Apart from those services directly linked to structural issues, business incubators often also provide “non structural services” such as access to reinforcement of human resources, training, consultancy, financing, networking.
7.4.1Reinforcement of human resources
Human resources are fundamental to all businesses. In new businesses, roles, activities and competences for a successful team are not always clear. Services that are provided in this area regard mainly two aspects: (1) evaluation of entrepreneurial spirit and team building and (2) support in human resources research.
7.4.1.1Evaluation of entrepreneurial spirit and team building
There are many methodologies and tools that help evaluate competencies abilities and build a team. Interesting experiences that are to be mentioned are those of GRAIN, I TECH-OFF and KEIM.
GRAIN
GRAIN has defined an interesting approach to help project teams in identifying internal competencies and abilities and, based on the results of an individual and project group evaluation through a specific questionnaire aimed at identifying entrepreneurs profiles, a path is jointly defined to complete the existing project team.
I TECH-OFF
In the pre-incubation phase, beneficiaries go through a series of group meetings aimed both at the evaluation of their entrepreneurship pretensions as well as at the analysis of predispositions and capacities present in the team. This service aims at developing beneficiaries capacity to self-analyse their entrepreneurship pretensions and work on those capacities that a successful entrepreneur may have. Another objective is to help building the team and advice on profiles who could be inserted in the team.
This service, that is carried out by an expert in team building foresees a series of tools including:
- questionnaires on entrepreneurship spirit (with individual consultancy) and various characteristics (i.e. listening capacity, team leading, etc.),
- business games,
- situation simulations.
In particular, this service is provided through five different meetings organised as follows:
1) Introduction: activity presentation, reflection on entrepreneurs features, delivery and compilation of a questionnaire. A feedback on the questionnaire’s results is given individually via e-mail. Advice on further tools to use is also provided.
2) Analysis of the entrepreneurial profile through a series of exercises (selection of entrepreneurs features and steps for starting a business).
3) Development of appropriate competences (organisational, relational etc.) aimed at creating working group focused on a common objective. The methodology, based on a high interaction, foresees:
- to experiment and analyse situations where reaching your own objective depends on the interaction with other people;
- to reflect on dynamics for mutual perception and its impact on group outputs;
- common decision taking on organisational aspects favouring participation and integration;
- knowledge transfer on the real organisational structure.
4) Analysis of those factors that characterise leadership: steps in the team building process and goals sharing; identification of obstacles and the way to surpass them jointly; organisation and processes to take group decisions.
5) Personalized consultancy for each enterprise group: identification of roles, identification and share of objectives; identification of critical points and way to surpass them.
KEIM
A laboratory for the organisation of business management simulations was established in 1998 at the KEIM-centre for business development as a training centre for future entrepreneurs. In order to sensitise potential target groups as early as possible, a project was set up for a new business game which addresses students in their penultimate year of high school.
PriManager11 is a business game competition for students in their penultimate year of high school. It simulates the development of a company over 16 years from its foundation to the initial public offer.
A special software was developed in partnership with the market leader for computer based management business games, UNICON Management Simulation GmbH (now TERTIA Edusoft GmbH). The development project was conducted in a time span from September 2000 till October 2001. The software responds to the needs of high school students as users as well as to the needs of the competition and the organisation.
In addition to the software, there are also other supporting tools: (1) a website, (2) a guidebook for participants and mentors about the game, (3) training sessions for mentors, (4) a monthly newsletter.
The initiative started with a test phase with only 10 participants, on a local level and with an old software. Due to the big success, the initiative was modified and developed for more participants and designed for 3 levels: city, regional and federal state level. The first year was a pilot phase, with only 33 participants and 5 regions. The initiative has seen a rapid rise in participants and has become a state-wide competition.
7.4.1.2Human resources research
A support in the identification and mobilisation of new human resources is often a key issue for a new company who, as a whole, may be missing some competencies. In addition, new businesses are often enable to employ new resources and are often set by people who already have a pre-existing professional activity (e.g. researchers or employees), who may have a limited time to be dedicated to this new company. Experiences to solve these two mentioned issues are provided by GRAIN and I TECH-OFF.
GRAIN
GRAIN help their beneficiaries with the identification of individuals to be included in the project team trough the access to a wide network which includes: (1) Out Placement Consulting Companies, (2) Professional Management Schools, (3) Previous Start-up Managers, (4) Spontaneous Candidates. The idea is to identify professionals with a solid experience who can help project holders. Projects are indeed often carried out by technicians who are not familiar with all aspects linked to business management. For this reason, GRAIN help identifying new resources with competencies in those fields project teams are not familiar with.
ITECHOFF
I TECH-OFF will help identifying new human resources to support beneficiary companies. In particular, I TECH-OFF will help project groups to have students doing an internship placement in their company. I TECH-OFF will also help companies identifying and contact human resources - with an appropriate educational and professional background - to be employed. This will be carried out in collaboration with the specific organisation set by the University of Bologna to monitor their graduates.
7.4.2Training
Vocational training for members of new companies may be provided through several ways. First of all, training could be available either directly (organisation of specific courses) or indirectly (e.g. through providing “vouchers” to be used in specific organisations), on-line or off line. Second, access to training may be on “general” business themes or linked to a sector specificity or on technology aspects.
Vocational training may be provided in all the themes linked to business management: human resources, finance and administration, taxes and legal aspects, sales, marketing, communication, intellectual property management.
Examples of an adequate training supply may be found in GRAIN, I TECH-OFF and KEIM.
GRAIN
GRAIN has established its training programme on the following principles: (1) One day per week, (2) 12 days per cycle, (3) 3 Cycles per year, (4) One Day = One Topic, (5) External experts with practical experience.
The established purposed of the training programme are:
- Teaching practical aspects of start-up creation
- Increasing Key Factors of Success awareness in (1) Human Resources Management, (2) Time Control, (3) Money Awareness, (4) Market Sensibility
- Experience sharing
Examples of training themes are detailed in the following scheme:
I TECH-OFF
Training is both supplied off and on line. For on line training, a platform has been developed only in support of the off line courses.
Pre-incubation: 36 hours of direct training in economic/financial themes with the objective of developing a business plan.
Training themes are:
- Project management
- Marketing
- Business administration
- Management control
- Organisation
- Fund raising
- Business types
- Intellectual property (patents, trademark and inventions)
Incubation: 40 hours of direct training in the following themes:
- Business strategy
- Business administration
- Legal, tax and contractual issues
- Marketing, publicity and sales
- Communication
- Business organisation
- Team building
- Protection of intellectual and commercial property rights
In additions to this compulsory cycle, seminars are organised e.g. on possible financing sources.
KEIM
KEIM organises a series of training workshops for their beneficiaries. For example, one training theme regards public relations through a 2 days workshop on “Press and public relations” as well as a workshop on “PR-oriented writing”.
7.4.2.2Training on technology themes
Training on technological themes are mainly provided by those incubating structures focusing on a specific sector. A good example of this is I TECH-OFF.
I TECH-OFF
I TECH-OFF offers training on technological aspects that beneficiaries in the “incubation phase” consider important. A request is to be made to the “management committee” that express an opinion on the matter.
In addition, I TECH-OFF organises seminars on specific technologies linked to the ICT and multimedia sectors. Two seminars have been organised in 2004 on “UMTS technology” and “Land Digital”. Those seminars have been organised at the University of Bologna (in the future, seminars may also be organised in other regional universities) and were conceived as follows: an expert carrying out research on the specific theme was asked to give a speech, a representative of a private company applying this specific technology was also invited to speak as well as new enterprises of the ICT sector and an expert on the support to new companies. These seminars are open to: I TECH-OFF beneficiaries, students, researchers, entrepreneurs associations and companies in the ICT sector. The aim of those seminars are to raise awareness on the potentiality of a new technology as well as networking actors working in the ICT sector.
7.4.3Consultancy
7.4.3.1Consultancy on general and economic themes
Professional support on specific themes – e.g. on marketing, communication, technology, product commercialisation, intellectual property rights, business management and strategy, legal, tax and contractual issues – are of wide benefit for new enterprises. Support may be provided internally or, as in the cases of CREALYS and I TECH-OFF, by external consultants.
CREALYS12
CREALYS makes a budget available for each project (the amount is of € 31.000 per project financed with funds from Rhone-Alpes Government and the Ministry of National Education, Higher Education and Research funds) for external consultancy.
The consultancy should be in the following areas:
• Market analysis
• Strategical advice
• Industrial property and trademark
• Financial development plans
• Communication
• Technical sub-contracting
CREALYS personnel analyse beneficiaries needs and submit a proposal on the kind of consultancy required to the «Executive Committee», which makes the final decision on this aspects.
The originality of the approach consists in the fact that the external consultancies are made available before the projects actually start CREALYS support path. After 1 or 2 pre-consultancies, the executive committee asks the project group to submit a proposal to the “commitment committee”, which will give an opinion on their admittance to CREALYS’ full service supply.
I TECH-OFF
Access to external consultants is available both in pre-incubation and incubation:
Pre-incubation: 10 working days are available for each project group. The main objective is to support beneficiaries with writing their business plan. In agreement with their tutor, beneficiaries set priorities and involve appropriate consultants. Most beneficiaries in the first selection have decided to be supported by an expert in marketing and an expert in financial planning.
Incubation:
The following external consultancy themes are available for a total amount of 16 working days:
- Business management and business strategy
- Financial planning and management control
- Legal, tax and contractual issues
- Marketing and communication
- Protection of intellectual and commercial property rights
- Assistance to product industrialisation
- Assistance and technology training
In addition, assistance is available for:
- accessing Emilia-Romagna research competences and facilities
- identifying technology, productive and commercial partners
- identifying public and private financial sources
7.4.3.2Consultancy on trade and marketing issues
As mentioned above, identification and access to market – including the definition of a proper marketing strategy through the correct identification of the company’s “marketing mix” is one main problem that new companies have to face in their very early stage as well as all along their development phases. Another issue that technology companies may have to tackle since their early development stages is “going global”, therefore an assistance in international trade is an important service to foresee.
All studied KREO initiatives deal with these delicate issues. Most of them provide access to external consultancy (see above for working mechanisms and detailed supply), or facilitate networking with regional resources. A good example of this is the experience of KEIM within the “marketing support for entrepreneurs” workshops.
KEIM
An interesting experience of KEIM is the initiative “Marketing support for entrepreneurs”13 that involves students and professors of the Karlsruhe University of Applied Sciences in the framework of new business support programmes, giving them an active role. In fact, interested beneficiaries of KEIM services get support on specific marketing issues from students of the Faculties of Economics and Information Management involved in collegiate project groups and with the professional guidance of several professors.
A six months seminar is organised according to five main steps as follows:
(1) Preliminary talks between KEIM personnel and new entrepreneurs on possible problems. Based on that, preparation of briefings with product or service description, development status, target group, description of the problem to be solved, etc.
(2) Forwarding the relevant marketing projects to professors who are willing to let their students work on marketing projects within their lectures. The professors make a pre-selection of the projects.
(3) Coordination of the presentations: the new entrepreneurs present their business ideas to the students, set out the tasks and clarify queries.
(4) The project groups, with a supervision from the professors and support from the KEIM centre, work on the respective marketing projects during the semester.
(5) At the end of the semester, the project groups present their results to the entrepreneurs and submit a final report.
The following activities are carried out by the project groups: analysis of the target group, market segmentation, market analysis, analysis of the competition; analysis of strengths and weaknesses; analysis of opportunities and threats; SWOT-analysis; marketing concept etc.
Karlsruhe University of Applied Sciences integrated the seminar on “Marketing support for entrepreneurs” in the study courses on Industrial Engineering and International Management (respectively: Department of Business Sciences and Department of Information Management) as integration to the compulsory lectures. The seminar therefore benefits of the supervision from five different professors.
7.4.3.3Consultancy on technology-specific issues
Assistance on technology-specific requirements is often provided by technology-oriented incubating programmes. Assistance include: technology evaluation, market validation, potential for technology licensing, product development, collaborative development.
7.4.4Finance
Access to finance represent an extremely delicate issue for a company in the starting phases especially in the pre-seed and seed phases when risk is extremely high and product commercialisation is at its very beginning. For instance, according to a study involving the French research incubators (31 incubators are operating in the support for innovating enterprises out of research structures in France, GRAIN and CREALYS are two structures for this network)14, only 1/3 of incubators confirm that more than 50% of their supported business projects have found an adequate amount of capital to cover all their needs. Incubators’ managers highlight the lack of financing in pre-seed for all business types and, in early stages, a lack of financing for those companies with a moderate growth potential that are of little interest for risk capital operators. In pre-seed, financing needs of beneficiary companies are estimated between € 30,000 and € 150,000 to cover several types of costs: starting capital, feasibility studies and entrepreneur’s income.
The identification of suitable financing sources is therefore a major issue for a new company. Several types of financing sources are to be mentioned, such as grants, loans, provision of equity, access to financing networks.
7.4.4.1Identification of suitable financing sources
Assistance in the identification of financial sources is an important service new enterprise need to access to. Those sources may be (1) of different origin (public origin or private or mixed) and (2) of different nature (grants, loans, equity, etc.). Associated to this specific service, beneficiaries may also have access to a support service for applying to these financing sources, e.g. support in application writing, access to contact networks, etc.
7.4.4.2Grants
When feasibility of a business idea is still to be proved, financing is often made available on a human resources basis. This is the case in SPINNER framework, which provides grants directly to the beneficiaries, or GRAIN and CREALYS programmes, which help beneficiaries in making the applications to access specific regional funds.
In other cases, grants may also be made available for the research structure the business idea was developed at. Here again, a good example is CREALYS’s (and GRAIN’s) approach with the contribution of the Rhone-Alpes Region.
SPINNER
SPINNER provides to unemployed individuals developing a business idea yearly grants for a total amount of €15,600. In addition, SPINNER also provides financing for covering costs related to specific events, such as conferences, seminars, technical/specific costs (€2,500 per person), as well as financing for purchasing specific services (€ 5,000 Euro per person). In total, financing cannot exceed € 45,000 Euro per project.
GRAIN and CREALYS
The Rhone-Alpes Region finances “starting-up grants” - for individuals with an innovative business idea - for a 6 months period and a total amount of € 7,622. CREALYS and GRAIN gather the applications, which are evaluated by a technical committee in the Rhone-Alpes region. These grants can be renewed only once, upon agreement of this committee,.
The Rhone-Alpes region has also set up a financing scheme for public research laboratories with outputs exploitable by a spin-out company. The laboratory has access to a € 30,000 for covering 50% of research programme costs. In this case, a contract is to be signed between the project holder and the research structure. The remaining 50% of costs is supported by the lab through the provision of personnel and space. In compensation for this support, the lab will receive, once the new company has been established, a minimal amount of € 1,905 in shares. Instead of this lump sum, the lab may claim for the reimbursement of supported costs.
7.4.4.3Loans
Some structures might make loans available to new enterprises to be re-funded at favourable conditions in terms of applicable interest rate, re-funding delays, etc. In other cases, the incubator guarantee for their beneficiaries to obtaining a bank loan with partner banks.
7.4.4.4Provision of investment equity
Access to early stage-stage capital is a major issue for most technology-based companies. Some business incubators directly take shares of their beneficiary companies. This is mainly true for technology based private business incubators such as those that were set by important consultant companies as Accenture. In other cases, a private company partner of the incubator can take shares in the new company. There are also cases where University incubators have set up their own investment fund for their resident companies. This is for instance the case in Purdue Research Park Incubators (West Lafayette, Indiana, USA) where the Purdue University Foundation finances a pre-seed fund providing up to $ 250,000 for each selected start-up firm. “The program offers initial funding to help firms develop their technologies and to leverage private seed and venture funding; thus it provides gap financing between start up and the acquisition of outside financing. To qualify, the applicant needs a licence agreement in place with the university, and Purdue takes an equity position in each firm”.15
It is to be mentioned that none of the incubating programmes selected in the KREO regions directly provide equity to their beneficiaries.
7.4.4.5Access to financing networks
Access to finance – equity or loans – can also be provided indirectly through networking with relevant actors. A good example of that is the experience of Oxford Innovation with the establishment of Business Angels Networks.
OXIN
Oxford Innovation Ltd (OXIN) has established different Business Angels Networks aimed at linking investors and companies with high growth potential, who are seeking business development funds from around €15,000 to € 1.5 million (£10,000 to £1m).
In particular, the various Business Angels Network set by OXIN organise, on a regular basis, presentation meetings of selected companies with a high growth potential to potential investors members of the Networks. In addition, a large investment forum, the Venture Fest, is organised on a yearly basis in Oxford, and presentation sessions of companies looking for equity are organised over this 2 days event.
7.4.5Networking
Another important service that incubators provide to their beneficiaries is the access to their networks as for instance:
-
with the research base to access competencies, laboratories and equipment
-
with the industry to identify strategic partners and potential customers
-
with other types of actors such as institutions, banks, investors etc.
A good example of networking services is provided by CREALYS.
8Conclusion
There are many studies on business incubators. Most of them are aimed to the analysis of a limited number of cases, to benchmark initiatives or to measure their impact on a series of factors.
A practical tool to define a proper service supply responding to new businesses needs – with a special focus on innovative companies – was however missing.
The present tool is also based on studying service supply in a series of “performing” structures selected in the four European regions participating in the KREO network. It is however difficult to measure business incubator performance as this is directly linked to its ability to help beneficiary companies in attracting investments, creating wealth and employment both when they are “incubated” and when they “graduate”.
Therefore, the major challenge business incubators have to cope with lies in the creation of a supportive environment for their beneficiaries and, at the same time, in their capacity to help them become independent. Among those structures that are considered particularly successful, the approach can go from extreme “protection” to extreme “permission”, the balance depending on decisions based on various elements that are to be considered such as promoting organisations, funding sources, “competitors” already in place, framework conditions, etc. These elements can hardly be transferred from one organisation to another, but can be accurately analysed and this may become a knowledge base and inspire new actions.
9Bibliography
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Centre for Strategy & Evaluation Services, European Commission (2002) “Benchmarking of Business Incubators”, available at the following address: http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/incubators
M. G. Colombo, M. Del Mastro (2002), “How effective are technology incubators? Evidence from Italy”, Reseatch Policy 31 (2002) 1103-1122
D. A. Lewis (2001), “Does Technology Incubation Work? A Critical Review”, Reviews of Economic Development Literature and Practice: No. 11, EDA U.S. Economic Development Administration
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National Business Inncubation Association (2003), “A National Benchmarking Analysis of Technology Business Incubator Performance and Practices”, U.S. Department of Commerce Technology Administration, available at the website : http://www.franceincubation.com/Benchmarking_Incubateurs_USA_2003Report.pdf
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D4.1 – Technical Report on WP4
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