Introduction to business incubation

Copyright 2011 M. Long 1

INTRODUCTION TO BUSINESS

INCUBATIONMark S. Long

Long Performance Advisors


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?


Types of Incubation Programs


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

Facilities Management © M. Long, 2011

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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


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


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…


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


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


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


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


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


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


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.


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.


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.


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.


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.


Facilities


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.


Staffing


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.


Staffing


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.


Services


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.


Services


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.


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.


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.


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.


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.


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


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


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?


Typical incubation services!Mentoring

Advising

Business modeling assistanceAssistance in finding capital

Networking

Intellectual property management

Finding good personnel

But Most Important!


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


Utilization of University Technology Transfer departments

Accessing the Incubator’s legal networkPro-bono work, authorized legal advice

Technology Commercialization


Partnering with University faculty for government grants

Pursuing capital funding with incubator management assistance

Funding Assistance


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


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


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


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

M. Long, 2011 50

Find the “fit”


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?


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?


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?

Copyright 2013 M. Long