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Loading  Five Minute Guide to: Business Incubation
Business Incubation was pioneered in the USA in the 1950s. It gets its name from the first Incubator which was established in a failed chicken hatchery. Originally a means of finding new uses for old buildings, business incubation is now a powerful economic development tool helping a wide range of businesses.
What is an Incubator? Business Incubation is a process which supports companies to grow and survive. There are several definitions but the three core characteristics are:
If it isn’t Selective, Supportive & Time-Limited it isn’t an Incubator. It may be an equally valid form of business support but it isn’t Business Incubation.
Business incubation programmes are not buildings, offices, or any form of premises. Incubation programmes can switch locations, or even exist with no premises at all. Most successful programmes however do have a fixed location from which incubatee companies operate.
When is Incubation appropriate? There are a number of stages in the incubation process, collectively known as "The Incubation Chain":
The business has not started. Support consists of training the management and developing the business plan.
Typically small start-up incubation. Fewer than 5 people join full-time and bring on others. The ESI stage usually lasts between 9 and 18 months. Companies arrive brand new and leave as a free-standing company employing perhaps 5-10 FTE. Very high levels of support, say 8 person hours per week plus facilities. Often heavily subsidised. Welsh example - @Wales.
Accelerates the growth of a young company. Company typically arrives with fewer than 10 staff and stays for around 3 years. Usually in an ‘own office’ environment companies pay their way although costs may be subsidised, particularly in the first year. There are significant levels of support, but less than ESI. Welsh example – Technium.
Companies have now moved to their own premises. Support is distant and usually confined to mentoring, sector events, possibly finance and networking. Late incubation tails off into general programmes of company support, usually within 1-2 years.
It is early and mid stage Incubators that people usually recognise when the term ‘Incubator’ is used.
General Incubators General incubators will incubate anybody. They typically have a range of facilities including: Reception, Secretarial, telephony, mentoring, aggregated purchase, Marketing, PR, Broadband, access to investors, mentoring and access to business advice.
Sector Incubators Sector, or specialist, incubators work within specific industry sectors areas and are often built to specification for industries. Biotech incubators will include modern lab facilities; Digital incubators appropriate software, hardware, electricity & connectivity; fashion incubators cutting and patterning machines, etc. The aim in every case is to allow a company to gain a foothold and a trading record before investing in what would initially be under-used equipment. Other sector incubators include Engineering, Kitchen & Arts incubators.
Sector incubators also employ specialist, high-quality, staff with in-depth knowledge of the relevant sector and often an entrepreneurial background. Quality of staff is recognised as the single most crucial factor in an Incubator’s success or failure.
‘Soft Landing’ Incubators Soft Landing incubators (sometimes called Touchdown Incubators) provide facilities for inward-investment companies moving into a country for the first time. Companies expanding into new markets face a number of challenges not faced by indigenous enterprises. The US-Based National Business Incubation Association run a recognised ‘Soft Landing’ accreditation programme.
Lifebelt Incubation Lifebelt Incubation supports companies in danger of closure. This may mean re-locating external companies to the Incubator or it may mean high-quality support within their current premises.
Does it work? In the USA over 80% of incubated companies survive to year 5. The overwhelming majority stay within the broad community within which they were incubated. Yes, it works.
References A comprehensive Guide to Business Incubation, Hayhow, S The New Business Incubator, Smilor, R W. ISBN 0-669-11096-5 Growing New Ventures, Creating New Jobs, Rice & Mathews. ISBN 1-56720-033-8 The Evaluation of Business Incubation Projects, Bearse, P. ISBN 1-887183-19-1 Forging the Incubator, how to design & implement a feasibility study for Business Incubation programs, Meeder, R. NO ISBN. Publisher: National Business Incubation Association, 20 East Circle Drive, Athens, Ohio 45701, USA Best Practice in Business Incubation, United Nations. ISBN 92-1-116749-3 Incubating the Arts, Gerl, E. ISBN 1-887183-50-7
UK Business Incubation Association - http://www.ukbi.co.uk/ National Business Incubation Association ( USA) - http://www.nbia.org/
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