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Survey of Russian Business Incubators 2010

Survey of Russian Business Incubators 2010



This survey is based on a study done by Ernst & Young ...

This survey is based on a study done by Ernst & Young
specialists in September and October 2010. The study was
designed to give an understanding of the current state of the
business incubation industry in Russia and its potential for
development. The principal method of collecting data for our
analysis was a survey of the heads and representatives of business
incubators as well as similar innovative-technology centers and
divisions of science and technology parks (hereinafter,
“incubators”, “incubation programs”). Over fifty actively operating
and developing Russian incubators took part in the survey. The
participants included state and private incubators varying in area
from 50 to 10,000 square meters in Russian cities from
St. Petersburg to Khabarovsk.



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Survey of Russian Business Incubators 2010 Survey of Russian Business Incubators 2010 Document Transcript

  • Survey ofRussian BusinessIncubators
  • ContentsIntroduction 2General information 3Incubator services: premises 4Incubator services:business services 5Incubator services: payment 6Incubator residents 7Incubator functioning 9 Survey of Russian Business Incubators 1
  • IntroductionWe are pleased to present our survey of Russian business We hope that this survey will prove useful for organizations andincubators. This survey is based on a study done by Ernst & Young companies seeking to gain an understanding of Russian incubatorsspecialists in September and October 2010. The study was and will promote further consolidation and development of thedesigned to give an understanding of the current state of the industry, which is a key contributor to the country’s modernizationbusiness incubation industry in Russia and its potential for and innovation-based development. We will be happy to answerdevelopment. The principal method of collecting data for our your questions on the study’s findings and to work with you onanalysis was a survey of the heads and representatives of business business incubation and innovation projects.incubators as well as similar innovative-technology centers anddivisions of science and technology parks (hereinafter, Vadim Balashov“incubators”, “incubation programs”). Over fifty actively operating Partner, Technology Sector Leaderand developing Russian incubators took part in the survey. Theparticipants included state and private incubators varying in areafrom 50 to 10,000 square meters in Russian cities fromSt. Petersburg to Khabarovsk.Selected findings of the study show that as an industry, businessincubation is still developing. This is indicated by the large numberof incubators positioned as subsidy programs to support smallbusiness rather than as business projects for the development offast-growing, breakthrough startup companies. On the other hand,it should be noted that most Russian incubator programs provide abroad range of services to startups and don’t limit themselves torenting premises at low rates. This is in line with the experience ofcountries that have had the most success in developing businessincubation (the United States in particular): incubation services –not the premises provided – are of key significance for startups.MethodologyRespondents were selected by compiling a list of 400 innovative infrastructure projects (using public sources:allmedia.ru, the National Centre for Monitoring of the Innovation Infrastructure and Regional InnovationSystems, innovbusiness.ru, the Russian Technology Transfer Network (RTTN), Gate2RuBIN, the Russian Unionof Innovation and Technology Centers, opora-credit.ru). In addition to business incubators, the list includedtechnology parks, innovation and technology centers and other organizations that could potentially undertakeincubation programs. From this list, 150 organizations with their own Internet site or webpage were selectedand invited to participate in the survey. Fifty-three companies responded to the invitations, and their answerswere used as the basis for this study.2 Survey of Russian Business Incubators
  • General informationThe distribution of business incubators by federal district is more effective if they have a sustainable business model allowinggenerally in line with Russia’s overall population distribution. Apart them to cover operating costs without additional investments fromfrom three districts with a minimal number of incubators (two or sponsors.less in the Southern, Far East and North Caucasus federaldistricts), the saturation level of incubation programs in Russia The ratio of private to state incubators varies widely from countryaverages one incubator for every 2,700,000 persons. Not all to country. In Israel, for example, private investors finance mostincubators are taken into account in this study, so the actual figure incubators and profit from owing shares in successful startups. Themay be higher, but the overall saturation of incubation programs in state’s involvement in financing such companies is still crucial inRussia is still around a tenth of what it is in the US, where there is the early stages (before significant venture capital is obtained). Inone incubator for every 280,000 persons. China, on the other hand, the private component in the ownership of business incubators is almost nonexistent: the great majority ofThe preponderance of state-owned incubators – designed to incubators are set up and managed by the state using state funds.provide support rather than generate revenues – is generally in line Rent accounts for only a small portion of an incubator’s revenueswith world practice: the economic development of a region or and is insufficient even to cover operating costs. When these twocountry is often the priority objective of incubation programs. It systems are compared in terms of effectiveness, the results tend toshould nonetheless be kept in mind that state incubators may be be strongly in favor of the Israeli model.Distribution of incubators by federal district Distribution of incubators by form of ownership 4% 2% 4% 30% 9% 10% Central State 58% Volga Mixed Siberian Municipal 13% 11% Northwest Private Ural Southern Far East 13% North Caucasus 26% 19%Population per business incubator(by Russian federal district, as compared with the Russian Federation as a whole and the USA) 10 000 8 200 8 000 7 300 6 000 4 000 3 200 2 700 2 300 2 800 2 500 2 200 2 200 2 000 280 0 thousand Central Volga Siberian Northwest Ural Southern Far East North Russian USA persons Caucasus Federation Survey of Russian Business Incubators 3
  • Incubator services:premisesThe majority of incubators (some 80% of respondents) are located Forty-six of our 53 survey participants rent space to residents,in reconstructed buildings, most with a cabinet layout. This can while the remaining seven are virtual incubators. All 46 incubatorscomplicate their operations: the practice of setting up incubators in provide office space; relatively few offer other kinds of premises.buildings not specially adapted for business incubation is one of This may be because the residents of incubators concentrate onthe risk factors in world practice. projects that do not involve materials and equipment, or because they use equipment and premises in educational institutions orAmerican experience suggests that a building that is properly research institutes that collaborate with the incubator.designed will make a business incubation program more effectivefor a number of reasons. For example, an open plan and shared- The respondents additionally note that startups are provided withuse common areas encourage contacts and cooperation between conference rooms, lecture rooms, auditoriums, server rooms,residents. Specially designed buildings also offer more possibilities meeting rooms, etc.for equipping specialized shared-use areas (laboratories, serverrooms, storage, etc.).Percentage of incubators with a given layout Percentage of incubators that rent a given type of space to residents 6% % of sampling 74% 100% 20% 100% Cabinet Mixed 80% Open space 60% 40% 22% 20% 20% 20% 0% Office space Laboratories Manufacturing Storage4 Survey of Russian Business Incubators
  • Incubator services:business servicesAccording to our respondents, business incubators provide a broad A number of incubators provide such additional services asrange of services that meet virtually all the needs of startup representing a company’s interests in relations with state andcompanies. Nearly all incubators provide basic services (mail and regulatory agencies, assistance in protecting intellectual property,secretarial services, office equipment, telephone and Internet various types of expert examinations, etc.service, IT service, etc.), and incubator employees provideconsultations to residents. It should be noted that in most cases (83%) nonresidents may also use an incubator’s services, usually for a fee. Nearly all theA smaller number of incubators act as mentors – individually advantages of an incubator are available to nonresidents, with theexplaining the options for resolving problems and coaching new exception of preferential rent. Thus, the majority of incubators areentrepreneurs to find their own solutions to specific business not so much exclusive private clubs for handpicked companies asissues. Not too many incubators directly support residents’ they are sources of business services for starting entrepreneursoperations or bring in outside experts to work with startups.Only around a quarter of incubators provide residents withscientific equipment – a figure in line with data on the availability ofspecialized lab / manufacturing areas in incubators. Incubatorsevidently have a hard time convincing potential sponsors to makethe substantial capital investments needed in order to purchaseand operate sophisticated equipment, especially if residents haveaccess to laboratories and equipment at nearby educationalinstitutions and research centers.Percentage of incubators providing a given type of services Basic services 94% Consultations by incubator employees 94% Instruction services 89% Assistance in raising financing 87%Assistance in developing partner relations among residents 83% Mentoring and coaching 70% Support for operations 65% Consultations by outside experts/consultants 65% Marketing support 61% Provision of scientific equipment for shared use 26% Other services 24% % of sampling 0% 20% 40% 60% 80% 100% Survey of Russian Business Incubators 5
  • Incubator services:paymentRent 85% of respondents charge rent. 15% of respondents do not charge rent (typically, these are incubators that are structural subdivisions of educational institutions and research institutes).Indexation The majority of incubators set escalating rates of rent for office space. The rents and rent dynamics may be affected by: • Restrictions placed on state and municipal business incubators by the Ministry of Economic Development of the Russian Federation • Indexing for inflation • Changes in the average market ratesPayment for services 50% of incubators charge residents for services provided. In addition to rent, residents generally pay for: • Basic services and utilities • Accounting services, personnel record-keeping, recruiting assistance (support for operations) • Instruction services (internships, training) • Use of special scientific equipmentForeign experience with business incubation indicates that low Note: Here and hereinafter, legal restrictions are cited pursuant to:rates of rent are not the primary advantage that incubators have 1. Order No. 59 of the Ministry of Economic Development of theover ordinary business centers. The heart of business incubation Russian Federation of 16 February 2010 “Concerning theprograms is the services they provide. Thus an incubator offering Implementation of Measures for the State Support of Small andmid-market rental rates and a broad range of services for startups Medium-Sized Business in 2010”.is more likely to nurture a successful company than an incubatoroffering cut-rate premises and minimal services. 2. Decree No. 178 of the Government of the Russian Federation of 27 February 2009 “Concerning the Distribution and ProvisionFor state and municipal incubators, the level of rent depends on the of Subsidies from the Federal Budget to the Budgets ofrate for premises owned by the constituent entity of the Russian Constituent Entities of the Russian Federation for the StateFederation or municipality. The amount of discounts for length of Support of Small and Medium-Sized Business, Including Peasantresidence in a business incubator is also regulated by law. (Farm) Holdings” (as amended by Decrees No. 798 of 3 October 2009 and No. 1181 of 31 December 2009 of the Government of the Russian Federation).6 Survey of Russian Business Incubators
  • Incubator residentsRussian incubators have an average of around eighteen residents. importance to the experience of a startup’s employees and toResidents come from different industries, and the diagram shows whether it has the funds for rent payments. Synergy with existingthat a single incubator may have residents of varying profiles. residents was not even mentioned. The study did not identify any generally accepted methods of evaluating potential residents in theThe likely reason for the large number of respondents citing a Russian business incubation industry.company’s specialization, early stage of development and thequality of its business plan* as criteria is that these are legal In international practice, all of the above criteria are typicallyrequirements for state and municipal business incubators. The evaluated, and a decision to accept a resident is usually based on aprevious diagram shows that in practice a flexible approach tends combination of all parameters. This allows a comprehensiveto be taken with respect to specialization. evaluation of a startup’s potential in a given incubation program as well as a flexible approach to companies that fall short of one orAmong the criteria named by incubators themselves (“other another parameter. Promising startups that would be screened outcriteria” in the diagram), the most common were a project’s social if criteria were strictly adhered to can still be accepted as residents.effectiveness and importance. Incubators attached relatively littlePercentage of incubators with residents of a given business profile 80% 74% 67% 63% 61% 60% 46% 37% 40% 20% 0% % of Manufacturing Software Business Internet Research Othersampling development services projects & developmentPercentage of incubators that apply a given criterion in accepting residents Startup specialization 83% Startup business plan quality 74% Early stage of startup development (up to 1 year) 67% Other criteria 39% Sufficient funds for rent payments 24% Experience of a startup employees 22% % of sampling 0% 20% 40% 60% 80% 100%* Among the chief criteria of a business plan’s quality, the Ministry of Economic Development lists the following: • The quality of a description of the advantages of goods or services over equivalents/competitors • The quality of marketing, operating and financial strategies for the development of a small business • Projected changes in a small business’s financial performance and number of jobs • A project’s recoupment period Survey of Russian Business Incubators 7
  • Percentage of incubators whose residents make use of a given source of financing Programs for the support and development of small and medium sized business 72% Bank loans 48% Business angel financing 24% Financing by the business incubator 22% No data 9% % of sampling 0% 10% 20% 30% 40% 50% 60% 70% 80%Financing of incubator residents generally takes the form of In the opinion of some directors of American incubation programs,subsidies and grants, federal programs for the support of this attitude on the part of venture funds betrays a poorentrepreneurship and bank loans. Private investments play a understanding of incubation principles and results. Therelatively minor role. A low level of cooperation between incubators consultations, support and partner network provided by anand private investors (venture capital investors and business incubator give startups a substantially better chance of success:angels) is also apparent. statistically, some 85% of companies in incubators are successful, as compared with only 20% of those not in incubators. IncubatorsIt should be noted that venture capital doesn’t play a large role for thus reduce the investment risks of venture capital. On this basis,incubator residents in the US either. This has to do with the fact companies at an earlier stage of development than those normallythat many representatives of venture capital regard companies in targeted by venture capital investors may be quite attractive asincubators as being in an early stage of development and thus risky investments.investments.Percentage of incubators that apply a given criterion of graduation from an incubation program Maximum incubation period 74% Other criteria 33% Financial indicators 28% Number of employees / space occupied 19% % of sampling 0% 10% 20% 30% 40% 50% 60% 70% 80%The survey findings show that the main criterion for graduation in market conditions. In international practice, a decision tofrom an incubation program is completion of a startup’s legally graduate a company from a business incubator is based on aestablished incubation period. This criterion has little to do with the regular comprehensive assessment of residents’ activities. Such anreal demands of the business incubation industry. It can hardly be assessment may include:expected that a startup’s need for incubation support will beminimal by the end of its incubation period, regardless of industry • Determining a company’s need for further incubation servicesand project specifics. • Monitoring a company’s progress in fulfilling its business plan • Monitoring compliance with formal graduation criteria (a certainPremature graduation is as likely to hurt a startup’s success as is staff size, a positive cash flow balance/favorable ratio of incomekeeping it too long in a business incubator. It is thus important to to expenditures, short- or long-term financing, etc.)correctly assess how ready a new company is to operate on its own8 Survey of Russian Business Incubators
  • Incubator functioningA large number of incubators identify rent and fees for services as None of the survey participants named revenues from successfulimportant sources of income. A significant number receive startups (i.e., proceeds from the sale of an interest in a successfulsubsidies that the regional authorities use to stimulate the company) as a source of funds. Though this source of income isdevelopment of entrepreneurship. Other sources named by the not critical for the majority of successful Western incubators, theincubators themselves include grants distributed by means of possibility of generating revenues from successful residents helpsspecialized competitions and the budgets of “parent” organizations link the goals of an incubator’s management to the incubator’s– institutions of higher education or technology parks. mission, thereby enhancing the incubator’s effectiveness.Percentage of incubators with a given source of financing 70% 59% 57% 60% 50% 44% 40% 30% 20% 17% 15% 20% 11% 10% 0% % of Rent Fees for Regional Other Sponsor Federal Localsampling services budget sources contributions budget budgetAssessment of the effectiveness of incubation programs Assesment of residents performance indicators 69% Assesment of incubators performance indicators 59% Comparison with the incubators business plan 20% Other criteria 20% No assesment 6% % of sampling 0% 10% 20% 30% 40% 50% 60% 70% 80%Relatively few respondents mentioned the business plan as a It is also common in world practice for the success of an incubatorperformance criterion. This may be due to the incubator lacking a to be measured by its contribution to the development of the localbusiness plan in many cases. International practice shows that an economy. This contribution may be assessed in terms of theincubator cannot afford to be without such a plan if it wants to be number of graduates operating independently on the local marketsuccessful. Incubators are rarely profitable, but they should be or acquired by larger companies, the number of jobs created byorganized like a real business. Otherwise, an incubator’s goals may residents and graduates, the amount of tax revenues fromshift from business to charity, resulting in the dissipation of its graduates, etc. It is also advisable to assess the activities oflimited resources. business incubators by conducting regular surveys of residents and monitoring the long-term development of graduates. Survey of Russian Business Incubators 9
  • Partner relations of Russian business incubators With universities and institutes 69% With other organizations 65% With other business incubators 63% With companies in the industry 41% No partner relations 6% % of sampling 0% 10% 20% 30% 40% 50% 60% 70% 80%International experience shows that an incubator network of • Companies interested in new technologies may finance businesspartners and contacts is a prime benefit for startups in a business incubators in their technology cluster.incubation program. Partner relations are the key to resolving most • Cooperation with other business incubators allows an exchangeproblems that arise. For example: of experience, know-how and support programs. National and international networks of business incubators, such as NBIA in• An educational institution may provide a business incubator with the US and EBN in the European Union, have long been in useful services and resources as well as promote projects by operation abroad. involving students specializing in the relevant areas (including • Growth of partner networks is a key development strategy for for no charge). any incubator. Our study indicates that this may become one of the main efforts of the management of Russian incubation programs in the near future.Map of federal districts of the Russian Federation – Central federal district – Volga federal district – Siberian federal district – North-Western federal district – Ural federal district – Far Eastern federal district – Southern federal district – North Caucasian federal district10 Survey of Russian Business Incubators
  • Region City NameCentral federal districtBelgorod oblast Belgorod Belgorod RRITs innovation business incubatorMoscow region Dubna Innovation technology incubator of Dubna science cityMoscow Moscow RosNOU Innovation ParkMoscow Moscow Zagorie Technopark business incubatorMoscow Moscow Project business incubator of Bauman Moscow State Technical UniversityMoscow Moscow Higher School of Economics business incubatorMoscow Moscow Smart CapitalMoscow Moscow Academy of National Economy under the Government of Russian Federation business incubatorMoscow Moscow Moscow State University science parkMoscow Moscow Strogino technoparkKaluga oblast Obninsk Obninsk Center of Science and Technology business incubatorKaluga oblast Obninsk Obninsk business incubatorMoscow region Serpukhov Serpukhov business incubatorTambov oblast Tambov Innovatika business incubatorMoscow region Troitsk Troitsk business incubatorTver oblast Tver TGFPMP business incubatorVolga federal districtUdmurtia Izhevsk Izhevsk State Technical University business incubatorUdmurtia Izhevsk Udmurtia Republic business incubatorTatarstan Kazan Sviaga business incubatorTatarstan Kazan Povolzhsky light industry business incubatorKirov oblast Kirov Business learning center for the youthChuvashia Krasnoarmeiskoye Krasnoarmeisky business development centerTatarstan Leninogorsk Idea-South-West Innovation manufacturing technoparkNizhny Novgorod oblast Nizhny Novgorod Innovation technological center of Nizhny Novgorod State UniversityOrenburg oblast Orsk Orsky business incubatorPenza oblast Penza SBU "PROBI"Bashkortostan Sibay Business center Delovoy Mir ZauralyaUlyanovsk oblast Ulyanovsk Ulyanovsk State University high technology technoparkMari El Yoshkar-Ola Mari El Republic business incubatorPenza oblast Zarechny Impulse business incubator Survey of Russian Business Incubators 11
  • Region City NameSiberian federal districtAltai Barnaul Altai business incubatorIrkutsk oblast Irkutsk Irkutsk State Technical University incubatorKrasnoyarsk Krasnoyarsk Distance consulting incubator of Krasnoyarsk KraiNovosibirsk oblast Novosibirsk Akadempark business incubatorOmsk oblast Omsk Omsk State Pedagogical University incubatorOmsk oblast Omsk Omsk regional business incubatorTomsk oblast Tomsk Druzhba Intrauniversity student business incubatorNorth-Western federal districtMurmansk oblast Murmansk Murmansk regional innovation business incubatorMurmansk oblast Murmansk Polar Star business incubatorKarelia Petrozavodsk Karelia Republic business incubatorSaint Petersburg Saint Petersburg First Saint Petersburg city business incubatorSaint Petersburg Saint Petersburg Ingria business incubatorVologda oblast Vologda Vologda oblast business incubatorUral federal districtChelyabinsk oblast Chelyabinsk Chelyabinsk oblast innovation business incubatorSverdlovsk oblast Ekaterinburg Ekaterinburg chamber of manufacturers business incubatorKurgan oblast Kurgan Kurgan oblast business incubatorChelyabinsk oblast Magnitogorsk Magnitogorsk innovation business incubatorTyumen oblast Tyumen, Tobolsk, Ishim Tyumen oblast business incubatorFar Eastern federal districtKhabarovsk Khabarovsk Pacific Ocean University business incubatorSakha Yakutsk Sakha Republic business incubatorSouthern federal districtRostov oblast Novocherkassk InTehDon innovation technological centerVolgograd oblast Volzhsky Volgograd oblast business incubatorNorth Caucasian federal districtStavropol Stavropol Stavropol business incubator12 Survey of Russian Business Incubators
  • Contact information: Alexander Levchenko Partner, Technology Sector Tel.: +7 (495) 755 9758 Alexander.Levchenko@ru.ey.com Petr Fedorov Executive Director, Ernst & Young Technology Center Tel.: +7 (495) 644 0836 Petr.Fedorov@ru.ey.com Vadim Balashov Partner, Technology Sector Leader Tel.: +7 (495) 755 9721 Vadim.Balashov@ru.ey.com Survey of Russian Business Incubators 13
  • Ernst & YoungAssurance | Tax | Transactions | AdvisoryAbout Ernst & YoungErnst & Young is a global leader in assurance,tax, transaction and advisory services.Worldwide, our 141,000 people are unitedby our shared values and an unwaveringcommitment to quality. We make a differenceby helping our people, our clients and our widercommunities achieve their potential.Ernst & Young expands its services and resourcesin accordance with clients’ needs throughout theCIS. 3,500 professionals work at 17 offices inMoscow, St. Petersburg, Novosibirsk, Ekaterinburg,Kazan, Togliatti, Yuzhno-Sakhalinsk, Almaty,Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent,Tbilisi, Yerevan, and Minsk.For more information about our organization,please visit www.ey.com.Ernst & Young refers to the global organizationof member firms of Ernst & Young Global Limited,each of which is a separate legal entity.Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide servicesto clients.© 2010 Ernst & Young (CIS) B.V.All Rights Reserved.