Incubators make management assistance available. This can be business-school professors, a consulting firm or experienced entrepreneurs.
Business incubation is growing of businesses from infancy to independence. In the words of Carlos Morales, executive director of the US National Business Incubation Association, “fledgling entrepreneurs” are drawn “out of their basements and garages and into controlled environments structured for the care and feeding of new businesses.”
According to experts, incubators vary in their objectives. There are those operated on a venture-capital basis, which may limit admission to promising growth companies, in which the sponsors take an equity stake (generally 20 to 50 percent of the stock) in exchange for the space, services and management assistance. The aim, we are told, is to profit as the business expands and perhaps ultimately goes public.
Experts hold too that incubators make management assistance available; that this can be business-school professors, a consulting firm or experienced entrepreneurs. It is believed that with this support, the business will eventually outgrow the incubator’s limited space and will graduate into a facility of its own.
This writer’s first close contact with business incubation was in Cape Town, South Africa in 2004. This was at Mark Richard Shuttleworth’s Shuttleworth Foundation, the platform for HBD Venture Capital - a business incubator and venture capital provider. Visiting too was a journalist from Nigeria, Fred Mordi, then of Financial Standard. We were in South Africa for the African SMME Awards ceremony. Fred was winner while this writer was first runner-up.
Julie Streicher, University of Stellenbosch Business School’s senior communication officer (publications), arranged the visit. The incubator centre was a beauty to behold. The Mark Shuttleworth’s example is a good one for our successful entrepreneurs like Aliko Dangote, Sam Ohuabunwa, Fola Adeola, to replicate here.
Mark Shuttleworth, an African entrepreneur with a love for technology, innovation, change and space flight, currently lives in the Isle of Man, and is an active member of the Ubuntu community – working to create a universal, freely available high quality desktop software environment for everyone. He funds HBD Venture Capital along with The Shuttleworth Foundation, a non-profit organisation that accelerates social innovation in Africa with a particular focus on education.
Business incubation in India
Only recently, Chief Minister V.S. Achuthanandan of India said government would encourage the setting up of incubation centres in all engineering colleges and polytechnics “so that entrepreneurship becomes a part of the state’s culture.”
He was inaugurating the second annual conference of Indian STEPs (Science and Technology Entrepreneurs’ Parks) and Business Incubation Association (ISBA) at Technopark. Technopark had been the flagship organisation of the state government in bringing the benefits of the IT revolution to the people, the Chief Minister said. The government was committed to replicating the success of Technopark in different parts of the state, he added. Within the next five years, almost all the districts of Kerala would have IT parks of world standards, he said.
Nigerian efforts
Nigeria is not sitting with its hands folded. Some moves are being made in some quarters on this issue of business incubation development in the private and public sectors. The Institute for Venture Design (IVD), a product of collaboration between FATE Foundation and University of Stanford, is a subsidiary unit within FATE Foundation established to create effective and globally scalable solutions in Nigeria.
This will be done through entrepreneurship and innovation, where high impact entrepreneurs are united for a two-year fellowship programme, the epicentre of a new wave of technological advancements impacting home and abroad. Through its programme, IVD will create an ecosystem of venture and technology innovation that will drive sustainable growth in Nigeria.
In close collaboration with the Centre for Design Research (CDR) at Stanford University, the institute will offer an array of programmes geared towards cultivating a culture of risk-taking, a mindset of unconventional behaviour and creativity. IVD’s philosophy on capital formation rests on the idea that the first step lies in the hands of the inventor.
The atmosphere of IVD will allow brilliant minds to produce cutting-edge design and innovation, but it takes investment capital for their fledgling ventures to flourish into prototypes and businesses.
IVD will operate out of its state-of-the-art workshop and design studio in Abeokuta, Ogun State, which also has the capacity to house 30 participants. The institute will maintain a liaison office in Lagos. The CDR is a community of scholars focused on understanding and augmenting engineering design innovation practice and education. This is the skill-saturated technical centre that will work in collaboration with IVD fellowship, bringing design research methodology to bear in the curriculum and training of participants. Doctoral students and associates at CDR will form the core part of IVD’s faculty and coaching.
Phase 2 of the programme, the Venture Incubation phase, is when participants set up their new ventures. With seed funding and support from the institute, venture teams will commence business operations at a small scale. At the end of this phase, the venture will again be evaluated by the institute and a panel of investors and entrepreneurs, both local and global. Successful ventures can apply for additional venture funding at this stage. The fellowship funding will end and the entrepreneur fellows will strike out an independent location to grow their venture further. IVD is a not-for-profit endeavour that seeks to improve economic development by increasing the rate of technological innovation in Nigeria. The institute’s start-up annual budget is estimated at $1 million (N152.92 million).
Alitheia Capital and business incubation
Alitheia Capital is an investment management and advisory firm focused on channelling private equity investments into business and real estate assets to enhance access to finance, energy and housing for those at the base of the economic pyramid.
Tokunbo Ishmael, Alitheia’s chief executive, explained Alitheia has three main areas of business “which include fund management where we manage funds for investment, private equity fund with which we focus on microfinance banks. The second area is what we call business incubation, where essentially we provide business development and business transformation services. And the third area is in real estate advisory, where we provide real estate management and development services.”
She explained: “There are a couple of companies that are providing incubation services other than ourselves, but it is not a very well spread activity. Many companies also provide the services in the form of business development services. But essentially, when we talk about business incubation we are talking about providing mentoring, providing access to finance, providing strategic oversight, providing access to a network of resources.”
Alitheia is working towards providing infrastructure for business incubation. The company is setting up facilities whereby businesses can come in, essentially to plug in and play. Such businesses will also have access to strategic advice, access to financial platform, technology platform. “We will be looking at sharing marketing services, etc. That is where we are going,” said Ishmael.
Nextzon Business Incubator
Nextzon Business Incubator is the first privately owned and managed incubator, which started operation in March 2005 with two incubated companies but has grown to 15 incubated companies to date. The incubator is located on a 1,000 square metres land in the Victoria Island business district area of Lagos State.
The offerings of the incubator are anchored on the following services: Pre start-up business development services such as idea scanning, project conceptualisation and business modelling; industry and market study/consumer survey; fundraising support; management oversight, coaching and mentoring etc.
The incubator has office space with facilities such as ICT, utilities, conference/meeting room, etc. It also has back-office services that include HR/payroll management; budgeting, accounting, financial and treasury management; legal/secretarial, etc.
Recently, the incubator set up a leather processing company to support the activities across the value chain of shoemakers in the Shoe Cluster of Aba, Abia State, Nigeria. It is currently seeking opportunities to work and share experiences with other incubators.
Government efforts
From the public sector end, the Federal Government has set out a strategic plan to boost capacity of about 1,000 businesses in the micro, small and medium enterprise sector across the nation’s six geo-political zones by December, 2011.
Government has therefore signed an agreement with the Entrepreneurship Development Centre (EDC) of the Pan African University, Lagos, for the training of Nigerians in various fields of entrepreneurship. The programme tagged ‘Grooming Enterprise Leadership Programme’ is financed by the World Bank as a pilot programme.
The EDC is to work with 23 business incubation centres across the nation to train budding entrepreneurs. Besides training, it shall work on the creation of clusters for these enterprises which will provide shared services and reduce their individual running costs. On completion of their training expected to take about five months, these entrepreneurs shall be eligible to apply for the SME intervention fund with the Bank of Industry.
The minister of finance last year announced the establishment of a $500 million intervention fund by the Federal Government for SMEs. The fund domiciled with the Bank of Industry goes to SMEs at single digit interest rate.
This agreement, which was signed just a day after the Presidential Summit on Job Creation, signposts government’s seriousness about reducing unemployment and ushering in inclusive growth.
