Business incubators are programmes designed to focus in on start-up enterprises, aid in their development and survival (which is especially difficult in a business trying to establish itself in a competitive market place), provide an array of key services geared towards achieving the successful development of new entrepreneurial endeavours, and give the new enterprise access to an extensive network of influential contacts. Research has shown that the successful completion of a business incubator programme dramatically increases the long-term survival rates of businesses as compared to those who do not enter into incubator programmes. This owes, perhaps above all other factors, to the support network and resources made available to enterprises operating during their crucial initial phases.
Incubator programmes are often confused with Research and Technology Parks. Whereas research and tech parks house a variety of organisational interests and types, including corporate entities, tertiary institution labs, government agencies, and SMMEs, the primary difference between incubators and the technology parks is that incubators offer business assistance (including access to financial assistance, loans, and venture capital), whereas tech parks do not. Incubators further differ from tech parks in that they focus exclusively on enterprises engaged in the initial phases of their development, whereas tech park SMMEs are not limited by their developmental status.
For a start-up or early stage company to enter into an incubator programme, the company in question must meet the qualifying criteria set out by the incubator policy. Incubation programmes reserve the right to select the companies with which they want to work based on their belief that the relevant company has a workable and feasible business model and strategy. Failing to meet the criteria excludes businesses from programme participation. In this eventuality, however, companies still have recourse to Small Business Development Centres, or similar organisations who, in certain countries, are obliged by law to assist the company in its development process.
Typical services that are offered by incubator programmes include: assistance with business basics; the provision of networking activities; assistance with effective, targeted marketing; editing services; help and advice with financial planning and financial management; easier access to bank loans, loan and investment funds; development of presentation skills; access to higher education institution research resources; links to strategic partners; access to venture capital; the provision of comprehensive business training programmes; access to advisory boards; help with regulation and legal compliance; and assistance with intellectual property management.
Most often, incubators save programme members time and money by eliminating the need to find property for rent by offering clients office space and shared administrative services. The value and benefits of the incubator programme, however, are truly contained within the above-mentioned services that the programmes offer. Based in Midrand, South Africa’s own Softstart: Business and Technology Incubator can be seen as a typical technology incubator, and describes the services and benefits it offers in the following terms:
Key services, as depicted, include business and technology mentoring and coaching, furnished “plug and play” office space in a secure environment, shared resources such as reception and meeting facilities, internet access, access to professional service providers, networking opportunities and access to business and skills development interventions, such as training in functional business disciplines… Softstart BTI improves enterprise performance, enhances profitability and growth, and offers technology and management support to South African ICT SMMEs and is geared to help early movers maximise the value of their ideas.
Graduation from incubation programmes is not defined by a set date of “course” completion as is the case in education institutions, but is instead defined by the meeting of a set of predetermined “benchmarks” that usually include revenue goals, company size or market share. Governments are highly supportive, both in terms of spirit and in terms of capital contribution, of incubators, as they are seen as enormously effective aids in the sustainable growth of the economy (in South Africa, for example, SMMEs contribute more than 40% of the GDP). Incubators can be seen to aid in: job and value creation; developing an entrepreneurial culture; finding innovative ways to use technological developments; diversifying local economies; encouraging female and previously disadvantaged entrepreneurship; and promoting community development projects.