Introduction to business incubation
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Transcript of Introduction to business incubation
Copyright 2011 M. Long 1
INTRODUCTION TO BUSINESS
INCUBATIONMark S. Long
Long Performance Advisors
Copyright 2011 M. Long 2
A business incubator is…. a program designed to accelerate the successful development of
entrepreneurial companies through an array of business support resources and services, developed or orchestrated by incubator management, and offered both in the incubator and through its network of contacts.
A business incubator is NOT…. cheap rent a way to use an old building
What IS Business Incubation?
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Types of Incubation Programs
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Almost 50% - Information Technology, Informatics, Information Sciences, Microelectronics, Security
25% - Biosciences, Biotech, Life Sciences, Biologicals, Biomedicine, Medical Instrumentation, Med-Surgical, Medical Diagnostics
25% - Mixed Technology such as nanotechnology, “Cleantech”, energy sciences, material sciences, coatings, other
Further Categorization
University Incubation Models
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Technology Incubators are DIFFERENT!
Tech vs. Regular Incubation
METRIC ALL NBIA RESPONDENTS
ALL TECH NBIA
RESPONDENTS
Date of Inception 1996 1997
Gross Sq. Footage 30,086 36,631
Occupancy % 80% 86%
Avg. Program Revenues $597,083 $1,012,762
Avg. # Resident Clients 17 14
Total Active F/T Client Employees
109 112*Based on 2006 NBIA State of The Industry Survey
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Variable Industry Average Technology Average
Square Footage 24,375 38,988
Number of Tenants 13.9 12.0
Number of Employees per Tenant
4.5 5.1
Number of Graduates per year
3.3 1.7
Number of Employees per Graduate
22.4 30.4
Percent of Firms remaining in Community
82.2 86.0
More Information on Differences
C. Wolfe, 2008
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Foster innovation and support small companies
Create jobs and stimulate economic development
Build or accelerate local industry clusters Business creation and retention Identify local spin-out opportunities Technology commercialization
The Job is the Same…
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In addition to “normal” business incubator services (support, networking, mentoring, advising, and other services), technology incubators may include:Specialized work areas/equipment
Access to University facilities, labs & staff
Technology commercialization assistanceSpecial funding assistanceAccess to educated/specialized workforce
Additional educational opportunities
But in a Specialized Atmosphere
Model 1 – University-Run Incubation Program May be operated as a division within the school May be a separate entity under the school’s
jurisdiction Usually selected as an option when Economic
Development is part of core mission Focus is on strengthening opportunities between
University – Business Community
Incubator-University Models
Examples of Model 1 University of Florida
Sid Martin Center Owned by U of F Direct ownership of
facility Staff are all U of F
employees Report through
University’s Research Foundation
NO separate BOD U of F companies only
Incubator-University Models
U of F Sid Martin Incubator – Results (1995-present)
Active or merged
Failed
Split/Spinout
10
2
32
42 companies admitted + 2 spinouts = 44
Over HALF a BILLION dollars in investment, contracts, grants
81% Success/Survival
Model 2 – Incubators with formal partnerships with colleges & universities May be the result of a formation of a quasi, public-
private non-profit partnership with the college or university as one of the main stakeholders in the entity
Has a separate board of directors, with university participation
Can (and often does) include other functions (TTO, etc.)
Focus is often on economic development/community engagement
Incubator-University Models
Model 2 – Incubators with formal partnerships with colleges & universities May be the result of a formation of a quasi, public-
private non-profit partnership with the college or university as one of the main stakeholders in the entity
Has a separate board of directors, with university participation
Can (and often does) include other functions (TTO, etc.)
Focus is often on economic development/community engagement
Incubator-University Models
Examples of Model 2 The Indiana University
Emerging Technologies Center
A separate 501(c)3 organization
Formal agreement in place for governance
Operates as 1 of 3 “affiliates”
Report to BOD – University President is Chair
Community + University companies
Incubator-University Models
Model 3 – Incubator programs with informal relationships with colleges & universities This model may include real-world class projects,
internships, and providing students as part-time workers.
Again has separate board of directors with strong community involvement, some college/university participation
May engage or involve several colleges/universities Focus is on regional economic development/job
formation/student opportunity & community development
Incubator-University Models
Examples of Model 3 The Northeast Indiana
Innovation Center Near a branch campus of
Indiana University-Purdue University Ft. Wayne (IPFW)
Engage several universities in various ways
Utilize students from IPFW in programs
Report to mostly community BOD
Incubator-University Models
As opposed to incubation programs run by economic development groups, university-based incubation programs typically consider job creation as secondary to the following areas: Faculty Research Opportunities Course Project Opportunities Student Employment Opportunities Utilization of University-Funded Technology
Client Evaluation Criteria
Faculty Research Opportunities Forges partnerships eligible for government and
private sponsorships. Allows for the application of theory to a real-
world context. Encourages the development of curriculum to
address specific business needs. Requires striking a balance between the needs of
the faculty and the clients.
Client Evaluation Criteria
Course Project Opportunities Provides students with real-world experience
which is résumé-worthy. Affords clients the opportunity to gather several
different perspectives from an educated group at little to no cost.
Allows clients to vet potential internship and full-time prospects.
Requires striking a balance between the needs of clients and students as well as faculty.
Client Evaluation Criteria
Student Employment Opportunities Establishes a pipeline of experienced students for
clients. Reinforces the value of hosting clients to the
university and its constituents. Encourages students completing course projects
to remain committed in order to be considered for employment.
Client Evaluation Criteria
Utilization of University-Funded Technology Generates revenue for the university and faculty. Provides the clients direct access to the
researchers behind the technology they are using.
Provides students interested in research to engage in the commercialization of university-funded technology.
Client Evaluation Criteria
Determining the source of funding for the resources required to make a university-based business incubation program can be difficult:
Facilities: University-Funded Self-Funded
Staffing: University-Funded Self-Funded
Services: University-Funded Self-Funded
Where a program falls on each scale depends on the nature of the program and who championed it, and the degree to which each resource is either university- or self-funded will have an impact on how those resources are managed.
Good Management Structure
Facilities
University-Funded Self-Funded
Pro(s)Vested interest by the university in supporting the program.Reduced need to raise funds to cover overhead costs.
Con(s)Ownership and, in turn, use of the space can be ambiguous.Susceptible to the effect of the university’s funding priorities.
Good Management Structure
Facilities
University-Funded Self-Funded
Pro(s)Greater freedom in how the space is used.Reduced vulnerability to the university’s funding priorities.
Con(s)Demonstrates less commitment by the university to the
program.More time spent raising funds to cover the overhead costs.
Good Management Structure
Staffing
University-Funded Self-Funded
Pro(s)Greater employment security for staff.Reduced need to raise funds to cover overhead costs.
Con(s)Perception by faculty that money spent on administration is
money lost.Susceptible to the effect of the university’s funding priorities.
Good Management Structure
Staffing
University-Funded Self-Funded
Pro(s)Less expectation by the university that staff are a shared
resource.Reduced vulnerability to the university’s funding priorities.
Con(s)Greater insecurity of staff regarding the stability of their
employment.More time spent raising funds to cover the overhead costs.
Good Management Structure
Services
University-Funded Self-Funded
Pro(s)Ability to bulk purchase supplies and services.Reduced need to raise funds to cover overhead costs.
Con(s)Focused on the university’s needs rather than the clients’
needs.Susceptible to the effect of the university’s funding priorities.
Good Management Structure
Services
University-Funded Self-Funded
Pro(s)Ability to focus on the clients’ needs rather than the
university’s needs.Reduced vulnerability to the university’s funding priorities.
Con(s)Reduced opportunity to bulk purchase through the university.More time spent raising funds to cover the overhead costs.
Good Management Structure
Managing the needs of faculty, students and clients can be a delicate balancing act. Following are highlights of the competing perspectives of faculty and clients:
Faculty vs. Students vs. Clients
Effective Operating Policies/Procedures
Faculty Focused on their research
and teaching record. Evaluated by their
colleagues according to established criteria.
Operate according to the academic calendar.
View practitioners as being disconnected from the discipline.
Effective Operating Policies/Procedures
Students Focused on their skills
developed and résumé-worthy accomplishments.
Evaluated by their faculty. Operate according to their
competing priorities and affect on their grade.
View practitioners and researchers as being in-sync regarding expectations.
Effective Operating Policies/Procedures
Clients Focused on the viability of
their business. Evaluated by their
customers according to fluctuating criteria.
Operate according to the needs of their business.
View researchers as being disconnected from the discipline of business.
Effective Operating Policies/Procedures
Other Ways to Engage the University Community Faculty representatives on the Client
Selection/Review Committee. Scholars in Residence on an annual basis. Faculty and student attendance at client
workshops and seminars. Clients serving as guest speakers and project
judges for faculty. Clients serving as mentors/business advisors
for students.
Effective Operating Policies/Procedures
When a university is partially or fully funding an incubation program, the key performance indicators (KPI’s) for the program extend beyond economic impact. Following are some of the KPI’s relevant to a university assessing an incubation program: Number of internships and full-time positions
created for students Number of faculty research opportunities created Number of course projects developed and completed Number of university technologies licensed by the
clients Number of business incubation seminars and
workshops available to faculty and students
Promoting Useful Assessment Metrics
The Johnson Center for Entrepreneurship & Innovation (JCEI) has offices and affiliations across Indiana University to foster the entrepreneurial perspective. Johnson Center for Entrepreneurship & Innovation
(JCEI) Johnson Center for Entrepreneurship & Science
Innovations (JCESI) Johnson Center for Entrepreneurship & Medical
Science Innovations (JCEMSI) Johnson Center for Entrepreneurship & Cultural
Leadership (JCECL) Elmore Entrepreneurship Law Clinic (ELC) The Hoosier Hatchery
The Johnson Center forEntrepreneurship & Innovation
The Johnson Center for Entrepreneurship & Innovation recognized a need for the development and incubation of student-developed innovations. The IU Hoosier Hatchery provides the space within the IU Innovation Center at the Indiana University, Bloomington campus so that JCEI can establish a stronger relationship with IU student entrepreneurs. Following is the tiered model of venture creation developed by the JCEI to support student entrepreneurs:
Step 1: Students with innovative ideas compete in the IU Innovation Idea Challenge for an opportunity to gain access to the Hoosier Hatchery. Students may also gain access through performance in specific entrepreneurship courses like the Spine Sweat Experience or recommendations from professors.
Step 2: The innovation will be “incubated” for a 6-9 month period at the Hoosier Hatchery in order to better position the innovation for venture development.
Step 3: The student management team will be given the opportunity to present their progress to a panel, comprised of Plug and Play executives, Kelley School of Business faculty and staff and experienced venture capitalists, in the form of a “pitch” for further funding and their innovation’s graduation to the Plug and Play facilities in Silicon Valley.
Final Step: If deemed acceptable by the panel, the students will use the “earned capital” to make the move to Silicon Valley for three months to make full use of Plug and Play’s resources.
The Hoosier Hatchery
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Typically, clients are looking for “specialized equipment” and “wet labs”
Tech Incubator Facilities
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What is a “wet lab”?
“A Hood, A Sink, A Place to Think”The basics – Chemical fume hood (4’, 6’(std), 8’) –
continuous or variable flowSink – acid disposal – water sources – Distilled water
to the tap? Central source?Cabinetry – minimal? Modular?
The infrastructure is expensive, but necessaryHVAC (air exchange)Power (120/240, emergency backup)Water systems (boilers for autoclaves, etc.)Floor drains, Gas?, Pressure?, Vacuum?
The “Web Lab” Consideration
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Typically – the space and the servicesThe Fume Hood, Lab Bench Space, Distilled Water
source, Controlled Air Flow (Heat and Air Conditioning), Security, and “some equipment if possible”
Biohazard waste disposal services, also radioactive waste management (occasionally), acid disposal sink, dishwasher (with distilled water rinse cycle), and autoclave/sterilizer
What’s Important?
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Typical incubation services!Mentoring
Advising
Business modeling assistanceAssistance in finding capital
Networking
Intellectual property management
Finding good personnel
But Most Important!
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University faculty – source of IP, source of Advisory Board members, source of partnering
University facilities – Bio Level 2/3 labs, animal facilities, higher level equipmentMass Spectrometers, Electron Microscopy,
Cyclotrons, other expensive equipment
Access to other University amenitiesLibraries, continuing education
Access to University Amenities
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Utilization of University Technology Transfer departments
Accessing the Incubator’s legal networkPro-bono work, authorized legal advice
Technology Commercialization
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Partnering with University faculty for government grants
Pursuing capital funding with incubator management assistance
Funding Assistance
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Accessing the Incubator Network to find new hires
Accessing the University for Graduate Students/Graduate AssistantsInterns, part-time hires
Leading to future hires, local job creation
Need for management talent, board of advisors, board of directors
Access to Educated Workforce
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Continuing Education for management and other personnel
Seminars, symposia and training sessions on latest scientific findings
Guest speakers from various sectors on new topics
Additional Educational Opportunities
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First – a good screening mechanismYou cannot help companies you cannot
accommodate!
You must determine their requirements “up front”
A good application A good processing mechanism!
Your Plan of Assistance
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A simple application – ask for a business concept, not a business plan!Get basic information – do they have money? Do
they have IP protection? Do they have management?
What kind of space do they need? What are their requirements?
The process – have an advisory board review the application & talk to the company management; are they are “fit”?Are they progressive? Will they “grow”? Do they
“match your portfolio”?
Application Process
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Find the “fit”
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Facilities and Amenities, certainly!Having wet labs, equipment, “extras”
Access to University Faculty and ResourcesA major draw for start-ups
Your network & “set-up”Connections and assistance groups
Low rent, location, flexible lease, easy terms
All these are important – BUT …
What Attracts Technology Companies?
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Truthfully, the “Lab and the Advice”Most scientists say – we can’t find the space and
we don’t know how to start the company!
In a large survey in the Midwest U.S., most technology company CEOs said “we need the lab, we can’t find it anywhere else – but we need the advice more!”
What RETAINS Technology Companies?
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Good facility planningBuild in the “right stuff” when you decide on a
technology incubator!
Understand your market and what it will require
Market Analysis – knowing who’s out there and what’s out there will help you prepareDo a careful study to evaluate demand and
demand “type”
Don’t overbuild and over buyShare equipment and resources with Universities
and companies
The “Keys” to Planning
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Are you providing services?SpaceCounselingResources
or Are you offering outcomes?
Accelerating time to marketImproving chance of success
Managing Expectations - Reality
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Questions?
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