As a catalyst for regional economic development,
we assist new and start-up firms in Asia to establish,
by providing solutions such as management support, coaching and/Or facilities.
Business incubator definition
Business incubators assists and guide start-up companies in their development by providing expertise, services and facilities. Business incubators stimulate local, regional or national economic development and can be divided into the following 6 incubator types; corporate incubators, academic institutions, non-profit government initiatives, profit-driven business development projects, venture capital firms or hybrid versions. But all business incubators models are characterised by a high degree of cooperation from different venture partners help new start-up companies to survive and grow through the problematic and vulnerable early stages of their development. An incubation process fosters innovation and entrepreneurship and aims to accelerate the growth of high-quality start-ups to successful companies. In general, incubators concentrate on innovation and emerged targeting industries, will take a small or no equity investment in the start-ups and focus on long-term development and relationship of 2 to 3 years on average. Commonly it is believed that accelerators and incubators are the same concepts, but this is a misunderstanding. The accelerator model is based on rapid growth, an intensive fixed term program of 3 to 6 months (fast fail or survive attitude) and a small investment for 5 to 10% equity. An accelerator covenant is devoted, as mentioned, to scale the business while in a business incubator situation usually, the focus is innovation.
Business incubator concept
• main objective
– stimulate local, regional or national economic development and realising some other social and economic goals.
– corporate incubators, academic institutions, non-profit government initiatives, profit-driven business development projects, venture capital firms or hybrid versions
• business model & funding
– non-profit, funding through rent, government subsidies, gifts
– mediating government, universities and enterprises
– mostly academic-led, in partnership with universities, research institutes, (semi-) governmental institutions, public & private companies, consultants, financiers and investors
• cohort, homogeneous participating start-ups
– no, board range of local start-ups
• benefit start-ups
– increase business success, facilities, business skills training, management support, professional networks, access to financiers and investors
– by a business plan, rigorous but also average competitive
• start-up stage
– early or late
• equity investment
– usually not, no seed funding
• support time
– average 2 to 3 years, maximum 5 years
• venture location
– ad-hoc, business related topics
– by consultants, tactical and business related
– some, supportive control
• other remarks
– nurturing development
– corporate incubator concentrate on R&D and recruitment options, will normally invest and take up to 25% equity
– limited resources
– long-term success driven gives less pressure.
Objectives of a business incubator
• adding to the competitiveness of and improving the regional economic climate
• creating employment opportunities, jobs
• support new SMEs with excellent growth potential
• stimulate entrepreneurial spirit
• boosting innovation
• sustaining particular industries and clusters in development
Various other goals
• promoting the development of regional competitiveness
• enhance cooperation between universities, research institutions and the private business sector
• exchange of knowledge and better leverage intellectual property
• facilitating a breeding ground of in potential victorious emerging and innovating businesses
• making funds available in an optimal way
• social, economic motives; lower unemployment, enterprising women, help for disadvantaged groups (minorities, youth, elderly), etc.
Asia Investment Service role
In our view, the business incubator is basically about joining forces, in which several parties work together and make a contribution. Our role and knowledge areas are here:
• selecting, compiling and setting up a business incubator organisation,
• the (co-) selection of start-up companies that fit within the incubator profile and policy,
• business planning, scheduling targets, coordinating and monitoring developments,
• providing guidance and support in the form of business mentors (or teams)
• taking care, as an intermediary, of corporate financing, access to investors (and a possible M&A business transfer)
Business incubators, for real involvement in the development of your company.
Meanwhile, the concept of the business incubator is on the rise again. The government, universities and the business community realise that new high-quality business is essential to make the local and regional economy competitive in a globalising business. Regarding positioning, all choose more and more for a Knowledge Economy. Looking for opportunities to promote the emergence and successful growth of the high-quality new companies, the business incubator model is consequently, an attractive option. The universal business incubator model does have the ability to be successful in all types of communities, sizes, industries and demographic segments.
The term incubator is traditionally used in the agricultural sector, where it is the term for the device with which eggs are artificially incubated. In the USA, the term ‘business incubator’ is therefore often used to indicate that this ‘device’ focuses on ‘hatching’ new companies so that you could call the business incubator model a breeding ground.
The service and added value.
It is of course very attractive to sit together with other starters so that you stimulate each other and move forward together. You can easily share the costs for housing, the computer network, reception, telephone, etc. Moreover, this has been reinforced with specialised services that guide a faster development of your company. You have to think of a network of consultants/mentors, successful entrepreneurs, investors, and potential customers. But also the direct support ranging from secretarial, administration and marketing and the acquisition of subsidies. You understand that the real value lies in whether the business incubator can help you, to contribute making your business successful. While housing is an essential precondition, the real value lies in the experience of growing and commercial development of companies that are based on high-quality knowledge and innovation in a particular domain. You will also find specialists in various fields, mostly university and research spin-offs. Summarizing; business incubators will give;
customised experience support, business training, cost-effective access to several facilities, inexpensive business services and solutions, networking opportunities and financing assistance. If you are acknowledged and admitted to an incubator start-up, you step into a ready-made network; and you substantially increase the chances of success of your company.
Differences with other start-up service providers
As an entrepreneur, you can go to many places when you start a business. If you compare an incubator with multi-company buildings, the main difference is that you have a lot more contact with the other entrepreneurs in an incubator and also do a lot more together. If you compare incubators with starter guides, the involvement of the incubator mentor in your company is frequenter, more individual and broader than that of an advisory starter counsellor. Business incubators offer a total solution for start-ups, multiple services as support and guidance so that you as the entrepreneur can entirely focus on the development of your company.
What is a business incubator not?
There is a big misunderstanding that we have to correct. Incubators as non-profit service, do not have the standard requirement in advance that you have to relinquish part of your shares in your company to the incubator. The incubator organisation does a lot to help you make your business successful, that investment can be expressed in different ways, a share transaction can be one of them. Business incubators invest in social, economic development and not in the gain of buying and selling companies and its shares.
Business incubators characteristic features
Business incubators do help starting, unique, knowledge-intensive companies on their way from growth to established. We would like to mention a few remarkable traits here:
In the late nineties there was the internet bubble, many incubators failed and never met the expectations: a lot of money was pumped in, but the majority of the companies just did not make it. At that time it also caused a bad or at least a wrong image of business incubators.
In recent years, new nurseries have been developed, not only internet or digital related, but this time also with more realism: at the entry gate, stricter selection will be made. Besides, most business incubators are also connected to universities and institutes.
2. Added value
An incubator is more than a multi-company building; the added value lies in other areas. Business incubators have coaches and consultants who help starting entrepreneurs on their way. But the most significant advantage is access to a network. Many starters come from the attic or a shed and suddenly encounter other passionate entrepreneurs with such a business incubator. This often leads to cooperation, sometimes even to mergers. The breeding ground not only supplies business partners but often also customers and investors. Business incubators sometimes invest themselves with small amounts and put the entrepreneurs in contact with informal investors and banks for substantial investments.
Business incubators are usually specialised in a specific sector and are explicitly intended for innovative and creative companies that are knowledge-intensive and do something new. For a manufacturing jobber it is not meant, but for a manufacturer who has a new technique, product or target audience in mind it could be an opportunity. The development phase in which the company is in also important. An entrepreneur with only a vague plan to start doing business has nothing to look for in a business incubator; the same applies to companies that already make a profit. The breeding grounds are for companies that are in between both phases: they already have a prototype or concept, perhaps a first customer, but no profit yet. Sometimes incubators have a unique formula such as a ‘Cluster Incubator’, where targeted companies of a particular nature and mix are brought together; preferably complementary to each other.
4. Proven results
An image that some of the business incubators have is that it is kind and pleasant, and results in a poor as only a very few successful companies will reach next stage. This is not entirely true because research shows that after 3 years 80 to 85% of these companies are profitable. It is true that tremendous successes are exceptional. Business incubators are mainly for those who know that they can use some support.
Sooner or later, companies have to stand on their own feet. Each business incubator has its policy for this. For some, there is a hard time limit: for example, a company can stay for up to 3 years. Profitability can also be a criterion. Furthermore, a maximum can be set for the number of employees. For example, as soon as the company has more than six employees, they have to exit.
Benefits for start-up companies
Business incubators offer a nurturing, practical and supportive community for start-up entrepreneurs throughout the critical stages of launching a new company. The objective of an incubator is to boost the success rate of start-ups, shorten the time as well as reduce costs of developing and expanding the business to break-even or profitable level. In the concept of business incubator, start-up companies may benefit from;
• providing facilities
– inspiring and stimulating work environment, shared with similar businesses, co-working space, infrastructure and shared services, at reduced and below current market prices
• cost savings
– save on founding and operational costs (30 to 50% are possible)
• administrative support
– organised and proven systems and procedures available; staff administration, hrm, payroll, insurance, reception and telephone service, virtual assistant etc.
• shared production equipment
– possibly, depending on the business incubator target group, there could be specific, expensive equipment available that can be shared in use
• better opportunities for debt and equity financing
– access to and greater confidence by supervision (will enhance credit rating) from banks, financial institutions and investors; private informal and venture capital. Also, assistance in applications preparing and assessment of financial proposals
• focussing on core business
– saving time and energy, devote all time to develop the business
• access to the business incubator network
– get introduced to expertise, partners, (potential) customers, increase network productivity
• marketing and PR
– as part of a greater whole, there are more opportunities for being promoted
• trusting company
– enhance credibility among customers, suppliers and employees
• learn and enjoy with fellow entrepreneurs
– establish alliances, comradeship, learn from other mistakes, share victories; share business related information, provide encouragement to each other and establish networks
• business mentor support and guidance
– expertise business partners in every knowledge area available
• more likely to succeed
– a 70% to 85% 5 years survival rate (average rate is less as 50%).
Considerations for start-up companies
Below a list of some factors to considers for choosing the right business incubator, these are;
– what is the reason you opt for the venture location, convenience, district, trendy, facilities and everything under one roof, near customers, low cost, etc.?
– does contract agreements for a specified period of time, limit future growth, has consequences (f.e. long-term rental and service) or have other restrictions on future options?
• preferred service
– is there an exclusive contact on hired service (consultants/mentors, office rental, secretarial and administrative support) are costs according to the value (check!), are you bound or can you hire the services elsewhere, are there particular conditions (deferred payment, price increases etc.)?
– do you trade equity (shares) or IP intellectual property in exchange for assistance, and if so is the deal fair?
• business entity
– does the business incubator require a specific or costly complex business entity as a sole proprietorship will generally do in the beginning?
– private incubator companies will have profit but are their offers attractive and non-questionable and do not contain long-term hindering agreements?
• application & admission
– which conditions must be met and are those fair, is there a fit with the target group and objectives, what are they demanding as evidence; business plan, criminal background check, deposits, liability insurance etc.?
• empathic cooperation
How does it feel, is there mutual respect, how are the interpersonal relationships, does the working method and atmosphere fit, and is there a real good feeling of being such a breeding ground?
• righteous low costs
– is their service attractive given the low cost or just low service quality with expensive add-ons and usage fees are you overpaying?
• expertise added value
– is this corresponding the needs and quality, exclusively general (business, legal, finance) or very specific expertise (technical, industry) or a perfect mix, is external advice recommended (at a discount) and allowed?
• exchange of knowledge and contacts
– how you value the transfer of expertise, instructions, workshops, panel discussions, network initiatives, what other activities do appeal to you, and do those activities strengthen your company?
• providing grants and loans
– is business incubator provide grants and/or debt financing, loans at an attractive interest rate
• binding program
– a structured environment, professional with mutual obligations, reduced liberties for the entrepreneur and direct supervision of the developments, you can accept this or does it feel like a straitjacket?
If you wish to receive further information, please contact us.