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Business incubators in the framework of local development
Introduction into the system of Business Incubation
Belgrade 2.4.2015
Expert for GIZ: Franz Dietrich
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Start – ups in Germany
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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
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Basis: Regional Potential
Industry
Research & Development,
Higher education
institutions (HEIs)
Industrial-/Commer-cial Zone
Science Park
Business Park
Technology Park
Business Incubators/
Innov. Centres
Goal: Creation of Wealth (new companies, products + services, innovation, technology transfer, jobs)
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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,........... Awareness rainsing for Local governm. Intro
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SME
SME
Science and/ or Technology Park – Elements
University
HEI
Business Incubator
Park-Management
Larger 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 present initiatives in Eastern + Central Europe for restructuring + revitalisation of industrial areas
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Batavia Industrial Centre (N.Y.)l
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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
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Managed Workshops
Enterprise Agencies
Industrial Estates
1970s
Early 1980s
Business Centres
Business Incubator Concept
Science Parks
Multi-Purpose Incubators
Late 1990s
Specialised Incubators
Technology Incubator Centres
Incubator without walls
Sector-specific Incubators (e.g. rural incubators)
Source: UNIDO
New Econ. BI
Virtual BI Hubs, Accelerator, Pre-Incubator
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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
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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
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TZDO Technology park Dortmund
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Examples of business incubators (cont.) Sector-specific ->Craftsmen GHG – Incubation centre for handicraft + trade Töging 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
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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
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• 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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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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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
max. 3 years
Number of management staff 2.3 managers 1-9 managers 2 ++ managers
Ratio of incubator staff: tenants 1:14 1:2 – 1:64 1:10–1:20 % of managers’ time advising clients 39% 5% - 80% 50%
Source: Europ. Commission
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For questions: Franz Dietrich
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