What the
use Incubator Company & its use in
Indian
Startups.
In depth
Study
Introduction to Incubation
Incubator plays major role in startups.
An incubator is a physical location that
provides a defined set of services to individuals or small companies. This may
include specific types of office space, flexible lease terms, access to
technology, financing, and technical assistance (such as marketing, legal,
finance, HR, and other business development services). By locating similar or
complementary entities in proximity to each other, the incubator may also play
a critical role in promoting knowledge transfer, both formally and informally.
So if any startup have innovative idea but
doesn’t have any resources to execute it . Then Incubator is for you.
Recently in developing countries,
incubation has become an interesting approach to accelerate the development of
technologies, industries and business skills. However, it should be noted that
the needs of these communities can often be radically different to a more
mature corporate environment where education, business training, and public
institutional support may be a completely different context to Europe and the
United States.
This Article is aimed at the context of
developing countries, and is intended to be a useful tool for anyone considering setting up an
incubator. These are the key questions that should be considered and what we hope to introduce in this
booklet:
· Why business
incubation?
· What
challenges do StartUps face?
· What are the
models of incubation?
· What should I
consider for my market?
· How do I
determine the feasibility of such a concept?
· What are the
steps required to get up and running?
Why Business Incubation?
Understanding the role that Startups play in the national
economy and providing them with adequate office space doesn’t explain the value
proposition of this initiative, or what makes it so unique. Young companies are
particularly vulnerable in their early/start-up years, and particularly in
India where there is a higher percentage of experienced Innovative people
starting StartUp businesses Lack of exposure to Funds & also lack of
exposure to the formal sector’s mature corporate governance (due to a
widespread lack of employment opportunities) means that there are a
significantly higher percentage of students or inexperienced entrepreneurs
trying their luck at starting companies.
Technology & digital marketing start-ups tend to
attract technology professionals with little business experience. Further, the
start-up environment can be significantly more hostile in a developing economy,
where services remain inadequate, inaccessible or expensive. In a report quoted
by the US Small Business Administration, the data shows that, across sectors,
66 percent of new establishments in the US were still in existence 2 years
after their birth, and 44 percent were still in existence 4 years after1. Other
analysts claim failure rates as high as 60 percent in the first five years and
some anecdotal evidence in South Africa would even suggest it may reach up to
80%.
Although these rates remain controversial, it’s broadly
accepted that incubation programmes can
increase survival rates dramatically when programmes are well-run and start-ups
pay for services: "Our experience has shown a success rate of 75-81
percent for companies participating in our incubation programmes" says
Jill Sawyers, of The Innovation Hub in South Africa. Similar results are found
at the Bandwidth Barn in Cape Town (started in 2000) with a tenant success rate
of 65%: “In the past five years, of the 142 businesses that have passed through
our doors, 111 of them are still in operation.
This overall success rate is astonishing considering that
most companies come to the Barn with little more than a laptop and a
dream," (Odette Potter, general manager of the UUNET Bandwidth Barn). In
addition to the provision of physical space, clearly there are critical
interventions that can be made by incubator programs that significantly help
these individuals, such as management coaching, mentors, help in preparing
effective business plans, administrative services, technical support, business
networking, advice on intellectual property, and help in finding sources of
financing.
It is clear that the critical success factors for these
incubators include:
· volume of companies
co-located is important as it leads to natural clustering & Collaboration.
· entrepreneurs will learn more from each other, and
other businesses, than ‘consultants’
· combining start-ups with mature companies in same building encourages Collaboration
· diversified models
(incubation + office rentals) keep programs sustainable and Independent
· not being 100% publicly funded keeps incubator focused on
tenants and services Provided
· strict entry criteria (focused on innovation &
implementation) can ensure high success rates
· investors/entrepreneurs seeking to make new equity
investments can be leveraged as Mentors
· businesses seeking future clients can provide discounted
professional services
· a strong manager who monitors both mentors and
companies is key
· use managers who have entrepreneurial experience and
can ‘relate’
· incubation programs can remain lean and cost effective with
few employees (2)
· ensuring tenants pay for services screens out those
that are not somewhat Commercialized
· incubators create a climate of collaboration &
networking from the start
What Challenges do StartUps face?
Small and Medium sized businesses across india face many and varied challenges to
their growth and operations. Incubation projects are designed to
address the following challenges, which are particularly acute for StartUp:
· Appropriate office space
· Appropriate support services
· Professional networking
Appropriate office space
Poor electrical & water: Startup needs first and foremost an appropriate
infrastructure in a building. This consists of dependable and redundant power
supply, appropriate electrical installation, power conditioning for sensitive
equipment, and water. This is rarely available in the cheaper office rentals
that most start-ups and small enterprises can afford.
Expensive Internet: Most
of Startups need good and low cost connectivity to the internet backbone;
preferably a fibre optic connection that has less interference or latency than
a wireless/satellite link. Most Startups need to arrange their own wireless or
DSL data links which prove to be less reliable and more expensive than if they
could pool resources and demand and push for wholesale pricing on bulk
connectivity options.
Inflexible lease terms: leases
can often be paid as much as three years in advance and do not provide
flexibility in terms of changing the terms of the lease, or expanding or
contracting into additional space as the company grows or contracts.
Individual Resources: companies
generally have to provide their own resources, like generators, receptionists, security, kitchens, water tanks,
internet connections as they cannot rely on other building tenants for
maintaining shared resources. An Startups is going to be much more vulnerable
to downtime than other SMEs – it’s like a factory, no power, no income. Startups
service industries supporting global customers need a 99% uptime. Building your
own infrastructure and environment in an older building is expensive to setup,
and expensive to maintain.
Unattractive locations: Startups
will often locate in the cheapest real estate available and this can project a
negative image to potential customers – often taking a garage or floor of a house,
or locating in a crowded market area. Image is important for an aspiring Startup
trying to establish its credibility, especially one that has just a few
employees and is seeking to get service contracts from larger corporations.
Appropriate support services
Most STartups are launched by aspiring entrepreneurs who
have had no previous experience, possibly even little exposure to a mature
corporate environment. The enterprises are not planned appropriately, markets
are not assessed, products not commercialized, marketing not adequate or
imaginative, and good corporate governance frequently lacking.
Business Plan competitions encourage individuals,
understandably but regrettably, to embark on their own projects. They have
little access to financial products and services, little training in project
management and scheduling, and are unaware of basic business practices like feasibility
studies. Worse still, they are unaware of the people, networks and support programs
that do exist that could be of assistance.
Appropriate Professional Networking
Key to the development of an entrepreneur is their exposure
to other professionals. This can be in the form of good employment
opportunities that reinforce best practices in business management. But it is
frequently a mentoring relationship that exists between an accomplished
professional and a bright, ambitious younger person; sharing ideas, techniques,
visions, or criticisms. These relationships can frequently develop into funding
opportunities, business contracts, or even employment. Whereas this form of
industry networking and lobbying is well developed in Europe and the United
States, it appears inadequate in India, and can be possibly linked to the size
of some markets and thus increased competition, rivalry and mistrust.
Understanding the models
Understanding incubators you must understand the startup
cycle of a business.The cycles of business can be directly related to the types
of interventions that Startup developers can participate in. For purposes of clarity, we
have defined three types of interventions:
Germinate (Preincubation)
This is the very earliest stage of intervention, where you are helping an
individual with an idea. Some incubators can afford this kind of activity where
they can access public support or private risk capital. This is often required
in high-tech innovation industries and with incubators closely attached to
Universities. Sometimes this innovation comes out of need, rather than
opportunity, and is very risky.
Incubate ( incubation
) This is where an idea has graduated to a plan, with a team, and operations
have begun. Incubators can help refine the plan, build the team, provide
resources and invest in the company. This is also a relatively early
intervention, before the company is profitable. Companies are often not able to
pay for services, and assistance is general. Also known as ‘acceleration’ this focuses on
more mature start-ups (Companies can pay for services, and need targeted assistance).
Host ( Postincubation
) This is where a profitable company merely seeks a particular type of
facility. No intervention is required by an incubator, but we include it here
as we feel many incubators act as hosts to some companies, for some period of
time, and this relationship with mature companies can be a crucial strategy to
assist with and subsidize their other programs.
This flexibility will allow companies within your organization
to move from one stage of evolution to another, while remaining a ‘customer’ of the
incubator. It also allows you to respond to the market and adapt to the demand that you
recognize. This flexibility is often not associated with classical types of
incubation, but is driven by the context of the developing economies in which
this article is focused. An incubator should build flexibility in from the
start and be able to act as a landlord to some tenants, while as a germinator/incubator/accelerator to others. A fluid
approach can be crucial to survival.
Understand your Market
Of course, setting up an incubator is 1% about what you
want, and 99% about what’s right for the market. So you need to think carefully
about the kind of environment you are working in.
Here are some key areas to consider:
Ø Real Estate
The simplest and often most important issue to consider is
what the real estate market looks like for Startups. If there are many spaces
available, at low cost, with good services like electricity and internet
connectivity, then your facility will be competing directly with the rest of
the market. You need to understand this aspect of the environment because a
most incubators live or die by incorporating some aspect of landlord Real
Estate rentals that has little to do with ‘traditional’ incubation. Anchor tenants
can serve to protect your revenue stream in the event that government funding or
donor support is not forthcoming for other riskier and expensive types of incubation.
So if you can determine that there is market demand among Startup for good
office space, with a decent profile and address, and can provide excellent and affordable
services like telephone, electricity and internet, and then you have a very strong
foundation, or guarantee, that your investors will appreciate. In other words,
if all else fails, your business could revert to being a simple
landlord/real-estate play, and this can serve as the foundation for investment.
In many developing countries it is very difficult for new businesses to find
locations that fit the ‘profile’ or image of their target market. It may be
difficult to find buildings that are wired with voice or data. And it may be
difficult to find places where they can easily access other types of companies
and services. So having a very good idea of what the current market is like for
a start-up is critical to guaranteeing the profitability of your enterprise. We
will look later at how you can determine this.
Questions to be answered: How much office space exists?
What is the nature of that office space? What seems to be lacking? What are the
current occupancy rates? What are the average charges for an office? What services are
generally provided? What does a cross section of Startup say they are lacking? What
are they willing to pay?
Ø Culture
Understanding the culture of innovation in your community
is also critical as that serves as an important metric both in terms of how you
may determine market demand for the kinds of services you will be offering, and
also will help you design the level and nature of services that you are
considering. In many developed economies, there are established cultures of
entrepreneurship, role models, success stories that serve to prepare and
educate the broader population. If that is different where you are, then you need
to consider building into your program a way to change attitudes and seed cultural
changes. Changing awareness in the broader community by providing public programs
about opportunities and sharing ideas about new technologies and basic entrepreneurship
skills can shape the model you develop: focus on going broad and shallow in
your incubation activities because there is a market opportunity (and challenge)
within your community. It’s also important to understand the difference of entrepreneurship
out of necessity versus entrepreneurship out of opportunity. A good understanding
of your community will also enable you to add related services that could
subsidize some other incubation activities... if the community aspires to technology,
and positively associates with high-tech, then offering cinemas, restaurants,
and other entertainment options around your core business will be a significant
business opportunity.
Ø Industry
What are the key industries and activities that are already
established in your economy? How may you play an active role in meeting the
demands of those industries? What is the competitive advantage that your
economy may present to the increasingly global economy? This is also critical
in understanding so that the incubator can fit into an already existing
economy. If tourism is the mainstay, then consider shaping the incubator as a
retail outlet for tourism start-ups. If trade and agriculture, then consider
the location. If high-tech then consider the equipment and resources offered at
the centre so that Startup can take advantage of group access to otherwise
inaccessible capital equipment. Understanding the local industries and profiling
them are critical to understanding how your facility may serve a community.
Whatever industries are targeted by your initiative, these
should be profiled: how many companies exist? What percentage could possibly
seek services from you? How is it projected to grow over time?
Industry-specific incubators are particularly vulnerable, and so if you want a
software incubator, or an agri-business incubator, you must understand those
industries well as you prepare your business plan.
Ø Policy
What is the policy framework in which you are considering
to operate? What role does government or other public institutions aspire to
play in the development of Startup?
What real action or policy has emerged from these
aspirations and what can you realistically expect from the public sector in
terms of advocacy or financial support for the work that you wish to undertake?
A good understanding of what realistically can be expected from the public
sector will also help you shape your model, and determine how far you may go in
expecting public subsidies to support some of your more noncommercial activities at the centre.
Ø Economy
Overall, how has the economy performed in the last few
years? Is the country growing or contracting? What kind of projections can you
make to determine the growth of Startup to meet demand overtime? Looking at
GDP, inflation, and getting some other metrics and understanding of the market
is key to be able to approach investors and say that there will be a continuing
and growing SME sector that you are going to service. Stagnant economies, or
contracting ones, should be a warning sign that you cannot predict growth in
this area, and thus your model must be tailored with that in mind.
Market surveys and counts can look at startup related
businesses and categorize them accordingly. Simple overviews that take into
consideration the age, rank and size of companies in a particular sector and
can make sensible predictions for the future will give your incubator a good
chance to refine its focus and tailor its product offering.
Age Rank Size
Rank less known small business/micro-enterprise known medium
business/medium enterprise well-known big business/big enterprise
Age
new les than 4 years
medium from 4 – 6 years
mature more than 6 years
Size
small 1-5 employees
medium 6-29 employees
large 30 employees and above
Customize Your Model
Once you understand the market, you can then proceed to
formulate a picture and model of what will be appropriate. In general, you
should consider your incubator as a real-estate play, with the ability to
survive as a landlord only. Then if that strategy is successful, you can then work
out how to subsidize more incubator-like activities. This foundation allows you
to be sustainable on your own terms in markets where public support or external
financing cannot always be relied on.
If you can identify that there is a market opportunity and
match it to a specific group of industries (high tech or service oriented) then
you can develop a product that is differentiated in the marketplace and can be
easily understood in the media. If you can associate an industry like software,e
commerce or tourism, or agriculture, then that focus may enable you to attract
further collaboration and investment from focused public institutions or
universities.
In the event that a university, government or other donor
is willing to provide you with substantial and guaranteed funding over a period of time,
then you can consider more ‘germination’ like activities where you are taking aspiring
entrepreneurs on board (those who are really just starting up with an idea, but
are not operational). This is particularly relevant with high-tech companies
and truly innovative industries. Locating close to that institution will be
critical in this regard.
Without much public or strong institutional support, you
move to the other end of the spectrum and create an accelerator model, where
you focus on companies that are already able to pay for the services that you
offer, and perhaps blend this with retail shopping services in the building
that are directly related to the sector you are seeking to serve.
As stated before, all incubators will have a blended
approach which allows them to stay flexible, and give them some independence over the program
they seek to run. In some cases you may state that x percentage of the building
is focused on full-fee paying tenants, and they are leveraged to subsidize the
rentals and services offered in your incubation program. It’s critical that you
find this blended approach and build flexibility into your model.
Writing a business plan will systematically record and
layout all the assumptions that you have made by looking at the market
opportunity and the demand from your target market. In essence, it is both a
feasibility study, and a roadmap to move forwards and attract investment.
It will be an overall presentation of what you plan to do,
what kind of competition may exist in the marketplace, who will be part of your
team, which partners you’ve identified, and where you will locate the business.
It will also indicate a five year financial plan and proposed investment
structure. Here’s an outline of what your business plan should include:
Executive Summary
Business
Overview This is a brief
introduction to the reader to the proposed initiative. It should cover the
mission, strategy and market opportunity in broad terms so that in one page, a
potential partner or investor can understand what you are trying to do, and how
you are going to accomplish it. It should cover the background information
about Startup development, the case for business incubation (and an explanation
of what incubation is) and the services that you will offer at your centre.
Summary
of Financial Information
This summary will indicate the amount required, the investment, the rate of
return, expenses, revenues, growth rate, the projected EBITDA and EBITDA
margins, cashflow and annual rental yield.
Summary
of Proposed Terms This is
a one page summary that outlines the purpose of the funds, the proposed investment amount, the
split between equity and debt, the board representation, the shareholding structure,
and investor rights.
Business Opportunity & Highlights
Background
Information This outlines
the challenge faced by small businesses, and the market demand/opportunity that
exists. It may outline the state of office space and how easy or difficult it
is to acquire, and it may outline what other types of business development
services are lacking or inaccessible in the market. You should focus on what is
needed, and what kind of demand there is.
The
Plan The plan is a more
detailed outline of exactly what you will offer to address the issues raised in
the previous section. You need to describe what the incubator is, and what
model you will setup and explain the services that it will offer.
Investment
Highlights Here you
highlight the advantages that you have for an investor, which may mean the
competitive advantages you posses, the return anticipated, the team you’ve put
together, the partnerships and public support you will create, and any barrier to
entry for others, and other types of advantages that may accrue to investors
(for example to meet their own corporate social responsibilities)
Investment
Considerations Here you
outline the risks involved.
Industry Overview
Market
Indicators You should
provide a comprehensive and detailed overview of the market, both in your
target city or town, but also in the country as a whole. You need to focus on
GDP, inflation, days to start a business, as well as other basic facts about
the country. This will help investors determine the size of the market, get
background information about the direction of the country, and the appetite of
the Startup sector. You should specifically analyze those industries and
markets that are directly relevant to the business you are intending to setup.
This should probably include a survey of the real estate market and what is out
there and the direction it is heading in. It should also include indicators for
any other industries that your incubator will focus on. EG if you intend to be
a travel and tour incubator, then you should cover that industry, similarly for
startup e commerce if you are doing that. You should provide macro-economic
data for the industry, then specifics for your market, and indicators as to where
the industry is going.
Market
segmentation This is an
analysis of how your target market is segmented. It shows that you understand
how the market is constituted and will help you focus your strategy on one or
more parts of that market.
Target
market segment strategy
This outlines exactly what your strategy will be in creating focus, and meeting
the needs of your target market. You need to show how, and which part of the
market, will access what kinds of services. Focus will be extremely important,
particularly if you want to establish partnerships with other institutions that
are industry-related.
Participants This is a summary of all the other
participants who are active and providing services to your target market.
Sector
Analysis This analyses
the strengths and weaknesses of those participants, and what is lacking or
saturated in the sector.
Competition This should list your key competitors and
identify their strengths and weaknesses.
Barriers
to entry This should be a
carefully thought through analysis of why it would be difficult for someone
else to enter the market and compete with what you are offering.
Business Description & Strategy
Company
Location This is where
you would locate the incubator. Some key options should already be identified
at this stage. More than one leaves you with options. Being specific can help
people visualize what you are trying to do. It can also help with the costs.
Most important, it will help you think through how important the location is to
meet your target market. If you are offering retail services to the general
public, then being located within easy access to public transportation will be
critical. However, that must be balanced with the needs of your incubates and
anchor tenants, who may want to have a very ‘upscale’ address where they can
bring clients. So the location is critical. Parking is absolutely essential.
Building
Description This would be
a description of the building layout. How many floors, what kinds of rooms,
what common spaces. It should include an architect’s rendering of what the
building would look like, along with the proper sizing for rooms etc. This
helps to be specific for costs. It also shows the scale of the project.
The design is critical to engineer the
networking that you are aiming for in the incubator. Having a standalone
building is key for branding. Giving visibility to businesses and shops. Integrating
public retail outlets and spaces will dramatically affect the design of the
building.
Products
& Services This
describes what products and services you may offer at the building.
Incubator
Program This section
could be covered in the previous one, but is so important that it gets its own
section. Here you will identify what the incubator program does, and how this
differentiates your facility from a pure real estate play. You will identify
the program and the services offered, as well as the monitoring and evaluation
that you will have in place.
Competitive
Comparison Outline how
your enterprise will compete with anything else similar on the ground in your community.
Marketing
strategy Outline the
positioning statement, pricing strategy and promotion strategy. Give some sense
of the flavor of your organization – how formal or informal you will be? What
kind of language you may use.
Strategic
Alliances Outline the
alliances you have already, or intend to, setup with government, media,
financial institutions, educational institutions, local businesses, local NGOs,
ISPs, suppliers, other local or international incubators, and international
NGOs and donors.
Management Summary
Organization
Chart Provide an
organization chart.
Team
Descriptions Describe the
role of each team member and the type of characteristics required for that
position. Remember, incubation is mostly about networking smart people. So
focus on ‘hospitality’. Focus on hiring people that have great people skills.
Focus on people that are good at admin and operations to keep the centre
running smoothly. Most industry specific roles (eg. Technology) are much more
easily learned than people skills.
Financial Projections
Key
Financial Assumptions You
need to list all of the assumptions you are making about the centre. This could
include the size of each floor, the number of floors, the average cost to build
per square metre, the common spaces, and then expenses, like rent, payroll, electricity,
internet. You should indicate what rates you are charging tenants for the
services that you provide. Probably some will be commercial tenants paying full
rates, and some will be incubates paying subsidized rates. In addition, you should
outline what demand you are assuming for these services, which could translate
simply into ‘occupancy’ for the spaces that you have. Don’t forget payroll
taxes and licensee fees.
Income
Statement Do eight years
if you can, indicating your revenues, VAT, net revenue, operating expenses,
EBITDA, depreciation, EBIT, interest payments, taxes, net income, EBITDA
margin, EBIT margin and net income margin.
Balance
Sheet & Cash Flow
Total assets (inventory, cash and securities, accounts receivable, property,
equipment, etc.) and Liabilities (short term and long term debt, accounts
payable, accrued expenses etc.)
Rollout Schedule Include a rollout schedule
Site Details Describe in detail the site, provide
aerial maps and satellite images with the building in place. Get GPS readings
and plot the exact size of your building showing access roads and parking. Do
this for as many sites as you have. Use google maps. Outline any issues with tenancies.
Describe pros and cons for each particular location. Indicate public
accessibility. Consider long-term development of the site.
Construction Quotations Set up an excel sheet with about five
quotations from a sample of five well-respected construction companies in your
area. They should provide per M2 costs for finished build, unfinished build,
electrical install, shop electrical install, parking, ceiling, flooring,
glazing, internal walls, elevator.
Equipment list & cost This should be a detailed list of all the
equipment you will buy and/or import, with their associated import duties. This
should include electrical fixtures, lighting, flooring, carpets, generator,
transformer, fire system, chairs, desks, cleaning equipment, office equipment, trunking,
wiring, PCs, etc.
Meeting Room Rates If you are offering meeting rooms to the
public, you should have a comprehensive list of what other facilities exist and
their prices.
Retail Shop Rental Rates If you offer retail rentals, you should
have samples of other comparable sites and the lease rates being offered in
those locations.
Potential Tenants You should provide a list of companies
that you believe would like to relocate to your facility. You should speak to
as many of these as possible about the idea and see if they are willing or not,
and how much they would be looking to pay. Try and identify large anchor tenants
that would be commercial tenants over the long-term, who could possible
co-invest in the building with you. Complement them to your industry focus if
you have one.
Salary Estimates Do a survey of the market, both public and
private sector, to determine what are the current rates for an entry-level
employee, driver, security guard, cleaner, graduate, middle manager, senior manager.
Office Survey If you will be offering office space, you
need to do a survey of your market. Hire some students to cover critical areas
of your town. Have them identify the key office buildings, and then inquire as
to whether any spaces are available to rent, and at what price, with what
services.
You need to establish the average rental
price that would compare to your facility, as this will determine a key metric
for you business model. Also, determining occupancy, and the projected growth
or decline of occupancy, is also key to your business plan. You may consider
also included a survey of retail services/shops if you intend to offer those in
your building as well.
Target Industry Survey If your incubator will be focused on one
industry (like tourism or technology) then you will also need to do a
comprehensive survey of businesses in your community that offer those services.
This will allow you to determine the size of your target market, and also to
see if the market is growing or contracting. Talking to several of them in terms
of whether they would be interested to move in can give you good data to use in
your business plan.
Lease Proposal If possible, enclose a proposed lease
agreement/terms for the landlord.
Macro Economic
Indicators
FDI, GDP, population, size, inflation,
days to start a business can all help build a picture of your environment for
potential investors to consider.
Target Industry Statistics This is a summary of the industry that you
are focusing on.
Doing Business Indicators From World Bank and IFC, you can
demonstrate the kind of culture
that exists for small businesses to
startup.
Network & Systems
Installation
Get quotes for any expensive items that
you would consider for the building, like your network and systems, a
generator, a construction quote etc.
Interviews Include transcripts of any interviews you
had, as well as a list of the people that you have met during the feasibility,
investment plan.
Profiles If you can identify investors, developers
or managers that could be substantially involved in this project, and have
expressed an interest to be involved, it’s crucial that you profile them.
Design Smart
Flexibility and mixed-use may be of critical importance to
your location and situation. In this sense here are some key considerations for
designing your space:
Consider a public, retail ground floor
As a community centre for entrepreneurship, you can
leverage that location and brand image to attract more foot traffic by
co-locating public retail companies on the ground floor like a shopping mall.
This will generate interest and traffic from the community – a commodity that can
often be converted into business leads or employment opportunities for your
incubates. It also diversifies your business model and introduces additional
revenue streams.
Consider your brand & image
The look and feel and flow is critical to how people will
perceive your services. The building should be stand-alone and immediately
recognizable. The lines should be modern and clean.
The logo and name should be aspirational and evocative.
Keep it fun.
Parking
Critical, but often inadequately considered! Any anchor
tenants with important established customers will require adequate parking for
themselves and visitors. Public events will also.
Separate entrances
Sometimes corporate offices may feel more comfortable with
their own entrance.
A communal ‘networked’ feel
All incubators will encourage social networking: your
building should reflect this by encouraging common spaces and social services
like restaurants, bars, food, cafes etc. Also, building an internal courtyard
can encourage this sense of community interaction & visibility.
Office floors
Mix your start-ups with your mature companies. Don’t
segregate them. Have fewer but longer floors, rather than a taller building
with many floors. Encourage people to access others.
Storage
Often forgotten, but storage is critical throughout the
building and should be strategically placed, particularly if some companies
will have food or any kind of inventory.
Meeting rooms
Make sure you allow generous space for meeting facilities.
Companies will need shared spaces to meet clients and run trainings. These
should be available on every floor.
Public facilities
Consider access for the public and allowing the community
outside your centre access to rent and use shared facilities within the
building, like conference rooms.
Wrong
You’re going to get some of this wrong, it’s inevitable, so
inform the architect that cabinets, desks, lights, wiring, electrical points
should be as flexible as possible and as you settle into serving the community,
you will want to move things around. Flexible options like wall trunking and
movable desks and walls will be critical to reducing costs later.
Incubate
(Brief as Incubator you provide complete infrastructure to
Innovative idea to grow. So mostly Incubators take some stack holding. But not
directly invested as Investors they invested in infrastructure required by
startup.)
To distinguish yourself from a pure real-estate development,
consider how you will integrate any of the following services into your model.
These need to be well thought through and clearly described in your plan.
Having clear strategies will allow you to set clear measurements of your
success
.
Offices
Provide excellent serviced office space at an affordable
rate with flexible leases (or no leases).
Consider a sliding scale for companies depending on their
maturity and ability to pay.
Leverage commercial tenant leases to subsidize the cost of
these offices. Provide electricity, internet and voice. Allow tenants to
contract or expand into other spaces without signing annual contracts. Provide
shared access to resources like printers, faxes, reception, and voicemail.
Referrals
The incubator program should have a series of referral
services available to the startups in their program. Local companies that
provide a broad range of business services may provide discounted initial
consultations and fees as negotiated by the incubator manager. These companies
participate to develop future clients and for their corporate social
responsibility program. Each year, the incubator manager will meet with each
company in the program and do a needs assessment and remind the incubate of the
services available. This is not intended as an active intervention in these
companies, more as a resource centre. The idea is NOT to attempt to manage or
run these companies, but rather provide resources to remove their bottlenecks
when they recognize they have some. Companies and experts would be screened and
approved by the incubator team, and made available that can assist with the
following areas: business plan writing and market research; marketing &
sales; financial planning; legal & HR; business setup and registration.
Mentors
The incubation program should match incubates with local
entrepreneurs in a mentoring program. Incubates and mentors must meet every
month, but it is up to the pair to determine the structure, format and content
of those meetings. The program manager must carefully select and monitor these
mentors. The mentors provide advice and will be drawn from the wider business
community. A plan should be agreed if possible and written up by the incubate and
the Mentor should help determine goals and a timescale and ensure that such
objectives are being met. Mentoring can also lead to business opportunities and
referrals for the incubates as the Mentor can provide much needed
introductions. A simple ‘mentoring guide’ will be written and updated, giving
an outline of how a mentoring program could work.
Mentors are required to fill out a simple report after
every meeting and to always meet with the incubator manager when they visit
monthly to share the progress of the company and identify constraints.
Incubates will also be required to assess the mentor and their progress after
every meeting, although this report is not shared with the mentor.
Support Groups
Incubates could be organized into small groups of ten or
less and required to meet monthly to share ideas, experiences, frustrations,
services and generally network with each other.
StartUps toolkit
A CD could be compiled and be made available to incubates
and also to Startups in the wider community that will contain a range of useful
materials, including accounting principles and tools, different government
forms, lists of resources and companies, sample business plans and other
materials. It will also be made available online. This material will be
reviewed and updated annually, or on a case-by-case basis, and should be developed
in partnership with other NGOs.
Monthly Debates
The centre could host a monthly debate/dialogue where
topics that combine technology and business innovation and policy are
addressed. Education, health, agriculture, security, policy are among the topics
that specialists will be asked to present. Vibrant question and answer sessions
will be encouraged, as well as a period of networking after the event. The
debates should be recorded and notes made available and online. The debates
will be open to the public and should try to help any business person or
professional understand the role, impact and opportunity that technology offers
for improvements in their field.
Workshops
In addition to the regular monthly debates, there could be
a series of events held throughout the year which will focus on special areas
of need for Startups. This will be organized and funded in conjunction with
other NGOs and resource centres within the community. Industry experts will be
invited to provide insight into specialist needs of the StartUp community.
Topics can range from writing business plans, financial management, human
resources, marketing your product, commercial law, project management etc.
Attendees will pay to attend these sessions, with discounts for incubates.
These events should be collaborative with specialist organizations that have
the resources, experts and materials available to deliver quality programs. The
Centre will be responsible for coordinating and scheduling, and providing the meeting
facilities as well as providing marketing services outreach to the community.
StartUp Calendar
The Incubator Manager could maintain a calendar of all
upcoming events for Startups across the city, as well as coordinating with all
the other programs that exist so that any Startups requiring information about
what programs or events or resources exist that could be of benefit to them are
easily available. The Centre will be a clearing house of sorts, ensuring that
the community knows where to go to find a comprehensive program of assistance.
The manager will coordinate between all the agencies and organizations that
provide these services, both commercial or not. This calendar will be published
on the Centre’s website.
Assessments & Contract
The incubator manager should meet with each company at
least once every two months to assess their progress against specific goals and
to ensure that they are in compliance with their obligations as an incubate.
Tenants in the incubation program (which can last between 12-24 months) will be
required to sign a contract upon entering the incubator agreeing to monthly mentor
meetings, and bi-monthly meetings with the incubator manager, as well as
certain other responsibilities. If an incubate fails to meet their obligations,
they will be evicted from the program and will also become liable for the
associated costs of the program to date. If they graduate, the program will be
provided to them at no cost.
Networking
The incubation program will also provide a networking
service linking incubates to other businesses and resources within the building
and community. The program cannot manage that relationship, but it can use its
influence and reputation, and links with the private sector and government to
identify possible linkages, and to network foreign investors and companies with
local companies and resources. Linkages with other incubators and programs will
be part of this networking facility.
In addition to these resources and programs, additional
in-house technical support can be provided at competitive rates: database and
server co-location, affordable internet rates, and hardware leasing.
Partners & Investors
Local Businesses Local businesses should be actively
involved in the setup and ongoing activities of the incubator. They can provide
services (technical, financial, legal etc.) to the tenant companies at
discounted rates in anticipation of those companies becoming full-paying
customers as they mature. Businesses can also leverage your centre as a
location to launch, test or market goods and services to the broader market.
Local investors can become involved in mentoring roles as a way of identifying
potential investments, not just as potential clients. Mature companies may
invest in the incubator because they recognize a corporate social
responsibility, and helping startups to develop may also broadly help the economy
to grow and thus generate tax revenues and more customers across the economy.
Investment Funds Identify all the funds within the
community and explain to them the goals of the incubator. Make sure you only
meet with decision makers who will ‘understand’ the vision. Other participants
are unlikely to entertain any ideas of discounted cash because of the merits of
the business.
Banks Important to have on the board and participate so that they
can understand the needs of Startup and develop packages for them, as well as
provide financing as those companies seek to expand. If familiar with your
business they will also extend credit to the incubator itself in times of need.
Universities Sometimes slow, but frequently a key
strategic ally in providing both research and new employees to start-up
companies. Incubators can also create transition paths where they take graduate
students into an incubation program straight out of the university.
Government Important strategically, to leverage
financing and support across the community. Try to give the government a
non-executive role in the running or ownership of the company. The incubator
can influence them in terms of policy. Government can generate much needed
publicity, awareness, credibility and financing for incubators.
NGOs & Donors Meet with the development community and
donors and act as a clearing house
for their services – a great challenge for
these organizations is coordination between and among the different agencies.
With a specific focus on Startup, the incubator can be the local information
point, helping startup recognize what assistance programs are available. Donors
often have difficulty in access to the community and distributing their
products and services, and the incubator can link them to a thriving innovative
culture.
Lokesh Madan
Managing Director Startups Seed Funding Capital Limited
Source InfoDev
