Business at the incubator
How to create a "startup of startups",
or a few touches to the portrait of a private business incubatorAnastasia Tyurina, National Business Network
We somehow got used to thinking that business incubators are infrastructure facilities created by the state to support small businesses. That is, that incubators are created on the initiative of "from above", are engaged in something like charity and bring very little profit to their founders. In general, this is not quite true. A business incubator can be quite a successful business. The only question is how to properly build his work and "run in" the business model.
The initiators of private incubators are usually wealthy and accomplished people whose names are familiar to almost everyone in our field. For example, the founders of the largest IT brands create them - it seems important to these people to make a gesture of goodwill and help young talents. But at the same time, of course, any good business should be profitable. And incubators, like any business systems, have their own rules of success.
I recently talked with one of the startups – the developer of an antenna with fundamentally new technical characteristics. His diagnosis to state technoparks and incubators was damning: "$600 per square meter." And his words describe the real situation. Most infrastructure facilities only claim to have consulting services, but in fact they only provide rent at a relatively low price.
In my opinion, the main thing is to correctly determine the concept and business model of the incubator, understand the sources of its income, investment sources for its promotion, search for interested parties, ways to attract the flow of projects.
As in any startup, it is better to start working out the concept of a business incubator with the well-known Osterwalder model. My experience shows that this gives a clearer idea of who can become a client of a business incubator, what services he needs, how much he is willing to pay and for whom all this activity is created inside the incubator - for future investors, strategic partners, or maybe we will "grow" only "products for export"? Understanding the market, the competencies of the incubator team itself, the goals of investors – all this allows you to more clearly build positioning, sharpen the profile of the future incubator. And then – a "matter of technique" for a team of creative professionals!
In fact, the success of a private incubator determines whether management will be able to find the line between investing in residents and patronage. My experience and observations of strong incubators show that the financial stability of the model depends on three approximately equal income streams: state co–financing (for example, for the construction of an infrastructure facility or the purchase of equipment) + funds from an "anchor investor" (read - a private investor and initiator of growing successful startups) + consulting funds for dynamically developing companies (I'm sure you've all heard the term "gazelle companies"; so, this is the dream of any consultant - to attract "gazelles"!). The ability to balance among these flows is the "recipe" for a steadily developing incubator.
In the meantime, there is almost no need to talk about the activity of the private sector in the field of innovation structure in our country. Incubators live exclusively in conjunction with universities and therefore cannot conduct entrepreneurial and even more so investment activities themselves. Therefore, the first thing we should do for a private project is to revise the legal model of the organization of the incubator. Namely, to divide the cash flows and create a second structure – investment. It is in this management company (let's call this division so) or fund that the most "delicious" assets of the incubator will accumulate. In addition, the implementation of the business process in two stages will reduce the risks of the investor. The role of the incubator is to select and help all promising projects, help teams finalize the prototype and win the first customers.
During 6-12 months, while the startup develops to the Minimum Viable Product (MVP), the incubator team receives the most detailed information about the startup, its team, leaders, their reliability, perseverance, etc. In fact, the incubator team is growing future investment projects for the Fund. Here it is necessary to distinguish the functions of the startup accelerator and the project incubator, they work with different stages of "maturity" of projects and different methods. As you know, the accelerator gives its participants "acceleration" money and for a short period of time "pumps" startups and massively expands business contacts through meetings with mentors, investors, etc. The role of the incubator is to weed out the weak and help the most promising projects; after all, the investor first of all wants to trust the projects in which he invests money. In the American incubator at Georgia Tech University, which I consider to be the "benchmark" (its capitalization is $ 2 billion, the portfolio of projects is more than two hundred high–tech companies over 15 years), investors enter the startup shares on average after two years of the incubator team working with it. That's the economy of trust.
So, we have roughly decided on the concept of the incubator. Where can I get the resources to start implementing my plans?
I must say right away that you can't do without investments. The incubator of the Higher School of Economics (of which I am the head) finances the university (salary, office, business trips). State incubators are obviously being built and launched with the budget funds of regions and municipalities. If you work out the business model qualitatively and select a team, then it will take at least three years to hone project selection technologies, build a working consulting system, personnel policy (including attracting employees both to work in an incubator and in startups).
And this is inevitable – one should not expect a "magic recipe" of a typical technology for launching incubators. Any startup is unique, and a business incubator, being a "startup of startups", is doubly unique. I was lucky to work with the HSE business incubator team, the backbone of the team has been working for five years, having gathered several thousand followers and dozens of success stories (and failures too, there are no startups without this!). In business, people decide everything. But not as fast as the investor usually wants.
As a rule, in two years, the incubator team, "assembled from scratch", is able to form its own community, unite ecosystem participants around itself – attract universities, entrepreneurs, venture funds to cooperation, set up contacts in the Government, with development Institutions, become noticeable in the field of startups. In the third year, we can expect maximum efficiency in the cultivation and promotion of success stories. And in the fourth year of the incubator's life, efforts can already be directed to the development of the revenue side through the commercialization of accumulated consulting competencies. Although, I repeat, there is no universal recipe for how to grow a successful incubator. I talked about how this was done by the HSE incubator and some of our partners in Russia and abroad. Maybe it's worth a try?
About the author:
Head of the HSE Business Incubator since July 2011. The main tasks are to build a process of consulting support for startup companies - residents of the business incubator and to ensure the commercialization of the incubator's activities as a structural unit of the HSE. Prior to joining the HSE, for three years she headed the Perm Krai Representative Office in the Government of the Russian Federation and supervised the development of innovative activities of regional universities, as well as the international promotion of innovative companies in the region. Previous experience, since 1996, has been associated with consulting in the field of personnel management: training of managerial personnel, youth programs, recruiting, business education. 7 years of experience in running your own business in the field of management consulting and business education. Professional business coach and coach.
Portal "Eternal youth" http://vechnayamolodost.ru10.01.2013