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  1. 1. Incubation A new way of Corporate Innovation?We make ICT strategies work
  2. 2. IntroductionWith the 2001 dotcom crash, many incubators were shut down. In recent years, the incubatormodel has experienced a renaissance. History of Incubation Number of Global Incubation Hot Spots The number of incubators incubators Silicon Valley New York shrank London drastically  Still the  Growing in  The most after the dot- benchmark for relevance relevant com bubble. innovative  33% growth European VC clusters in VC deals market  Receives 40% from 2007 of all US VC to 2011 National investments Business Incubation The first Association U.S. was founded business in the U.S. incubator, opened in 1959. 1959 1985 2001 2006 2011 Time © Detecon –2–
  3. 3. Innovation Ecosystems2012 ranking of the 20 most active startup ecosystems in the world: Silicon Valley is still thebiggest and most successful ecosystem followed by NYC and London. Ranking Comparison of Top Startup Ecosystems 01. Silicon Valley 02. New York City Founder experience & background: Funding: 03. London  Silicon Valley founders have, on average, started almost  On average, Silicon Valley startups raise 04. Toronto twice as many startups as founders from NYC or London. two to three-times more money in the first 05. Tel Aviv three stages of development: Discovery, 06. Los Angeles  Silicon Valley founding teams are 34% more likely to be Validation, and Efficiency. 07. Singapore technical heavy than founding teams from NYC. 08. Sao Paulo  But in the scale stage, compared to 09. Bangalore  Whereas NYC founding teams are almost 2x as likely to Silicon Valley, New York City startups 10. Moscow be business heavy than Silicon Valley founding teams. raise 27% more money and London 11. Paris startups raise 30% more money. 12. Santiago 13. Seattle Size: Startup types: 14. Madrid 15. Chicago  Silicon Valley’s ecosystem is still  Silicon Valley entrepreneurs are 13 percent more likely to tackle new 16. Vancouver 3x bigger than New York City markets than London entrepreneurs. 17. Berlin 18. Boston  4.5-times bigger than London  London entrepreneurs are 21 percent more likely than entrepreneurs 19. Austin  12.5-times bigger than Berlin in Silicon Valley to tackle existing markets with better products. 20. Mumbai  New York entrepreneurs have the highest proportion of companies trying to re-segment existing markets with niche products. Mentors: Startup Success Rate:  The Silicon Valley and New York City  Proportionally, Silicon Valley eco- ecosystems have more helpful mentors than system has 22% more companies the London ecosystem. in the “scale stage” than in NYC  Silicon Valley companies have 46 percent more and 54% more than in London. helpful mentors than companies in London.Source: Startup Compass by Startup Genome Project, May 2012 © Detecon –3–
  4. 4. Internal vs. External InnovationCorporates can leverage the incubation model either through internal innovation or externalinnovation. Incubation Models Carrier / Company Carrier / Company Startup Startup Innovator Incubator Project Project Startup Project Project Project Startup External Innovation Internal Innovation © Detecon –4–
  5. 5. Where Incubators add ValueBy providing a mix of “social capital” and “capital”, incubators cater to the needs of early stagestartups in the Ideation, Pre Launch or Launch Phase. Incubators’ Role in the Startup Lifecycle Friends & Family Angel Funds Seed Funds Venture Capital  Incubators provide/ early stage startups with Carrier Company high most needed resources to prepare for a potential launch Startup Capital Requirements  Startups are in need of intensive mentoring and Startup only small amounts of seed funding Incubator  A compelling mentorship program is Startup Incubator the essence for incubators to  Help startups accelerate growth Startup  To be connected to potential investors during scale-up phase low  Incubators cater to the needs of startups shortly before they receive funding Ideation Pre Launch Launch Phase Scaling Startup Maturity/Phase  Money = Financial investment  Social Capital = Business Expertise, Mentoring, Network etc. © Detecon –5–
  6. 6. Incubator OverviewIncubators come in different shapes and forms, and are mostly driven by either governments,large Corporates or independent groups. High Level Overview Non-Profit Oriented Profit Oriented Government Corporate Independent Technology/Science University Carrier Non-Carrier Park/ Community Goals:  Non-Profit orientation Goals:  Profit orientation  Policy driven:  Profit driven: Creation of jobs Creation of new businesses and opportunities regional development Company Development © Detecon –6–
  7. 7. Table of IncubatorsTypesThere are different incubator business models. In the U.S. the mentoring-centric model is mostprominent while international incubators tend to be rather investment-centric. Business Models Predominant model in the US Facility-Centric Mentoring-Centric1 Management-Centric Investment-Centric2 Examples Until certain company Duration 3-6 months 3-5 years (until exit) 1-5 years (until exit) size is reached Co-working space and Only during duration of Facilities Startup facilities Startup facilities IT services the program Provide business idea Provide business idea services (commercial, Intense mentoring; no Mentoring and mentor/coach and steer execution, technical and legal) controlling influence startups tech infrastructure, etc. Small Investment Higher seed funding; Several rounds of 10-50k seed funding; Invest vehicle, revenues mostly equity share diluted over funding; equity share 6-10% equity in return through rent time to <25% >50% until exit © Detecon –7–
  8. 8. Frame TemplateServices Provided by IncubatorsServices provided by incubators typically include (1) intensive mentoring (2) seed funding and(3) office space for startups. Services Provided by Incubators Mentoring Facilities & Networking Advice from serial entrepreneurs  Office space to refine  IT infrastructure services (e.g. data  Commercial strategy Business hosting) Incubators  Technology strategy  Testing environments  Functional capabilities  Networking opportunities (i.e. in online marketing) Funding  Seed funding (~ US$ 10-50k)  Support to receive follow up funding from major investors (VCs, Business Angels and Corporations) © Detecon –8–
  9. 9. BenefitsBenefits of incubation go beyond revenues. Incubators can support accelerating new productdevelopment, get exposed to new ideas, lower investment risk & boost corporate image. Potential Benefits of Incubation Accelerate Innovation Lower investment risk  Fast pivoting and decision  Small amounts of seed making within startups funding for many startups  No interference with legacy  No commitment to provide telco processes Incubator follow-up funding Access to new ideas Positive Image Effect  Screening of large number of  Increased brand presence in early stage ideas high ARPU segments  Immediate observation of  Support for founders each ideas’ potential generally positively received © Detecon –9–
  10. 10. Innovation Incubation - Trends and Core ModelsThe global incubation trend is thriving. Companies in all industries have identified it as apotential approach to drive innovation and also Telco’s are very active participants. Incubator Market Overview Mar. 2012 Wayra Academy in London  6 months mentorship program  ~ US$ 50k funding per startup Jan. 2012 First incubators in Shanghai  Startups receive ~ US$ 10k funding  2 years incubation program Sept. 2011 Many corporate incubators have locations in the Silicon Valley, hoping to benefit from the most “Xone” incubator in Silicon Valley  Hosts 24 US startups efficient and advanced innovation ecosystem  Technical & commercial testings © Detecon – 10 –
  11. 11. Innovation Incubation – Incubator Example: Telefónica’s Wayra AcademyTelefonica started early and established a global incubation ecosystem. While the approachseems solid it is still to early to evaluate its success. Telefonica Incubation Activities  Wayra is a Telefónica Digital initiative. It has grown to a network of Wayra incubators in Latin America and is expanding in Europe. Academy  Location: Colombia, Spain, Mexico, Argentina, Venezuela, Chile, Peru, Brazil, UK, (in plan: Berlin, Prague, Dublin)  Website: Goal: “To promote innovation and identify talent in Latin America and Europe in the fields of internet and new ICT area” Business Model: Mentoring Key Findings  Wayra invests up to €50,000 for 10% stake in the  High selectivity. For startup company. Office Facility Columbia 2012 Program  Telefónica gets the right of first refusal, but not the Wayra got 985 registered exclusivity. The startups get to choose the final Investment offer. projects, from which 10 will be selected. Management  Well-Managed Brand. The independent incubator brand Length: Offering Details name still not well known.  6 months, with possible extension of another 6  300 mentors and tech experts  Network Effect. Built up a network of incubators Budget  9 locations of global cities worldwide  Max. €50,000 for each of 10 startups in one batch  Mentoring © Detecon – 11 –
  12. 12. Innovation Incubation - The key ingredientsTo successfully set-up an incubator as part of the corporate innovation governance, five keyingredients are crucial to build a successful foundation. Key Ingredients of Successful Incubators Clear Positioning and Organizational Design Is value proposition Carrier / Company the Backbone of successful incubators Startup Strategy & Bridge between startups and Positioning corporation , incubators requires lean Startup processes and agile decision making Incubator Incubation Startup Corporations need to leverage their Core Processes Competencies to provide unique Startup offerings and services for top startups Org. Incubator Structure Services Successful incubators require Innovative People Management HR Approaches © Detecon – 12 –
  13. 13. Frame TemplateUSDetecon in theBased in San Francisco, Detecon Inc. leverages its wide innovation network, extensive internationalexperience and deep industry knowledge to help clients innovate more effectively. Who We Are Innovation & The Silicon Valley Strategy Consultants Silicon Valley culture:  >1,500 new startups created each year  global team with global experience  Four top US universities  62% of the Top500 US conferences  in-depth insights into best-practice  22 public idea sharing meetings/day Silicon Valley capital:  Over 35% of total US VC investments  300 VC deals & $2.2bn invest/quarter Technology Consultants  matched market/technology approach  deep knowledge of technology challenges Innovators  live network into US research community  Silicon Valley presence © Detecon – 13 –
  14. 14. Frame TemplateUSDetecon in theWe are ICT strategy consultants, with deep experience in emerging technologies, who specialize inrecognizing, evaluating and launching innovative business opportunities. Our Consulting Services Opportunity Sourcing Business Assessment Go-To-Market Innovation Intelligence & Technology, Product and Services New Product & Service Management Strategy Launch Support Proactively detect, evaluate, and leverage Detail the potential business opportunity of Support to successfully launch the innovation landscape to create leading innovative new products, services and groundbreaking products and services portfolios technologies Trend Analysis Financial Evaluation Business Model Development Market Scanning Portfolio Planning Marketing Strategy Corporate R&D Strategy Technical Feasibility Tendering and Vendor Selection Innovation Strategy Scenario Development Project Management/PMO © Detecon – 14 –
  15. 15. Contact sheetContact Information DETECON, Inc. 33 New Montgomery 20th Floor San Francisco, CA 94105 U.S.A. © Detecon – 15 –