Models of Business Incubation

By

S. AravazhiDeputy Manager

Agri-Business Incubator

For profit Strong financial support to tenants Rigorous screening Large equity share

Not for profit Moderate financial support to tenants

Open entry or simple screening

No or small equity share

Types of IncubatorsTypes of Incubators

Non-profit For profit

Specific Features of Technology Business Incubators

Generally linked to technical universitiesLinks

Established within a technology park or close to other sources of technological supportLocation

May require specific technical infrastructure and a network of service providersServices

Management & mentoring staff require specific expertise in dev’t of technology-led businessesStaff

CHARACTERISTICS OF INCUBATION MODELSBASED ON THE SPONSORS

CHARACTERISTICSCHARACTERISTICS PUBLIC- PRIVATEPUBLIC- PRIVATE INSTITUTION BASEDINSTITUTION BASED FI /VC//ANGELFI /VC//ANGEL

SPONSOREDSPONSORED

INDUSTRY INDUSTRY SPONSOREDSPONSORED

Profit OrientationProfit Orientation Non-ProfitNon-Profit Non-profitNon-profit Profit Profit ProfitProfit

GovernanceGovernance AdvisoryAdvisory AdvisoryAdvisory InstitutionalInstitutional CorporateCorporate

ServicesServices Rental space, Rental space, Shared servicesShared services

Rental space, Rental space, Shared services, Shared services, access to access to knowledgeknowledge

CapitalCapital MentoringMentoring

Entry criteriaEntry criteria Promising idea or Promising idea or technologytechnology

Promising idea or Promising idea or technologytechnology

Promising Promising technology ( well technology ( well developed)developed)

Promising Promising technologytechnology

GraduatingGraduating Visibility of Visibility of BusinessBusiness

Visibility of Visibility of BusinessBusiness

Readiness for a Readiness for a liquidity eventliquidity event

Incubator Incubator discretiondiscretion

ObjectivesObjectives Local economic Local economic growthgrowth

Technology Technology transfer, transfer, commercialisationcommercialisation

Capitalize on Capitalize on investmentsinvestments

Develop new and Develop new and complementary complementary technologiestechnologies

Industry SectorIndustry Sector SMEsSMEs Technology focusTechnology focus New and emerging New and emerging technologiestechnologies

Technology Technology related to related to sponsor’s focussponsor’s focus

Relationship after Relationship after graduationgraduation

None or casualNone or casual None or informalNone or informal NoneNone Control or strong Control or strong interest interest maintainedmaintained

PRIMARY FACTORS AFFECTING PRIMARY FACTORS AFFECTING BUSINESS INCUBATIONBUSINESS INCUBATION

NATIONAL INNOVATION SYSTEMNATIONAL INNOVATION SYSTEM GOVERNMENT SUPPORT FOR INDUSTRIALISATIONGOVERNMENT SUPPORT FOR INDUSTRIALISATION VENTURE FINANCEVENTURE FINANCE ACCESS TO SKILL AND COMPETENCIESACCESS TO SKILL AND COMPETENCIES

Technology business incubators are dynamic instrumentsof regional economic development

Technology Incubation System

Every technology incubator center is an unique entity

replace entrepreneurial initiative and markets

create better conditions for entrepreneurship

What Business Incubators Can and Cannot Do

Can not: Can:

TYPES OF INSTITUTIONS PROMOTINGBUSINESS INCUBATORS-INDIA

BUSINESS INCUBATORSNON GOVERNMENTAL

ORGANISATIONS2

FINANCIAL INST2

GOVERNMENTS96

INDUSTRY3

TECHNICAL INST7

63

11

10

55

313

ICT BIOTECH MICRO ELEC.

MATERIALS MECHANICAL DESIGN

GENERAL

TECHNOLOGY FOCUS IN BUSINESS INCUBATORS-NSTEDB PROMOTED

Operational ModelsOperational Models

BRICKS AND MORTAR (BAM)BRICKS AND MORTAR (BAM)

VIRTUAL, PORTAL OR WITHOUT VIRTUAL, PORTAL OR WITHOUT WALLSWALLS

THE HUB / VENTURE INCUBATORTHE HUB / VENTURE INCUBATOR

EGGUBATOREGGUBATOR

BRICKS AND MORTAR (BAM)BRICKS AND MORTAR (BAM) It represents the historical model of business incubation, It represents the historical model of business incubation,

which focuses on physical facilities, office support and which focuses on physical facilities, office support and limited on-site serviceslimited on-site services

It has a nuclear structure in that it is a facility providing It has a nuclear structure in that it is a facility providing very little alliances with external entities.very little alliances with external entities.

The incubator provides a very limited amount of The incubator provides a very limited amount of services, which may include a receptionist, a telephone, services, which may include a receptionist, a telephone, a photocopier and the likes.a photocopier and the likes.

It is unlikely that considerable management expertise is It is unlikely that considerable management expertise is available, but one individual may be there to provide available, but one individual may be there to provide limited coaching and directionlimited coaching and direction

VIRTUAL, PORTAL OR WITHOUT VIRTUAL, PORTAL OR WITHOUT WALLSWALLS

Virtual incubator is described as an organization which is set up on Virtual incubator is described as an organization which is set up on the Internet and which provides a wide data bank and information, the Internet and which provides a wide data bank and information, with the possibility of stimulating new business.with the possibility of stimulating new business.

They connect companies, customers, suppliers, partners and the They connect companies, customers, suppliers, partners and the operating management of the virtual incubator with each other operating management of the virtual incubator with each other through the Internet, electronic data interchange, videoconferences, through the Internet, electronic data interchange, videoconferences, etc.etc.

Easy access to a wide range of services, no administrative costs Easy access to a wide range of services, no administrative costs associated with physical facilities, and ease in seeking associates associated with physical facilities, and ease in seeking associates and serving clients, globallyand serving clients, globally

Lack of human interaction that delimits its clientele, since many Lack of human interaction that delimits its clientele, since many seek personalized humanized services, in addition to the electronic seek personalized humanized services, in addition to the electronic medium.medium.

Virtual incubators can be classified into Venture Incubators, Venture Virtual incubators can be classified into Venture Incubators, Venture Accelerators, Venture Portals and Venture Networks. Of these, only Accelerators, Venture Portals and Venture Networks. Of these, only the Venture Incubator will usually offer physical space.the Venture Incubator will usually offer physical space.

HUB / VENTURE INCUBATORHUB / VENTURE INCUBATOR Many of these incubators have come on board in the Many of these incubators have come on board in the

past year. Hubs combine the strengths from both the past year. Hubs combine the strengths from both the BAM model and the portal model into a central office.BAM model and the portal model into a central office.

Specialized divisions within the incubator offer a good Specialized divisions within the incubator offer a good range of services. range of services.

A limited amount of funding is available to the A limited amount of funding is available to the incubatees. incubatees.

Yet, the incubators network with the outside is Yet, the incubators network with the outside is underdeveloped, loose, informal and inconsistent.”underdeveloped, loose, informal and inconsistent.”

EGGUBATOR”EGGUBATOR” It has an orbital structure, in that it has a strong core in the center It has an orbital structure, in that it has a strong core in the center

that ensures good vertical information flow, and multi-layered that ensures good vertical information flow, and multi-layered orbits/affiliations that allow high quality information circulation both orbits/affiliations that allow high quality information circulation both horizontally and multi-directionally, across the layers.horizontally and multi-directionally, across the layers.

It offers a “total” range of services; its devoted alliances and It offers a “total” range of services; its devoted alliances and partnerships represent a perfect entrepreneurial network where partnerships represent a perfect entrepreneurial network where access to a needed service is offered at any time. These alliances access to a needed service is offered at any time. These alliances and partnerships also have internal sources of funding built into the and partnerships also have internal sources of funding built into the system.system.

An attempt at a visual representation of the incubator model that is An attempt at a visual representation of the incubator model that is most likely to survive the tribulations of time shows the yoke of the most likely to survive the tribulations of time shows the yoke of the “Eggubator” as the incubator proper, with its Board of Directors. It is, “Eggubator” as the incubator proper, with its Board of Directors. It is, in essence, the parent company, the service provider, the source of in essence, the parent company, the service provider, the source of networking and support, the cradle, and the hatchery.”networking and support, the cradle, and the hatchery.”

Examples -Incubator Models in IndiaExamples -Incubator Models in India

o STEPSTEP Science and Technology Entrepreneurs Park, Initially Started with focus on Science and Technology Entrepreneurs Park, Initially Started with focus on

Entrepreneurship Development among Technical Graduates, some of them Entrepreneurship Development among Technical Graduates, some of them evolved into TBIs –Public supportevolved into TBIs –Public support

o TBITBI Technology Business Incubator with focus on developing start-up Technology Business Incubator with focus on developing start-up

enterprises in Emerging areas of Technology- Public and Privateenterprises in Emerging areas of Technology- Public and Private

o STPISTPI Software Technology Parks of India, initially started to promote software Software Technology Parks of India, initially started to promote software

development companies, also entered into Technology Business Incubation development companies, also entered into Technology Business Incubation in ICT areas-Public Supportin ICT areas-Public Support

THANK YOU