Business incubators

in the framework of local development

Introduction into the system of Business Incubation

Belgrade 2.4.2015

Expert for GIZ: Franz Dietrich

Page 1
Dissemination of Business Incubators

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Start ups in Germany

Total new businesses in 2013: 755,000

Total small business start- ups: 238,000
Total side line businesses: 249.000
Total new business in incubators: 1,370

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Definition
Business Incubators + their relation with the environment

Goal: Creation of Wealth

(new companies, products + services,
innovation, technology transfer, jobs)

Industrial- Science
/Commer- Park
cial Zone Research &
Business Development,
Industry Incubators/ Higher
Innov. Centres education
institutions
Business Technology (HEIs)
Park Park

Basis: Regional Potential

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Business Incubator types
Business incubators + their relation with the environment

Business Incubator (BI)

Innovation Centre (IC)
Technology Business Incubator (TBI)
University Business Incubator (UBI)
Start Up Center
Business Support Center
Business Development Center
Technology Park (TP)
Accelerator, Hub, Pre-Incubator,...........
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Science and/ or Technology Park
Elements
Park-Management
University

SME

HEI SME
Business Larger
Incubator companies

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Facilities + services, the generic model
A full-service incubator usually offers:
Incubator space: offices or workshops, sometimes labs, available on
a flexible, affordable + temporary basis (easy-in + easy-out), more &
more: pre-incubation rooms

Common services: incl. secretarial support, telephone answering,

common reception, mailing facilities, access to computers (LAN) and
other office equipment, meeting rooms and (in some cases)
cafeteria/canteen facilities

Business counselling, namely hands-on assistance with regard to

business planning, training in management skills, access to
accounting, legal-, marketing- + financial expertise, + ad hoc advice

Access to finance + specialist advice: some operate own seed +

venture capital funds; access to specialist advice will be provided if an
incubator does not have the skills + know-how itself

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The role of municipalities and business
incubators
Most incubators are initiatives of local governments ( 80 90 %) as
part of their
Reactive approach need oriented, stimulate job growth
Proactive approach change the regional economical profile
Entrepreneurship development is a local task in most countries
Development of commercial zones and business infrastructure is a
local task
Local governments can receive public funding
Local municipalities own adequate buildings and/ or green area for the
development of Business Incubators
Local governments can make not for profit decisions

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Other important actors in the region with
potential to become stakeholders

(SME) Development agencies

Regional governments
Regional Development Agencies
Chambers
Associations
HEIs
Training institutes
Technology transfer agencies
Private service providers: like start up consultants, lawyers,
accountants,......
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History
First business incubator + origin of the term
First incubation activities in
the USA + Western Europe
partitioning space, share
services by J. Mancuso
Batavia Industrial Center
(BIC): first business
incubator, founded 1959
(Batavia/ State of N.Y.)
Still operating (110 tenants,
1000 working places
Had much in common with Batavia Industrial Centre (N.Y.)l
present initiatives in Eastern
+ Central Europe for
restructuring + revitalisation
of industrial areas

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History
Dissemination of the business incubator concept

European pioneers in business incubators based on the science

park concept + focussing on promoting technology-based start-up
companies:
Herriot-Watt University, Edinburgh (1969), Cambridge University

Followed by projects in
Australia (1972)
Asia (1974)
Scandinavia (1982)
Germany (1983) BIG Berlin
Latin America (1986)
Eastern + Central Europe (1990) at the same time in Africa

Different continents developed quite heterogeneous models

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History (cont.)
Development of the concept in US + Western - Europe
Managed Enterprise Industrial
Workshops Agencies Estates
1970s

Early Business Business Incubator Science Parks

1980s Centres Concept

Multi-Purpose Incubators

Late Specialised Incubators

1990s

Technology Incubator Sector-specific

Incubator without walls Incubators (e.g.
Centres rural incubators)

New Virtual BI
Hubs, Accelerator,
Econ. BI
Pre-Incubator Source: UNIDO

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Types of business incubators
Different forms of categorisation

There are common characteristics of Business

Incubators
There is a generic Business Incubator model
There is no single best practice model
Each Business Incubator features also regional
characteristics
Business Incubators should be embedded in the
regional development system
respond to the specific needs and requirements of
would-be entrepreneurs in their region
should pro-actively address untapped regional potential

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Grouping of Business Incubators
General Purpose Incubators are
most common and usually
accommodate a client mix of start-ups and young companies,
developing more production based businesses with a
no -, low or medium - technological orientation
businesses in the service sector

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Grouping of Business Incubators

Technology Business Incubators (TBI)

focus on promoting technology-based business start-ups.
Technology-based is not the development of technologies but
the set-up of a company wanting to sell its technology-based
product or service on the market.
Therefore a Technology Business Incubator is not to be
confused with an applied research centre
Technology Business Incubator are often closely developed and
operated by or with the local university

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Grouping of Business Incubators
Agroindustrial Incubators
often quite technology oriented (and then they are often close to
a University Business Incubator)
transferring scientific know-how to entrepreneurial activities in
the food-sector
Social Incubators often
take care of underprivileged and disadvantaged people,
often linked to traditional sectors
high focus on job creation and employment

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Dissemination of the business incubator
concept
Today:
approx. 65 associations (international + national) of business
+ innovation centres or science/ technology parks actively
promote the development of new companies + regional
economic development
more than 9,000 incubators worldwide

in Europe:
around 2,000 incubators generating 40.000 gross new
jobs/ year; results being achieved at an average cost per job
to public authorities of around 4.000 net
(Source: European Commission 2008; newer sources, where available)

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Business activities in which European
business incubators specialise
Business Activities Percentage

(1) Sales, marketing and distribution 0.4

(2) Business and financial services 0.6
(3) Advanced/ high-tech manufacturing 18.6
(4) Information & communication technologies 18.2
(5) Research & development 12.2
(6) Biotechnology/ pharmaceuticals 14.2
(7) Knowledge-based industries/ new economy companies 11.5
(8) Other manufacturing activities 6.1
(9) Other service activities 8.8
(10) A combination of some/ all of these activities 9.5
Total (multiple responses possible) 100.0

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Examples of business incubators
Technology Business Incubator:
TZDO Dortmund Technology Centre
Opened in 1985 + belongs to the largest technology centres Europe-wide
approx. 90 companies, 1.300 work places
size: 70.000 sqm, consists of 8 complexes of buildings
with complete service-package + established network-links to main agents in the
region
PPP by local admininistration, chambers and 7 banks
Focus on existing technology potentials in science + economy: Micro-
systems-technologies, IT, technology-oriented services, electronics,
mechanical engineering, logistics, environmental technologies, biomedicine

TZDO Technology park Dortmund

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Examples of business incubators (cont.)
Sector-specific ->Craftsmen
GHG Incubation centre for handicraft + trade Tging am Inn
Background: former production location of an aluminium company
Focus on: founders of new businesses + young entrepreneurs from
handicraft + trade, but GHG is also open to other branches
Size: 2.500 sqm of workshop/production space + storage areas with
integrated offices + services (e.g. counselling for target group)
Management company composed of town, district + 2 banks
Clients: 34 companies + organisations (e.g. chamber of handicraft)

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Examples of business incubators (cont.)
Sector-spec. TBI Biomedicine
IZB Innovation- + incubation centre biotechnology Martinsried

Located in Munich, founded 1995, run by a management

company (with predominant share of private sector)
Management comp. builds networks + provides also
seed-capital + counselling services
Promoted by Bavarian government initiative High-tech-
strategy Bavaria
Size: 17.000 sqm (after enlargement) campus-like
with kindergarten for children + cafeteria + offering
conference facilities
Tenants: 40 companies focussed on medical
biotechnology, approx. 500 employees
Graduates: 90, settled in the surrounding SP

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Examples from other countries: Austria
Software centre Hagenberg, Upper Austria

Founded 1988, located in the Software park Hagenberg

Size for clients: 7.200 sqm, enlargement is going on
Favourable environment due to location near to on-site research
institutes, competence centres + polytechnical university
Focus: ICT
Austrian-wide network provides start-up assistance to
entrepreneurs
Upper Austria is among the top-networking regions in Europe
concerning its cluster strategies
Each incubator focuses on
particular technologies + clusters http://www.softwarepark.co.at

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Examples from other countries: Ireland
Dublin Business Innovation Centre (Dublin BIC)
today also: Guiness Enterprise Centre (GEC)

Opened in 2001 initiated due to need for enlargement

of the existing EU-BIC in the disused premises of a
former warehouse from the Guiness Group
Joint initiative of public + private sector (ppp of six
partners)
Focus primarily on: software services oriented
businesses, hi-tech prototype engineering, e-
commerce, internet + mobile technology development
Own seed capital fonds
Size: 5.000 sqm
83 companies (2013)
Max Stay: 33 month

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Examples from other countries: Thailand
Khon Kaen University Business Incubator

Location: 1st Floor Pienwitjitr Building, Khon Kaen University

Management:
Managing Director (full-time)
2 Business advisers (ft)
1 accountant (part-time)
Area
Total 280 sq.m.
Management Area: 144 sq.m.
Incubation Area 136 sq.m. (6 rooms for rent)

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Offices

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TIKKU Financial Key Figures
Investments:
Reconstruction: 70.000 USD
Infrastructure: 20.000 USD
Operational cost per year: 60.000 USD
Deficit spending ratio: 70 %
No. of Applicants (last year) 59
No. of Applicants accepted to join TIKKU 38
Fail / Quit during incubation process 20
Start-up and sustainable business 18

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Business Incubator Malacky, Slowakia
Set up under framework of CbC 2001 - 2004
Multi purpose/ multifunctional incubator in the heart of Malacky
4,500 sqm
60 offices (from 20 60 sqm.)
10 production areas (up to 130 sqm)
Today 27 incubatees and 15 commercial clients

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Business Incubator Malacky

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Key European incubator performance statistics +
suggested benchmarks

Setting up + operating Average Range Benchmark

Average capital investment cost 3.7 m. 1.5 22 m. na
Average operating costs 480,000 p.a. 50,000-1.8 mio. na
% of revenue from public subsidies 37% 0-100% 25% 75% self-
finacing ratio
Incubator space 3,200 sqm 90-41,000 sqm 2,000-4,000 sqm
Number of incubator clients 27 firms 1-120 firms 30 +
Incubator functions Average Range Benchmark
Incubator occupancy rates 85% 9-100% 85%
Length of stay 35 months 6 months no 3 years
max.
Number of management staff 2.3 managers 1-9 managers 2 ++ managers
Ratio of incubator staff: tenants 1:14 1:2 1:64 1:101:20
% of managers time advising clients 39% 5% - 80% 50%
Source: Europ. Commission

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For questions: Franz Dietrich
franz-dietrich@web.de

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Thank you for your attention.

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