Economist Ricardo Hausmann says the U.S. has a chance to invent the manufacturing technology of tomorrow.

• By Antonio Regalado on January 4, 2013

The production tax credit doesn’t promote radical innovation, but maybe that’s okay.

The country’s domestic market will also see continued growth, fueled by a boom in mobile and cloud computing.

By Phil Muncaster on January 7, 2013

According to the 12-year cycle of the Chinese zodiac, those born in the year of the Dragon are blessed with power and good fortune. 2012 was certainly an auspicious year for the country’s technology industry, as China’s rise to become the planet’s preëminent technology producer and consumer continued apace.

The past 12 months saw China reach and surpass milestones across the technology firmament. For example, by most reckonings, it has already overtaken the United States as the world’s biggest smartphone market. Chinaalso passed the magic figure of one billion mobile subscribers early in the year. The country now has over 500 million  Internet users, according to the government-affiliated China Internet Network Information Center.

So what can we expect from China and its growing rank of world-class technology companies in 2013, as it enters the year of the Snake?

Needless to say, the Chinese government is keen to keep pushing growth forward, and it has a plan to increase the country’s online population to 800 million by 2015, and to expand Web sales to reach to 18 trillion yuan ($2.9 trillion) by 2015—taking the top spot in global e-commerce.

Gartner is predicting enterprise IT spending alone in China will grow from $117.8 billion in 2013 to $172.4 billion by 2016, representing a compound annual growth rate of 8 percent, compared to a global growth rate of just 3 percent over the same period. As elsewhere in the world, cloud, mobile, and hardware and software virtualization will be the main spurs to growth.

When it comes to cloud computing, China will continue to benefit from huge regional government investments and the fact that most organizations are unencumbered by legacy IT systems, enabling them to leap straight to cutting-edge deployments. Although only 10 percent of conventional systems in the country are currently virtualized, this will jump to 70 percent by 2016, according to Gartner.

IDC meanwhile forecasts that despite suffering a four-point dip in annual growth in 2013 to 10 percent, due to falling demand from Europe and elsewhere, China will lead the charge to account for over a quarter of spending from emerging markets, including Latin America and Eastern Europe.

In its new 2013 predictions report, IDC writes: “As an example of this impact, we are predicting that China’s ZTE will leap from fourth to third position in smartphone shipments—riding an astounding 80 percent plus growth rate and driven in large part by its emerging market roots and focus on low-cost smartphones.”

Chinese firms are likely to have the biggest impact in the mobile and PC spaces globally in 2013. Gartner predicts that both ZTE and its Shenzhen neighbor Huawei will continue their rise up the mobile handset rankings, and will be joined in the top five by Lenovo, which this year surpassed HP for the first time to become the world’s number one PC vendor.

These three in particular will benefit from success in their domestic market in the low to mid-end, where most growth will come as China’s huge pool of feature phone users gradually transition to the smartphone age. It’s an area where Lenovo in particular has flourished. Gartner expects the company to reach the top spot in China, at least in terms of unit sales, by next year.

Canalys analyst Nicole Peng believes that many Chinese smartphone vendors—“large and more resourceful ones and small or even non-brands”—will push for overseas growth in 2013.

“Vendors such as Gionee and K-Touch have already been using their existing feature phone channels for smart phones and Yulong has managed to reach the carrier channel in the U.S. with their low-cost LTE device shipping with MetroPCS,” she says. “Chipset vendors like Qualcomm and [Taiwan-based] MediaTek are providing technical, market, and business support to more Chinese vendors, allowing them to expand internationally, particularly into emerging markets.”

Despite success in the handset space, ZTE and Huawei will likely continue to struggle in the international telecom equipment market due to national security concerns. The U.S. and Australia have blocked the firms from competing in their domestic markets, while Canada, India, and even the U.K. are investigating the firms’ links to the Chinese government.

Experts also argue that the unique, highly regulated and semi-closed nature of the Chinese Internet makes it difficult for new local Web firms to survive and thrive to the point where they can make the jump into overseas expansion. To an extent that’s going to remain true in 2013, but some of China’s biggest and more innovative Web platform providers are likely to begin dipping their toes in international waters.

However, Google rival Baidu, whose Q3 net income surged 60 percent compared to the same period in 2011, recently added Sydney, Australia, to its international offices (along with Hong Kong, Taiwan, London, and San Francisco). The past year has seen it introduce localized services in Vietnam, Thailand, and Egypt with mixed results, although it has already announced a Singapore-based research lab on natural language processing for Thai and Vietnamese and is currently building a new international headquarters in Shenzhen.

Alibaba’s e-commerce platform, Taobao, often dubbed the eBay of China, was recently taken off the U.S. government’s Notorious Markets blacklist of sites which play host to pirated content, which will help its expansion efforts. The firm has hinted that its recent move into Hong Kong and Taiwan could be followed by modest growth elsewhere.

Web giant Tencent is also likely to increase its international user numbers for the Whatsapp-like WeChat (Weixin) service. Most of its 200 million users—more than double its numbers of users from six months ago—are still China-based, but the firm has said this is rapidly changing, and it has just released a BlackBerry app which will appeal to users in overseas markets like Indonesia.

Frost & Sullivan analyst Peng Zhai believes that China’s Web giants will struggle to succeed in mature overseas markets. “Baidu is the number one Chinese Internet company in size and revenue. It has the technology and a mature business model and maybe it can enter other countries successfully, but in the U.S. and Europe, it will be difficult with Google already there,” he says. “Taobao could be successful, but credibility is important, and it isn’t well known outside of China. Plus in the U.S. and Europe, you have eBay and Amazon, which makes it tough to compete.”

However, the Chinese tech market is still one of the fastest-growing IT markets in the world, according to Forrester. It accounts for $105 billion of annual technology spending, which places it third after the U.S. and Japan, but per-capita IT spending in China is only 4 percent of Japan’s and 3 percent of that in the U.S., pointing to huge long-term potential. So while commentators often focus on the potentially disruptive impact of Chinese tech vendors overseas, as the country’s IT appetite grows, the opportunities for foreign firms to sell their goods and services into the People’s Republic could become even more compelling.

For American cleantech companies, there’s just one country that matters most: China. After years of massive growth that took a heavy toll on the environment and natural resources, China now has an ambitious plan to tackle its energy needs by developing clean energy alternatives. Still, for so-called “cleantech” companies, accessing the market and setting up shop there is no easy task.

That’s where Fred Chang comes in. A senior China advisor to Cleantech Group, a San Francisco-based consulting group, as well as a long-time investor in Asia’s cleantech industry, Chang compares himself to the Sherpa, a Tibetan tribe that helps foreign mountaineers conquer Everest. With the right partners, Chang said, the rewards for foreign cleantech companies in China are big.

According to a report by Bloomberg New Energy Finance, new clean energy investment in China has surged in the second and third quarter this year, surpassing the U.S. by $7.9 and $7.5 billion respectively.

“The Chinese public is not criticizing the government for supporting cleantech companies; they’re encouraging it to do more,” Chang said. The Obama administration has been under fire for some high profile failures of federally supported cleantech ventures, such as solar company Solyndra and car battery maker A123.

In its recent five-year plan, China aims to cut its carbon dioxide emission per unit of GDP by 17% by 2015. The plan also has a focus on the development of what some observers call the “new magic seven,” namely seven “emerging strategic industries”, including biotechnology, high-end manufacturing and new energy, which are deemed to be the driver of China’s future growth.

“The government knows it’s (environmental) problems, and the policies are clear and consistent,” Chang said. “It won’t be like in the U.S, where the Congress has to renew some programs every few years.”

For the last two years, Chang’s firm has helped American cleantech companies come to China by providing week-long tours aimed to help entrepreneurs build contacts, learn about the business landscape and find investments.

“China is a market where there’s a desire to move fast,” because of its urgent sustainability issues, said Richard Youngman, Europe and Asia managing director of Cleantech Group. “But there’s a tech gap between what’s available locally and what they want to achieve.” And that’s the gap the Cleantech Group hopes to bridge.

“It’s the most efficient business trip I’ve been on,” said Frank Magnotti, one of the eight CEOs (three of whom are from Europe, five are from the U.S.) that took the tour last month. His New Jersey-based company, Fluitec, develops technology to monitor and control the quality of lubricants in rotating machinery, which are widely used in power plants, wind mills and steel refineries. Fluitec already has an office in China, but its main customers are foreign enterprises operating there. “As an entry point, it’s easier, but you can’t just rely on foreign companies,” Magnotti said, adding that during the trip, the group met with lawyers and accountants, who helped him understand more about doing business in China. He also met with potential customers and interested investors.

Atmosphere Recovery is another company that looks to grow their existing operation in China. The Minnesota-based venture builds gas analyzer systems to help industrial companies become more energy efficient.

Ronald Rich, president of Atmosphere Recovery, said that the biggest challenge the company faces is that the demand for their products has outpaced their production capacity. “We don’t actively market anymore,” Rich said. “Sinopec (China’s largest oil company) said they would buy 75 a year, we make 5 a month.”

Rich said he didn’t expect the market to be so big when he first entered China in 2006; but last year, the company sold nearly half of its equipment there. Now he hopes to quadruple the company’s production capacity, as he begins to tap into the Chinese oil and gas industry, which apparently is more willing to try new technologies than its American counterpart. “U.S. companies just don’t take risk like that,” Rich said, as they’re enjoying historic prosperity and thus have no incentives to invest in technology upgrades.

Another challenge for Atmosphere Recovery is the lack of good financing options in the U.S., said Rich. “Most of the cleantech investment in mid 2000s didn’t pay out the way the venture capitalists hoped they would,” he said, explaining why he finds investing deals today less attractive. While still preferring an American investor, Rich said he’d be happy to team up with a Chinese one if the offer suits.

According to a report by Ernst and Young, public cleantech companies around the world have witnessed a 41 percent drop in market capitalization and a 229% decline in net income this year. In a Deloitte survey of 440 venture capitalists globally, those from the U.S. had shown the least confidence in cleantech investment.

“There’s a cooling down of private and public capital in the U.S. (that’s available to the industry),” Youngman of Cleantech Group said. “There’re more and more western cleantech companies who are finding life quite hard.”

“Whenever there’s a chain break between capital and technology innovation on the market, the government has to be the first angel,” said Wan Gang, secretary of China’s Ministry of Science and Technology in a speech in 2010, affirming the government’s support for those industries.

“It’s not just some political movement; it makes economic sense for corporations too, because they have to compete on tech solutions to make money,” said Chang. “All those things are the opposite of what’s going on elsewhere in the world that makes it welcoming for foreign companies to come to China.”

(The author is a Reuters contributor)

(Editing by John Peabody, Ryan McCarthy and Brian Tracey)

(Reuters) – Few things encapsulate Portugal better than its bakeries, where people from all walks of life mingle over coffee and cake. So when a whole new chain emerges in the depths of an economic crisis, it sends a glimmer of hope.

“It’s almost like a hideout from the crisis. I was really happy to learn that they are opening more stores, it dispels the gloom a bit,” said Ana Justina, a freelance designer and a regular at two of the 12 cosy outlets of A Padaria Portuguesa (The Portuguese Bakery) in Lisbon.

With unemployment at record highs, empty stores and “for rent” signs on cafes are far more common than prospering new businesses after a 40 percent jump in insolvencies this year.

Still, the bakery chain is just one example of how a bold business concept can defy the worst economic slump since the 1970s, a smothering tax burden imposed under an international bailout, record-low business morale and a lack of bank loans.

Although not numerous, other startups in areas from farming to computer technologies and biomedicine, including in the all-important export sector, are jumping into action.

“There’s an urge to change and do business better,” said Daniela Couto, co-founder of Cell2B biomedical startup that raised about 1 million euros earlier this year, mostly from private investors in Portugal, Spain and the United States.

Cell2B is preparing for clinical trials of promising cell therapies aimed at eliminating transplant rejection in humans, after which the founders do not rule out a share offering.

Nuno Carvalho, 34-year-old CEO of The Portuguese Bakery, says a crisis is little hindrance to a growth-oriented concept.

“We are proof that by being lean and mean and responsibly managing your resources one can have a healthy business and expand, even under these circumstances,” he said.

“And the crisis presents its opportunities, like much cheaper leases and available skilled labor,” he said.

The stores with tiled floors are modern and clean yet distinctively Portuguese, while smiling staff are worlds away from the sour-faced vendors at many typical bakeries.

Set up with just one store in late 2010 by five members of the same family, it plans to invest 2 million euros ($2.6 million) from its cash flow next year into seven new outlets in greater Lisbon.

Carvalho says it is the first chain of street cafe-bakeries in Portugal and envisages expanding at home and possibly abroad. He says he has turned down franchise requests from as far as Australia in favor of maintaining control of the brand.

CHALLENGING OLD WAYS

The debt crisis has hammered the economy, depriving it of easy bank loans and state funding, but it is also helping to drive change, forcing entrepreneurs to come up with clever, detailed business plans to be noticed by precious few investors, who typically pick just 1-5 deals from 100 proposals.

These ideas are slowly beginning to challenge the traditional way of doing business in Portugal that is often criticized as too near-sighted and lacking ambition.

“Too many companies that are being set up still think small and are not sustainable enough,” said Paulo Andrez, president of the European Trade Association of Business Angels and Seed Funds which invest in promising startups.

Local angels’ groups and venture capital investors say they have a total of 350 million euros to invest in startups.

“It’s better to create fewer but more sustainable firms that think big in terms of growth. In northern Europe the proximity of countries like Belgium, the Netherlands and France makes most entrepreneurs think global from day one,” Andrez said.

He cites a Portuguese case to show how it should be done; United Resins opened a factory in 2010 backed by angel investors to make resin derivatives used in printing inks and exported all of its output worth 25 million euros last year.

As tax hikes and spending cuts under the bailout austerity program depress domestic demand, the country is betting on exports to ride out the crisis and return to growth in 2014. Exports have grown, but still remain below the EU average.

Small and medium-sized businesses account for almost three-quarters of jobs and 55 percent of company revenues, but their overall quality, and lifespan, leaves a lot to be desired.

The latest Eurostat data show Portugal had the third highest “birth rate” of company startups in Western Europe after France and Holland in 2009, before the sovereign debt crisis, more than a third higher than neighboring Spain or Ireland. But the survival rate, at about half, was the lowest.

The 2011 Global Entrepreneurship Monitor showed entrepreneurial intentions still exceed those of most EU states, double the levels seen in fellow bailout receiver Ireland that boasts low company taxes. Perceived opportunities lag behind Ireland’s but exceed those in Greece and Spain.

Cell2B’s Couto says defter, young entrepreneurs are emerging. “When I returned in 2011 after a two-year stint in the United States, there were many more companies being set up, more bright business plans vying for financing at incubators.”

NOT A TECH HUB, BUT INVESTORS KEEP COMING

Startup incubators, often sponsored by municipalities and mainly aimed at tech companies needing little initial investment and promising good returns, have mushroomed in the capital and university centers across Portugal. They offer startups cheap office space and free tax and legal consultancy.

“We are not a startup hub like London and Berlin. But when investors visit from abroad, they always pick one to invest in. They are amazed by the technical quality, the programmers and engineers,” said Joao Vasconcelos, head of the Startup Lisboa incubator that homes 40 startups, resembling a busy beehive.

It is yet to create a breakthrough computer-based service like Sweden-founded Skype or a viral game like Finland’s Angry Birds, but Portugal is no stranger to world-class technological innovation.

The world’s first prepaid mobile phones were launched here, as were single, country-wide electronic motorway tolls.

“Portugal is a demanding, sophisticated market, an early adopter. So if we test a product here and it sells, it has a high probability of success globally,” said Francisco Banha, head of the FNABA national business angels federation.

Britain’s Seedcamp startup accelerator fund has invested in four tech companies under Vasconcelos’ tutelage – from golf performance analytics to simple online tax refund claims, naming them among “70 of Europe’s most promising startups”.

Some foreigners prefer to do it themselves.

Nick Coutts is co-founder of the Fitness Hut gym chain whose modest fees have lured thousands of clients. It is betting on a low-cost model, saving on frills like saunas, pools and reception staff, who are replaced with keypad entry.

“I think it’s a very easy story to sell – a low-cost gym is going to work in a recessive economy. There are people with money still prepared to back startups if they have the right concept that fits into what’s going on,” the Briton said.

The company opened the first gym in Lisbon in October 2011, and now has four working clubs with 15,000 clients, including in Porto, with 2012 revenues at 3.2 million euros. It plans to reach 20 gyms in Portugal and expand to Brazil.

Is doing business in Portugal very painful? Not really.

“Bureaucracy here is challenging, especially in terms of licensing needed to get things moving at a reasonable speed, but when you get some momentum, it’s like most countries,” he said.

Portugal has simplified the process of setting up companies in recent years, but a lot more red tape is left. The government is aware it needs to cut it to return the country to growth.

“To cross this valley of death we need a great number of firms, especially innovative and export-oriented. The government is doing its best to put an end to bureaucracy, simplify the licensing to make Portugal a startup-friendly nation,” State Secretary for Entrepreneurship Carlos Oliveira told Reuters.

Whether this will be done remains to be seen, but Oliveira’s credentials in the startup world are solid – he was behind the mobile tech company Mobicomp set up in 2000 with a capital of 5,000 euros that later went international and was sold to Microsoft in 2008, reportedly for millions.

At the peak of the austerity drive he arranged social security breaks for firms hiring jobless university graduates, tax discounts for 2013 angel investment and set up a venture capital vehicle to invest 20 million euros a year in startups.

Another key area where Oliveira wants to promote change is higher education, with a greater focus on entrepreneurship studies and implementing business ideas.

“I graduated in management knowing how IBM and Kodak worked, but not how to set up and run a small business in Portugal, which is where most end up working,” said Filipe Botto, CEO and co-founder of another company coached by Startup Lisboa. The incubator already runs workshops for university students.

“We’d have been better off studying that, to have tools to overcome this crisis, to create our own jobs,” said Botto – an investment banker on an entrepreneurial sabbatical to launch his Yonest company. He plans to produce “honest” natural handmade Greek yogurt to occupy an unfilled market niche in Portugal.

“Some think Greece and Portugal in one sentence spell too much crisis,” he laughs. “To me it’s an anti-crisis recipe.” ($1 = 0.7628 euros)

(Editing by Philippa Fletcher)

(Reuters) – U.S. small business employment rebounded in December from a storm-related slump, the latest suggestion that job growth probably picked up last month.

The National Federation of Independent Business said on Thursday the net change in employment per firm edged up to 0.03 after slipping to minus 0.04 in November.

It comes on the heels of the ADP National Employment Report which showed the private sector added 215,000 jobs in December after a gain of 148,000 in November. While the ADP report tends to exaggerate employment in December, it has raised the risk of a better nonfarm payrolls number.

The government is expected to report on Friday that employers added 150,000 jobs in December, according to a Reuters survey of economists, up slightly from 146,000 in November.

The NFIB said there were job gains in manufacturing, transportation, professional services, finance, insurance and real estate sectors. There were large declines in construction.

The NFIB survey found that 11 percent of small business owners throughout the country added an average of 2.9 workers per firm over the past few months – up a point from the prior month.

The share of business owners reducing employment edged up a percentage point to 13 percent.

The share of business owners reporting hard-to-fill job openings fell to 16 percent from 17 percent. That suggests little change in the unemployment rate in December after it fell 0.2 percentage point to 7.7 percent in November.

(Reporting By Lucia Mutikani; Editing by Nick Zieminski)

(Reuters) – Borrowing by small U.S. businesses rose marginally in November, indicating they were essentially on hold in terms of growing their enterprises in the face of economic and government fiscal uncertainty, a report on Wednesday showed.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, rose to 108.3 from a downwardly revised 107 in October, PayNet said.

PayNet had initially reported the October figure as 107.5.

Borrowing was up 3 percent in November from a year earlier.

PayNet founder Bill Phelan, located in Chicago, said the small rise in the monthly index and the 3 percent year-on-year gain indicated small businesses are essentially on hold when it comes to borrowing and growing their businesses.

“Small businesses are on hold until they get some better stability from policymakers and greater clarity on the direction of the economy,” he said.

“Small businesses were waiting to see what is happening with Washington in November, they were waiting for more consumer activity to emerge, really watching the front door for new sales to emerge and it doesn’t look like any major new influx of sales came in — they have really been on hold,” Phelan said.

Small businesses are often responsible for the bulk of new job creation after recessions. The recent recession ended in 2009, but sluggish growth has meant weak job growth, and unemployment in November registered 7.7 percent, well above the 5.5 percent to 6 percent that many economists view as normal.

PayNet’s lending index typically correlates to economic growth one or two quarters in the future.

Separate PayNet data showed financial stress at near-record-low levels. Accounts overdue by 30 days rose slightly to 1.22 percent of the total from 1.21 percent the previous month. Phelan said a “normal” rate of delinquency is 1.5 percent to 1.6 percent.

Longer-term delinquency rates eased. Accounts behind 180 days or more, which are considered in default and unlikely to be paid, dipped to 0.27 percent from 0.29 percent.

Accounts behind 90 days or more, or in severe delinquency, were unchanged at 0.26 percent.

PayNet collects real-time loan information, such as originations and delinquencies, from more than 250 leading U.S. lenders.

(Editing by Chizu Nomiyama)

Happy Holidays and Happy New Year from EDG! We hope 2013 brings nothing but peace and joy to you and yours and we are looking forward to the exciting new happenings in the investment arena. Let’s bring these entrepreneurial ideas to life!

(Reuters) – Emirates NBD ENBD.DU expects lending to small businesses to double and top 1 billion dirhams ($272 million) next year as Dubai’s largest bank diversifies away from corporate and personal financing.

Suvo Sarkar, ENBD’s head retail banking, said on Tuesday the lender has a quarter of the market in lending to small and medium enterprises (SMEs) in the United Arab Emirates.

“This year the size of our lending to SMEs doubled from last year and we expect them to double in 2013 from 2012. I would say this will exceed 1 billion dirhams 2013,” he told Reuters.

Banks in the United Arab Emirates are increasingly focusing on small business lending following restrictions from the central bank on personal loans for individuals.

Corporate lending in the country has suffered during the past three years as companies grappled with debt.

“SMEs are expected to contribute more than 40 percent of the country’s GDP in 2013,” Sarkar said.

Emirates NBD, formed by the 2007 merger of Emirates Bank and National Bank of Dubai and which acquired Dubai Bank in 2010, will see revenue propped up by lending to SMEs, he said.

“We are seeing lot of action in food and beverage, travel and tourism, oil field services and construction.

(Reporting by Mirna Sleiman; Editing by Dan Lalor)

A new group of food-based startups are applying tricks learned from the technology industry to grow a new wave of businesses to cash in on the growing “foodie” movement across the U.S.

Like tech entrepreneurs starting out in a Starbucks, foodies who find themselves needing space to prepare boutique treats are turning to shared programs called incubators and accelerators that help them launch by offering communal business spaces and logistical assistance.

Small food businesses—mom and pop operations selling goods at farmers markets, food trucks, or at boutique retail establishments—have proliferated in the last few years, according to data provided by the National Association for the Specialty Food Trade. In the New York City area alone, city politicians are rushing through 22,000 additional permits for mobile food vendors. Due to hygienic needs, raw material needs, and other factors, new small food businesses often need help getting started. In large urban markets such as New York and Los Angeles, startup costs frequently exceed $10,000, and that’s where the incubators and accelerators come in.

“A company can come in, rent space for the day, pack up their things and leave,” says Michael Schwartz at the Organic Food Incubator in New York. “The not so traditional part is that we have companies who stay here more permanently.” Tenants at the Organic Food Incubator work on everything from spicy Indian sandwiches to gluten-free breads to soft-serve “ice cream” made from crushed fruits.

Both incubators and accelerators offer small food businesses the opportunity to grow within a nurturing environment while defraying large startup capital costs.

The Organic Food Incubator hosts trade shows to introduce their members to prominent local grocery chains and distributors; members also have access to classes, networking event, and consulting assistance for recipes, social media, and distributors.

Ahkilah Johnson is the co-founder of Manhattan’s City Cookhouse, which offers commercial kitchen rentals along with community cooking classes and business development opportunities. Johnson says that “I used to do children’s cooking classes in the neighborhood, but could never find space for classes. We needed space in the community. My day job is in building schools so I thought we could build a space. We created a center for businesses and for healthy cooking classes.” Incubators such as the Organic Food Incubator and City Cookhouse offer micro-businesses access to high-end kitchen equipment, space to produce at scale, and support to grow their business. This can include anything from packaging assistance to networking sessions with large wholesalers and distributors.

While most of New York’s food incubators are medium-to-large sized commercial kitchens, several even larger facilities are coming to the city. 3rd Ward, a Brooklyn community arts and educational organization, is opening a large culinary incubator and educational center. Also in Brooklyn, a former pharmaceutical plant is being converted into a 660,000 square-foot culinary production facility whose rooms will be subdivided among a warren of small businesses.

While traditional accelerators have been aimed at internet-based startups and small technology firms, food accelerators are a much newer proposition. Food businesses traditionally require thousands of dollars in launch capital at the very least and are subject to much more intensive government regulation. The large sums that small food businesses need to expand have traditionally been found through more traditional fundraising methods in the past. One accelerator, 500 Startups, is nurturing mail-order food businesses among others. Culture Kitchen (which sells make-your-own ethnic cuisine kits) and Craft Coffee. In exchange for up to $250,000 in seed funding, participating businesses give up 5% equity.

One accelerator in Arkansas, The ARK, pays special attention to food. Due to Wal-Mart’s and Tyson Food’s headquarters being located inside the state, The ARK is specifically recruiting food start-ups who could benefit from close proximity to the agribusiness giants. Three of the groups funded by ARK’s 15 are food startups, including a social network for food trucks, a high-tech meat analytics firm, and an online marketplace for farmers. The ARK offers recipients approximately $18,000 in funding in exchange for 6% equity and a promise to relocate to northwestern Arkansas for the duration of the program.

“Not only do food-oriented startups get access to mentorship from top minds in the food industry, but founders also receive support and resources to accelerate their businesses during the three-month program, all in preparation to make investor pitches,” the ARK’s Jeannette Balleza told Reuters.

Another accelerator specializing entirely in food startups was recently launched in California as well. Palo Alto’s Local Food Lab is unlike traditional accelerators in that it doesn’t offer capital in exchange for equity, but rather an intensive six-week program for food startups to develop a business plan and cultivate industry contacts. Recipients include all-brunch food truck Brunched in the Face, South African-style snack maker LifeBites, and urban farming education effort Seeducate.

“Working through (ARK) benefited us by providing mentors and advice related to the industry we are entering,” said Derek Kean of Truckily, a logistics firm for food trucks funded through the ARK. “Being able to build upon experience and knowledge from former executives, entrepreneurs and current employees of companies that have had years of research and, more importantly, ‘mistakes made’ was invaluable.”

But despite the growing the popularity and apparent need food incubators and accelerators, they aren’t found everywhere: Apart from outliers such as ARK, most are situated in large cities or in dense suburbs. Only a few food incubators have sprouted up in smaller communities. Replicating the food incubator model in rural areas and college towns is the next great challenge for the growing field.

(The author is a Reuters contributor) (Editing by John Peabody and Brian Tracey)