WHY YOUNGSTOWN HAS THE BEST INCUBATOR IN THE WORLD

Yes, Youngstown.

The giant banner hangs on the side of the brick building, partially obscuring the faded white lettering left over from when the structure housed a furniture store, back when the city imagined a different kind of future. The banner reads “Ranked #1 Best Incubator in the World – Youngstown Business Incubator.”

The three-stories-high brag can be forgiven — Youngstown has been singled out for a lot of things in the past few decades, almost all of them negative, so the rare piece of good news deserves some real estate.

But how does a nonprofit tech incubator in Youngstown, the very epicenter of the Rust Belt, a city best known for urban decay, organized crime and an unprecedented collapse in jobs and population, come to be ranked No. 1 in the world, ahead of all the other better-known and better-financed counterparts?

Youngstown Business Incubator (YBI) has never housed a billion-dollar company or spawned a startup that’s become a household name, the way Y Combinator did for Airbnb, Dropbox and Reddit. It doesn’t have famous mentors, multiple locations or millions to invest.

It starts to make more sense when you realize that the programs aren’t ranked specifically by launches, exits or valuations. YBI was ranked No. 1 by UBI Index, a Swedish research initiative which compares university-affiliated incubators in three performance categories: value to the ecosystem (improving the local economy and retaining talent); value to the client (mentorship, funding and networking); and attractiveness (incubator offer and post-incubation performance). Out of a possible 5 stars, UBI gave the Youngstown program 4.5 stars for value for clients and 4 stars each for value to the ecosystem and attractiveness.

“Youngstown Business Incubator is an exceptional incubation program that provides excellent value to its client startups, which generate high economic impact for the local economy,” UBI Index co-founder Dhruv Bhatli wrote in an email.

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For YBI Director Jim Cossler, the award is evidence of Youngstown’s comeback and validation of his approach to business incubation, one that he thinks could help other struggling Rust Belt cities.

“This may not be the model for Palo Alto or Tel Aviv, but it is the model for Gary, Indiana,” he said.

Taking stock

YBI launched in 1995 and muddled along for a few years with so-so results. Realizing that so-so was not going to do much to help Youngstown, Cossler decided to reorganize and rededicate.

“We think it’s a fundamental mistake for an incubator to think it’s going to be good at everything. Rather than be mediocre at everything we do, we thought let’s be very good at one thing,” he said.

So he took stock of the Mahoning Valley’s entrepreneurial assets and the have-nots dwarfed the haves. No university or federal institutions attracting research dollars, no healthcare industry, no tech base or legacy industries, no motherships like Microsoft or Genentech spinning off startups, no tradition of entrepreneurship or investing, no wealth and a poor quality of life. That pretty much eliminated polymers, pharma, healthcare, medical devices, retail, biosciences and robotics. So what was left?

“We kept coming back to software,” Cossler said. Specifically B2B software. It’s cheap to develop, fast to fail (or succeed), can be created anywhere and could draw students from local universities, like Youngstown State, Kent State and Cleveland State.

And while B2B software is the business of most of the companies in YBI, the city and its incubator are not in the position of turning down startups, so it’s also home to a hydroponics grower, a nuts-and-bolts distributor and a cricket farm (more on that later).

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Keeping them in the fold

Technically, the incubator serves 21 counties, but its emphasis is the Mahoning Valley, the counties of Mahoning, Trumbull and Columbiana. Its $1.3 million annual budget comes from the Ohio Department of Development, grants, program fees, rent and contributions. It has five full-time staff and hopes to be self-supporting in a few years. It doesn’t automatically take equity in member companies, but does invest in some, sometimes through loans and sometimes in convertible notes.

Many incubators tell companies to move on after a time or when the enterprise reaches a certain size. Not YBI.
Unsurprisingly in a city that has seen so many departures, YBI hangs onto its companies. “We don’t want them to graduate and scatter this ungodly talent,” Cossler said.

It has the luxury of expanding cheaply in one of the nation’s most depressed real estate markets. It’s now sprawled over four adjoining buildings and recently acquired a fifth.

Most of the 20 companies have roots in the Mahoning Valley, Pittsburgh or Cleveland, but YBI is trying to attract them from elsewhere.

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A hub for talent

While that “keep them under one roof” approach means YBI graduates are not seeding the Mahoning Valley with startups, it does create a locus of entrepreneurial energy in a reviving downtown.
YBI’s 2013-14 executive summary cites the following accomplishments of YBI clients in the previous five years:

• 610 new jobs with an average wage of $52,800, 60 percent above Mahoning County’s average wage
• $76 million in capital investment
• Nearly $53 million in wages
• Income of more than $184 million

The incubator’s greatest success story is Turning Technologies, which started in YBI in 2002. Named the fastest-growing, privately-owned software company in the U.S. by Inc. in 2007, it’s been sold twice, has more than 200 employees and an office in Amsterdam, and it’s still in the incubator.

Education software startup Learning Egg has been at YBI for nearly two years and CEO Elijah Stambaugh said he doesn’t anticipate going anywhere else. “It’s a community where you get to bump into people in similar positions at different stages,” he said. “My understanding of the startup world is infinitely greater than when I started.”

CEO Tony DeAscentis of via680, which has been at YBI since 2002, said Cossler helped the messaging startup pivot early on and helped him network. “It’s a community and we really try to help each other out,” he said.

All the CEOs, most of whom have roots in the city, said they feel like they are part of a Youngstown revival. “I’d love to be part of the story,” Stambaugh said.

YBI is partly responsible for a chorus of crickets in Youngstown and, no, that isn’t a joke about deserted streets. Big Cricket Farms, which calls itself America’s first urban cricket farm, is a B2B wholesaler of frozen crickets for use in food.

To hear CEO Kevin Bachhuber tell it, he located in Youngstown because he felt sorry for the city. After a 2014 Rust Belt tour of struggling cities, including Detroit (too intimidating) and Flint (too scary), they chose Youngstown. “We wanted to choose a site with an economy where it would do the most good,” he said.

Big Cricket Farms operates a 5,000-square-foot warehouse in the city and the self-described “first urban cricket farm” is looking to double its workforce of five.

“(YBI) has been so freaking helpful,” Bachhuber said. The incubator invited the startup into its coworking space, made introductions and even invested.

“There is nowhere to go but up,” Bachhuber said of his adopted hometown. “I think we can be part of the process of helping Youngstown.”

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Manufacturing innovation

After reorganizing the incubator, Cossler wanted to concentrate exclusively on B2B software, but manufacturing, however diminished, was still the rusty, beating heart of the Mahoning Valley, and community leaders wanted YBI to help those surviving companies trying to compete in the ruthless, global economy.

Bowing to pressure from its board, YBI, in conjunction with Youngstown State, in 2012 launched a pilot program on additive manufacturing. Often used synonymously with 3D printing, additive manufacturing is the process of building a component in layers by depositing materials. Then part of the National Network for Manufacturing Innovation (now known as America Makes), the $70 million federal research institute occupies a building in what’s now called the YBI Tech Block.

The 3-D printers inside range in size from desktop to small shipping container. A display of various printed parts, from chess pieces to machine parts, is displayed in the front window.

Additive manufacturing entrepreneurship is everything B2B software development isn’t – difficult, expensive, time-consuming and, often, company-specific. Small manufacturers who could benefit from innovation often don’t have the budget or foresight to make the investment.

Additive manufacturing is making slow inroads into the Valley’s foundry industry while another initiative targets precision hybrid manufacturing, a combination of 3D printing and traditional metal parts finishing, said YBI COO Barbara Ewing. “Companies don’t know how to integrate it yet. It’s a period of great flexibility,” she said.

The Youngstown diaspora

When the Mob ran Youngstown in the 1950s and 1960s, the city earned the nicknames “Murdertown U.S.A.” and “Bomb City U.S.A.”. It’s since traded those for another, only slightly more flattering, label – “The Incredible Shrinking City.”

Youngstown’s population peaked in 1950 at 168,000; it was 65,000 in 2014, the same year the Census Bureau named it the sixth-most impoverished area in the country. The city attracted national attention for its Youngstown 2010 land use plan, which acknowledged the undeniable loss of people and businesses and called for transforming the city into a smaller, greener community.

New college graduates and skilled workers have been a big part of the population exodus, leaving their hometown behind for better jobs and opportunities. Some of them have gone on to success elsewhere, becoming the mentors and investors every startup scene needs.

They might have fled Youngstown, Cossler reasoned, but that didn’t mean they couldn’t still help.

He and others searched LinkedIn for people with Youngstown roots, people who’d left for California, Boston, New York and Seattle to work in tech and finance, things they couldn’t do in their hometown. Cossler called and emailed. Remember us, he asked. How about helping out that city you let behind?

Turns out, Youngstown sticks with you. No matter how badly those people wanted out, they’ve kept a soft spot for their hometown. While a few have moved back, other members of the Youngstown diaspora made themselves available for YBI and its companies. They vetted startup ideas, networked, made introductions and offered advice.

No one has refused to help, Cossler claims, adding that many of the 7,000 in his expat network want to come home, that they hope the city recovers enough to make it possible.

“Everyone wants to help Youngstown,” he said.

Location doesn’t matter

IMG_5652-5Standing in front of YBI on a freshly streetscaped boulevard, Cossler looked down the block toward downtown, which is showing signs of life. An empty office building is being turned into apartments; Youngstown State has expanded its campus; YBI workers can walk down the street to some nice restaurants and there is even an upscale coffee shop, a sure sign of civic revival.

“Ten years ago, you could have shot a cannon down here,” he said.

Cossler’s business card lists him as CEO and Chief Evangelist and he preaches the glories of Youngstown to any who will listen, including the delegations from other cities and incubators who want to learn the YBI formula.

Like any good marketer, Cossler does his best to turn negatives into positives. Youngstown might have a lot of empty buildings, but that’s why you can get office space for $8 to $10 a square foot instead of paying least five times that much in Cleveland or Pittsburgh. And that goes for salaries, too. A software engineer in Youngstown earns $60,000 a year, not $190,000 like in Silicon Valley. Startup burn rates slow to a smolder in Youngstown.

“You can absolutely do world-class things in Youngstown because location doesn’t matter anymore,” he said.

And if he can convince enough people of that, then Youngstown will once again matter.

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