a Chinese company, from Chicago, into the facility. The third tenant as I recall was a local company that was growing, but moved in because a fire destroyed its facility and we were the only property manager in the community willing to provide a short term lease.
By Eric Voyles on 06/06/2012
Wonderful - then you know exactly what I am talking about. We have to increase our manufacturing base and grow our economy by 5% just to maintain our standard of living. The only way that will happen is do what you are talking about accept for a couple of modifications. We would recommend that a startup pay no rent and that they have access after being vetted to GAP funding. We are competing in a world economy and our competitors are much more aggressive than we are in fostering startup companies. Great comment Eric. Thank you.
By Michael Franchell on 06/06/2012
Last Updated on May 31st, 2012