Why Art Business Incubators are Boosting Startups

A new kind of retail incubator has emerged in recent years, providing support for arts-oriented start-ups. One example is the Cleveland Flea, which helps turn Northeast Ohio artists into retail entrepreneurs by offering support services, connections to suppliers, and market access.

Some observers have argued that these incubators have led to a dramatic rise in the rate at which artists are founding businesses. I’m not sure the data are strong enough to make that claim, but several economists believe that these types of incubators could be spurring the growth of independent arts businesses. Here’s why.

New business formation is often constrained by uncertainty. When a person has an idea for a new business, he or she rarely knows whether the product or service needed can be produced, whether customers will demand it, or whether competitors will offer better alternatives. For instance, it’s hard to know whether the residents of Northeast Ohio will want blown-glass figurines of the Kardashian family at a price higher than it costs to produce them, before an entrepreneur makes those figurines and offers them to customers.

Why Art Business Incubators May Be Spurring Growth

Many artists are deterred from starting businesses by the cost of testing these types of questions. Arts incubators help to solve that problem by offering pop-up markets. By going to a pop-up market and testing customer demand, would-be creative entrepreneurs can now try to sell their products without needing to sign a lease and open up a store. That’s a much cheaper and faster way of testing product-market fit, which encourages more would-be entrepreneurs to try.

A second reason why incubators, like Cleveland Flea, might be encouraging entrepreneurial activity in the arts is that they help connect would be creative-company founders to suppliers who can help them with the business side of what they are doing. While the driving force of a glass studio might be the glassblower who can create works of art, that artist needs designers to produce brochures and web sites. He or she needs access to payment systems and back-office record-keeping. Incubators like Cleveland Flea make it easier for artists to start companies by connecting them to suppliers, who can help them with the more routine tasks of company creation, and do so at a low marginal cost.

A third reason why arts incubators might be enhancing entrepreneurial activity is because they provide education. Many artists lack knowledge of the world of commerce. That’s an obstacle to becoming an entrepreneur. Starting a business is very difficult if you don’t know the meaning of the words “revenue” and “cost,” or how to calculate interest payments on a loan. Places like Cleveland Flea provide basic business education and advice to artists, which enables them to turn their artistry into businesses.

A fourth reason why Cleveland Flea, and incubators like it, might be encouraging new business formation is that they make it easier for people to have part-time, small-scale start-ups. A pop-up business operating for eight hours at a market once a week is a lot easier pull off on a part-time basis than a regular retail store. By facilitating pop-up businesses, these incubators allow artists to turn their passions into part-time businesses instead of just working overtime at their regular jobs, or taking other, non-creative, part-time work. The substitution of part-time, small-scale start-ups for other kinds of work boosts the rate of entrepreneurial activity.

Image: ClevelandFlea.com


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