Summary of the report

LESSONS LEARNED FROMVIRTUAL BUSINESS INCUBATION

“What is virtual business incubation?”

Physical incubation clients served in a physical building (only)

Virtual incubation is “the full range of business incubation tools and services that are not (necessarily) provided to clients residing inside the facilities of a business incubator”

As shorthand, “virtual” = location-independent.Definition: (V)BI Service concept = package of incubation services(V)BI Tools = way to deliver a service

Conventional & virtual

‘Conventional’ business incubation - Intense contact with

clients- Capital intensive- Limited outreach

Virtual business incubation- Outreach potential- New revenue

generation models- Impact on business

growth?

Questions to be addressed

1. How (and under what conditions) does virtual incubation work?

2. What successful examples of virtual business incubators exist?

3. What lessons can be derived from virtual business incubation and how can they be replicated?

VBI: How and under what conditions?

On-site; incubatees are invited to come to physical location.

E-learning and websites; Online training materials and online information provision.

1-on-1 ICT exchange; E-mail, SMS, phone, Skype, MSN and online collaboration tools.

Online recruitment; Recruiting incubatees, mentors, interns, investors

Virtual communities; online and physical networking and exchange

The online crowd; Crowdsourcing, Crowd funding

Prevailing conditions - Business

environment- Mission of the

incubator- Target group of the

incubator (location, skills, ICT access)

Tools

Types of VBIs

3 types of VBIs: “Hand-holders”; focussed on offering mainly

business development services “Network boosters”; networking focussed

business incubators (two sub-types: BPC+ and 2.0)

“Seed capital providers”, Finance focussed business incubators

‘Hand-holder’ example 3ie

3ie; Technological University in Valparaíso, Chile.Clients inside and outside the walls

“Virtual tools” Incubatee comes to the incubator /

meetings in other locations Email, phone, skype, online

collaboration tools

Acces to finance

Networking

TrainingMentoring

Selection

0

5

3ie

3ie

‘Hand holder’ lessons

Considerations for replication: Most likely to be of relevance in

remote, basic or (to a lesser extent) emerging business environments

Increasing outreach to rural / dispersed groups is possible, but may be more expensive

Lessons ICT, 1-on-1 communication can partially

replace face-to-face mentoring, trust remains essential

Use of online collaboration tools makes ICT communication more effective.

Peer-to-peer exchange in the start-up phase remains crucial, face-to-face

Usually, no new source of revenues Management of quality requires new

structures Replacing training with E-learning is less

effective, is a supplement

‘Network booster’ BiD Network

Business plan competitions + and investment matchmaking

“Virtual tools” Online recruitment Online matchmaking and

coaching Online networking and events

Acces to finance

Networking

TrainingMentoring

Selection

0

5

Series1

‘Network booster BPC+’ lessons

Considerations for replication: Added value more limited

where other BPCs are already active

Internet access for starting entrepreneurs essential

Designed for small, not micro entrepreneurs

Donor-funded most of the time

Lessons High outreach initially, but limited services to a

small group. Cost of a BPC+ needs to be carefully weighed against the benefits.

Good tool to raise interest in entrepreneurship and increase brand recognition of the incubator

Service intensity is typically highest during and after the awarding ceremony

To increase outreach & impact, online recruitment of (int’l) fellows and (local) volunteers, and promoting emergence of and linking to (angel) investor networks are effective

‘Network booster’ the HUB

Bringing people together, typically by hosting regular events. Examples: the HUB and Mobile Monday.

Virtual tools: Online recruitment Virtual Communities Brand building

Acces to finance

Networking

TrainingMentoring

Selection

0

5

the Hub Amsterdam

the Hub Amsterdam

‘Network booster 2.0’ lessons

Considerations for replication: Potential members are not too

dispersed. Attending an event should require less than one hour travelling.

The business environment should offer ample business opportunities in the targeted sector

Members of the target group are diverse and complementary in skills and know how. It is useful to for (most of) them to network;

Local business culture allows for open networking with people of different backgrounds.

Lessons Reaches and mobilises large numbers of people. Members have to be passionate to be involved and

volunteer their time Financially self supporting because of mobilising

members for in-kind and in-cash contributions Limited life-time: generally active for 3-5 years. Over

time, the added value of the network decreases. Needs to be innovative (“hip”, “in vogue”), and

changing itself constantly

‘Seed capital provider’ Y-Combinator

Commercially oriented – short term capital with network boosting and mentoringSocially oriented – patient capital with long term mentoring

Virtual tools: Online recruitment Brand building

Acces to finance

Networking

TrainingMentoring

Selection

0

5

Ycombinator

Ycombinator

‘Seed capital provider’ lessons

Considerations for replication: Commercial: Availability of business and

investment opportunities for firms that can grow quickly with little cash

Advanced venture capital markets

Non-commercial: Availability of patient capital,

funding sources

Lessons Suitable for quick-return start-ups, or already

later-stage innovative enterprises, if commercially oriented

Outreach is limited, with an average 10 -30 companies per year.

Quality of outreach and impact depend highly on the quality of the selection process and the monitoring and mentoring.

Training and mentoring services are light, but if they are highly sector specific, can be of high value.

ICT is mainly used during the selection process, and to boost the brand of the seed capital provider.

Revenue generation

Virtual service concepts offer new opportunities to generate revenue; some general observations:

For hand holders: challenging to raise additional revenues through out-of-walls/satellite incubation, but more public funding For network boosters: good opportunity to generate revenue through membership fees (small amount, large group), and events For seed capital providers: financial sustainability is possible, but for a narrow slice of the market (quick return, later-stage incubatees); revenue from training/mentoring, not equity shares

Overview

ItemHand-holders Network boosters Seed capital providers

Service FocusBDS(training, mentoring) Access to business networks Access to business finance

Target group Wide range; Special target group to high potential

High potential,Educated Early stage or established

High potential, or ‘Social enterprise’

Outreach10-20 business per year 100-300 businesses per

network / competition 15-30 per season

Service provision Service provider Facilitator Facilitator

FundingDonor / Gvt/ Univ / NGO Foundations, Commercial Commercial

Typical main revenue model Donations,Sponsors, (consultancy) projectsClient own contributions to service fees

Sponsors, membership fees

Admission fees, return on equity

Key lessons

Key benefits of Virtual Business incubation Service quality: New opportunities to use tailored, diverse and specialised sources and services for incubatees Scale: Possible to increase outreach and customer base significantly (with network boosting). Inventive: More possibilities to cater to innovative entrepreneurs by fast, flexible and creative networks of people Capital: access to new sources of (risk-) capital

Key lessons

Challenges of Virtual Business incubation Different set of skills and abilities in VBI are required; is not “easier” to do Cost is not necessarily lower; overhead cost same or more Lower capital outlay, but high maintenance and shorter lifetime of asset (of network boosting) Brand building is essential to catch the eye of the online crowd

Considerations for replication

To design a VBI service concept: Define the desired target group Assess and understand “needs” of incubatees Prioritise demand (=need x price) of incubatees for services and design a lean service package Weigh cost and benefits of virtual tools Assess own staff’s skills and -gaps Consider investment cost/time Decide on strategy, check consistency of concept Act...

THANK YOU!

November 2011

Nienke Stamn.stam@triodosfacet.nlwww.triodosfacet.nl

On-site services

Delivering BDS to non-resident clients can: expand geographical coverage of an incubator, (can) increase its cost effectiveness (if facilities are readily available), exposes entrepreneur to a new business environment, and allows for exchange between entrepreneurs from different backgrounds and regions.

Lessons If an incubator works with incubatees in a remote location, it needs a local partner

to mobilise local knowledge, networks and reputation in that specific area. In the start-up phase, entrepreneurs highly value interacting with peers. Incubators

need to actively facilitate this interaction. If incubatees and incubator staff need to travel, this can be costly and time

consuming; Interacting with the entrepreneur without experiencing their workplace can be less

effective

Websites and e-learning

Websites and E-learning: Websites can provide information or online training materials. This can expand outreach and

geographical coverage of an incubator, and also has the benefit that incubatee can learn / look for information at own pace, whenever and wherever convenient.

Lessons The potential of E-learning depends on the skills and access to tools of the incubatees, the

training topic, and the level of responsibility or motivation from the incubatee. If training is related to changing the habits, motivation or mind-set of the trainee, face-to-

face training is far more effective For a business incubator, it is costly to develop quality e-Learning training modules and

materials. Cooperation with existing e-learning portals is recommended. Information made available through the Internet (website) needs to be kept up-to-date. Social media tools can be added to a site at little or no cost, and are a good tool for

enhancing the brand identity of the incubator, but an incubator will need to allocate time and resources to monitor user content, frequently post new announcements, and reply to requests.

1-on-1 ICT based exchange

1-on-1 interaction with ICT Mentoring of monitoring the incubatees through ICT (phone, email, skype) can save time and

(travel) costs, and is a fast way of communication, which can be important in some situations.

Lessons: Use of ICT in communication between VBI and incubatee depends on complexity of the issue to

be addressed. Complex issues need to be addressed in face-to-face contact. Simple tasks can be performed through ICT.

Success of ICT based communication also depends on a relationship of trust between the incubatee and the service provider. These relationships do not develop overnight, and often require face to face contact, and/or a business incubator with a strong reputation.

For specific advice that does not involve disclosing too much about the background of the entrepreneur and the business, ICT based advice is considered fast and efficient.

Video skype in another location (outside the incubatee office) can help to ensure that the incubatee makes him or herself fully available for the conversation.

Online collaboration tools can make exchange through phone and skype more effective. Remote supporting of incubatees through a diverse means of ICT poses management challenges

to the incubator, if it is not systemised.

Online recruitment

Online recruitment Through the internet, incubators can reach and mobilise interested mentors / volunteers /

incubatees and select the most suited candidates and improve the quality of the incubator service. Recruiting highly qualified volunteers can save costs without jeopardising quality. Online recruitment can also positively contribute to the brand of the incubator.

Lessons: Online recruitment is a suitable tool for recruiting incubatees and mentors; for access to

finance, other tools need to be used. The incubator needs a well thought through recruitment strategy, to ensure the high quality

of the applications. The incubator needs to invest in building a brand, and build partnerships with networks or

organisations that have relations with the targeted audience (volunteers, mentors, incubatees).

Social media are support recruitment campaigns as additional tools. The incubator needs to verify the quality of applicants. In the final phase of recruitment,

face-to-face interaction is usually still needed.

Virtual communities & events

A vivid community mobilises members to actively contribute, by providing resources. This may improve the quality of services of the incubator, and may cut costs or even generate revenues because members may be willing to pay a membership or admission fee.

Lessons: Social media can be used to build and maintain a brand in existing off-line

communities, or for spreading invitations, announcements and news; building an active online community where members exchange knowledge is very challenging.

Successful virtual communities in our sample are based on regular combined networking or training events, usually outside of office hours. Members join the networks to learn, get inspired and build their network.

Hosting a community is an art, and requires skills and resources. Financing networks work best if they involve investors at geographical and cultural

proximity of the incubatees.

The online crowd

Crowd sourcing and crowd fundingThrough the internet, incubators as well as incubatees can mobilises large numbers of people to contribute their knowledge and/or finances online. Lessons: Building an attractive platform for crowds to become active is a sophisticated

challenge, VBIs can however seek cooperation with existing platforms; Crowds so far are mostly emerging in advanced countries, with maybe limited

knowledge for local solutions in other countries; Crowdsourcing may be suitable for incubators or incubatees with a clear problem

definition, such as feedback on a new product or service design (as suggested by Mobile Monday in the start-up phase), or feedback on specific business model related challenges.

Crowd funding is may offer an access to finance opportunity, especially when incubators can connect with existing crowd funding platforms.